Alcoa of Australia Ltd v Apache Energy Ltd
[2012] WASC 209
•20 JUNE 2012
ALCOA OF AUSTRALIA LTD -v- APACHE ENERGY LTD [2012] WASC 209
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 209 | |
| Case No: | CIV:1481/2011 | 26, 27 & 31 OCTOBER 2011 | |
| Coram: | LE MIERE J | 20/06/12 | |
| 48 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | ALCOA OF AUSTRALIA LTD APACHE ENERGY LTD APACHE NORTHWEST PTY LTD TAP (HARRIET) PTY LTD KUFPEC AUSTRALIA PTY LTD |
Catchwords: | Practice and procedure Application for summary judgment Strike out application Whether plaintiff has tenable case Turns on own facts Torts Negligence Action for breach of statutory duty Torts Negligence Essentials of action for negligence Duty of care Statutory duty Torts Negligence Pure economic loss Vulnerability and special relationship |
Legislation: | Civil Aviation Act 1998 (Cth) Civil Aviation Regulations (Cth) Environmental Planning and Assessment Act 1979 (NSW) Local Courts Act 1982 (NSW) Petroleum Pipelines Act 1969 (WA) Petroleum Pipelines Regulations 1970 (WA) |
Case References: | Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 Anns v Merton London Borough Council [1978] AC 728 Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 Bryan v Maloney (1995) 182 CLR 609 Byrne and Frew v Australian Airlines Ltd (1995) 185 CLR 410 Caltex Australia Petroleum Pty Ltd v Charben Haulage Pty Ltd [2005] FCAFC 271 Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529 Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649 Caparo Industries Plc v Dickman [1990] 2 AC 605 Central Trust Co v Rafuse (1986) 31 DLR (4th) 481 Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1 Cutler v Wandsworth Stadium Ltd [1949] AC 398 Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102 Gardiner v State of Victoria [1999] 2 VR 461 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Hill v Van Erp (1997) 188 CLR 159 Johnson Tiles Pty Ltd v Esso Australia Ltd (No 2) [2000] FCA 212; (2000) 97 FCR 175 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27 Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412 Matthews v SPI Electricity Pty Ltd (No 2) [2011] VSC 168 McDonald v Girkaid Pty Ltd [2004] NSWCA 297 McGuirk v University of New South Wales [2009] NSWSC 1424 Mills v Sheahan [2007] SASC 365; (2007) 99 SASR 357 Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55 Morrison Sports Ltd v Scottish Power Plc [2010] UKSC 37; [2010] FWLR 1934 Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556; (1970) 122 CLR 628; [1971] AC 793 O'Connor v SP Bray Ltd (1937) 56 CLR 464 Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 Preston Star City Pty Ltd [1990] NSWSC 127 Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2009] FCA 1487 Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] (1981) 150 CLR 225 Slivak v Lurgi (Australia) Pty Ltd [2001] HCA 6; (2001) 205 CLR 304 Sovar v Henry Lane Pty Ltd (1967) 116 CLR Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 Western Districts Developments Pty Ltd and Turnpike Land Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 75 NSWLR 706 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515 X (Minors) v Bedfordshire County Council [1995] 2 AC 633 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
APACHE ENERGY LTD
First Defendant
APACHE NORTHWEST PTY LTD
Second Defendant
TAP (HARRIET) PTY LTD
Third Defendant
KUFPEC AUSTRALIA PTY LTD
Fourth Defendant
Catchwords:
Practice and procedure - Application for summary judgment - Strike out application - Whether plaintiff has tenable case - Turns on own facts
Torts - Negligence - Action for breach of statutory duty
(Page 2)
Torts - Negligence - Essentials of action for negligence - Duty of care - Statutory duty
Torts - Negligence - Pure economic loss - Vulnerability and special relationship
Legislation:
Civil Aviation Act 1998 (Cth)
Civil Aviation Regulations (Cth)
Environmental Planning and Assessment Act 1979 (NSW)
Local Courts Act 1982 (NSW)
Petroleum Pipelines Act 1969 (WA)
Petroleum Pipelines Regulations 1970 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr D Collins SC, Mr K A J Lyons, Mr N P De Young
First Defendant : Mr J H Karkar QC, Mr D J O'Callaghan SC & Mr G P Harris
Second Defendant : Mr J H Karkar QC, Mr D J O'Callaghan SC & Mr G P Harris
Third Defendant : Mr M D Howard SC & Mr C W Lockhart
Fourth Defendant : Mr C G Colvin SC
Solicitors:
Plaintiff : Tottle Partners as agents for Landers & Rogers
First Defendant : Middletons
Second Defendant : Clifford Chance
Third Defendant : Maxim Litigation Consultants
Fourth Defendant : Allens Arthur Robinson
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Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Anns v Merton London Borough Council [1978] AC 728
Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256
Bryan v Maloney (1995) 182 CLR 609
Byrne and Frew v Australian Airlines Ltd (1995) 185 CLR 410
Caltex Australia Petroleum Pty Ltd v Charben Haulage Pty Ltd [2005] FCAFC 271
Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529
Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649
Caparo Industries Plc v Dickman [1990] 2 AC 605
Central Trust Co v Rafuse (1986) 31 DLR (4th) 481
Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1
Cutler v Wandsworth Stadium Ltd [1949] AC 398
Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102
Gardiner v State of Victoria [1999] 2 VR 461
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hill v Van Erp (1997) 188 CLR 159
Johnson Tiles Pty Ltd v Esso Australia Ltd (No 2) [2000] FCA 212; (2000) 97 FCR 175
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572; (2000) 104 FCR 564
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27
Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412
Matthews v SPI Electricity Pty Ltd (No 2) [2011] VSC 168
McDonald v Girkaid Pty Ltd [2004] NSWCA 297
McGuirk v University of New South Wales [2009] NSWSC 1424
Mills v Sheahan [2007] SASC 365; (2007) 99 SASR 357
Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55
Morrison Sports Ltd v Scottish Power Plc [2010] UKSC 37; [2010] FWLR 1934
Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556; (1970) 122 CLR 628; [1971] AC 793
O'Connor v SP Bray Ltd (1937) 56 CLR 464
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
Preston Star City Pty Ltd [1990] NSWSC 127
(Page 4)
Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2009] FCA 1487
Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] (1981) 150 CLR 225
Slivak v Lurgi (Australia) Pty Ltd [2001] HCA 6; (2001) 205 CLR 304
Sovar v Henry Lane Pty Ltd (1967) 116 CLR
Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118
Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80
Western Districts Developments Pty Ltd and Turnpike Land Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 75 NSWLR 706
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515
X (Minors) v Bedfordshire County Council [1995] 2 AC 633
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1 LE MIERE J: The plaintiff, Alcoa, claims damages for economic loss for breach of duties of care owed by each of the defendants' damages for breach of statutory duties and damages under a contract. The claims all arise out of a cessation of the supply of natural gas to Alcoa as a result of an explosion and fire at the defendants' processing facilities on Varanus Island.
The parties
2 The defendants apply for summary judgment or to strikeout the plaintiff's claims. For the purposes of this application the facts pleaded in the statement of claim are taken to be established. The following facts are either common ground or assumed to be correct for the purposes of the application.
3 Alcoa is the owner and operator of alumina refineries in Kwinana, Pinjarra and Wagerup in Western Australia, each of which consumes significant amounts of natural gas.
4 The first defendant, Apache Energy, is engaged in the business of exploration, production and processing of oil and gas in Western Australia and is the holding company of the second defendant, Apache Northwest. Apache Energy is in control of the day to day operation, management and maintenance of oil and gas production and processing facilities located on and around Varanus Island, which is approximately 75 km off the north-west coast of Western Australia (the Varanus Island Hub Facilities). The Varanus Island Hub Facilities include various offshore platforms and tankers and onshore processing facilities (Onshore Processing Facilities). The Varanus Island Hub Facilities also include various pipelines to carry oil and gas to and from the Onshore Processing Facilities, including two gas pipelines each approximately 100 km in length, which transport gas (Sales Gas) from Varanus Island to the Australian mainland (the Sales Gas Pipelines). The Sales Gas Pipelines consist of the 12 inch Sales Gas Pipeline, which was commissioned in 1992 (the 12 inch SGL) and the 16 inch Sales Gas Pipeline, which was commissioned in 1999 (the 16 inch SGL). All Sales Gas is transferred through the Sales Gas Pipelines into the Dampier to Bunbury Natural Gas Pipeline or the Goldfields Gas Pipeline at compressor station 1, south of Karratha, through which the Sales Gas is delivered to customers.
5 The Varanus Island Hub Facilities were collectively owned by three joint ventures (collectively Varanus Island Joint Ventures). The first is the Harriet Joint Venture (HJV), the parties to which are Apache Northwest, the third defendant, Tap, and the fourth defendant, Kufpec.
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- The HJV facilities include offshore production facilities, some onshore processing facilities and an interest in the 12 inch SGL and the 16 inch SGL. The second joint venture is the East Spar Joint Venture (ESJV), the parties to which are Apache Northwest and Santos (Bol) Pty Ltd. The ESJV facilities include offshore production facilities and some of the onshore facilities and an interest in the 16 inch SGL. The third joint venture is the John Brookes Joint Venture (JBJV), the parties to which are Apache Northwest and Santos. The JBJV facilities include offshore facilities. Apache Energy controlled the day to day operation, management and maintenance of the Varanus Island Hub Facilities pursuant to contracts, arrangements or understandings with Apache Northwest and the other parties to the Varanus Island Joint Ventures (the Operating Agreements).
6 Apache Energy was in control of the day to day operation, management and maintenance of the Sales Gas Pipelines through which the Sales Gas is transported from the Varanus Island Hub Facilities to the Australian mainland for delivery to customers of the Varanus Island Joint Ventures. By the terms of the Petroleum Pipelines Act 1969 (WA) (the Act) any person who intends to construct or operate an onshore pipeline to be used for the conveyance of hydrocarbon products must hold a licence issued by the Minister for Minerals and Energy for the State of Western Australia (the Director). On or about 9 May 1985 the Director issued pipeline licence number 12 (PL12) authorising the design, construction, testing, operation and maintenance of certain pipelines through which hydrocarbon products would pass en route from the Varanus Island Hub Facilities to the mainland (the Varanus Island pipelines). The Varanus Island pipelines included the 12 inch SGL and the 16 inch SGL. The licensees under the PL12 were the HJV joint venturers, that is, Apache Northwest, Tap and Kufpec (collectively the Licensees). Under the terms of PL12, the Varanus Island pipelines, including the Sales Gas Pipelines, may be operated and maintained by a person other than the licensees. The Licensees had nominated Apache Energy to the Government department responsible for the administration of the Act, as the entity controlling the day to day operation, management and maintenance of the Varanus Island pipelines. At all material times Apache Energy controlled the day to day operation, management and maintenance of the Varanus Island pipelines, including the Sales Gas Pipelines, pursuant to the Operating Agreements.
7 Each of Apache Northwest, Tap and Kufpec were engaged in the business of marketing and selling Sales Gas from the Varanus Island Hub Facilities to customers in Western Australia. Each was responsible under
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- the terms of PL12 for the operation, management and maintenance of the Varanus Island pipelines, including the Sales Gas Pipelines.
Alcoa's Gas Supply Agreements
8 The only significant sources of supply of gas in Western Australia were from Northwest Shelf Gas operated by Woodside Petroleum Ltd (NWSG) and from the Varanus Island Hub Facilities operated by Apache Energy. The Sales Gas produced from the Varanus Island Hub Facilities was only supplied to approximately 15 large commercial gas customers, including Alcoa (the Customers). The Sales Gas produced from the Varanus Island Hub Facilities was delivered to the Customers, including Alcoa, through, amongst other things, the Sales Gas Pipelines.
9 Alcoa entered into two long term Gas Supply Agreements with the Licensees to acquire up to a specified amount (the Specified Amount) of Sales Gas produced from the Varanus Island Hub Facilities (Supply Contracts) for the purposes of providing fuel required for the operation of the Alcoa refineries. Prior to 3 June 2008 Alcoa was supplied with an average of approximately the Specified Amount of Sales Gas produced from the Varanus Island Hub Facilities, which gas was purchased by Alcoa under the Supply Contracts, delivered to Alcoa through, amongst other things, the Sales Gas Pipelines and was used by Alcoa to provide the fuel required for the normal operation of its refineries. Apache Energy knew, or reasonably ought to have known, of those gas supply arrangements of Alcoa.
The pipelines
10 The 12 inch SGL crossed the beach perimeter of Varanus Island at a point to the north-east of the island en route from the island to the mainland (Beach Crossing). At the Beach Crossing the 12 inch SGL was laid along an excavated corridor and trench dug across the beach between the edge of the onshore facilities and the high water mark (the Pipeline Corridor). A portion of the 12 inch SGL between the onshore facilities and the high water mark was buried in the Pipeline Corridor. The 12 inch SGL was susceptible to corrosion, particularly in the area of the Beach Crossing. There were five other pipelines in close proximity to the 12 inch SGL in the Pipeline Corridor at the Beach Crossing, including the 16 inch SGL, which also conveyed hydrocarbon products. A consequence of the proximity of the pipelines in the Pipeline Corridor at the Beach Crossing, including the 12 inch SGL and the 16 inch SGL, was that each pipeline in the Pipeline Corridor at the Beach Crossing was particularly vulnerable and susceptible to damage from a rupture to any of the other
(Page 8)
- pipelines in the Pipeline Corridor and in the event of a rupture of any of the pipelines in the Pipeline Corridor at the Beach Crossing there was a real likelihood that both the 12 inch SGL and 16 inch SGL would be severely damaged in a manner that would result in a total cessation in the supply of Sales Gas from the Varanus Island Hub Facilities for a substantial period and other parts of the Varanus Island Hub Facilities would also be severely damaged thereby further preventing supply of Sales Gas.
11 In a review conducted for Apache Energy by QCL International (QCL) in 1998, QCL advised Apache Energy that 'intelligent pigging' of the 12 inch SGL should be conducted due to the significant external corrosion risk. In a further review conducted for Apache Energy by QCL in 2004, QCL advised Apache Energy that the 'shore zone' areas of the 12 inch SGL which included the Beach Crossing area were particularly susceptible to corrosion damage due to the effects of weather and environmental conditions but nevertheless the subject of very little inspection data and were not included in either the onshore or offshore standard work scopes for regular inspection and maintenance. Apache Energy knew, or reasonably to have known, of the matters I have referred to relating to the location of the 12 inch SGL and other pipelines, the vulnerability and susceptibility to damage of the pipelines and the QCL reviews.
12 Regulation 10 of the Petroleum Pipelines Regulations 1970 (WA) (the Regulations) required the Sales Gas Pipelines to be operated in a proper and workmanlike manner and in accordance with good pipeline operating practice. Apache Energy held itself out to the relevant statutory authorities and to Customers, including Alcoa, as the entity in control of the day to day operation, management and maintenance of the Sales Gas Pipelines.
13 Alcoa pleads that by reason of reg 10, and that Apache Energy held itself out as the entity in control of the day to day operation, management and maintenance of the Sales Gas Pipelines, Apache Energy assumed responsibility to operate and maintain the Sales Gas Pipelines in a proper and workmanlike manner and in accordance with good pipeline operating and maintenance practice.
14 Alcoa pleads that it was vulnerable and susceptible to suffering economic loss from a cessation in the supply of Sales Gas from the Varanus Island Hub Facilities for a substantial period in the event that the Sales Gas Pipelines were not operated and maintained in a proper and
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- workmanlike manner and in accordance with good pipeline operating and maintenance practice. Alcoa says the defendants knew or ought reasonably to have known of the facts which gave rise to that vulnerability.
15 Alcoa pleads that by reason of the matters I have referred to it was, or it reasonably ought to have been, foreseeable to Apache Energy that:
(a) if the 12 inch SGL in the area of the Beach Crossing was not properly or adequately inspected, monitored, maintained and/or repaired, a rupture of the pipeline due to damage by corrosion was likely to occur;
(b) a rupture of the 12 inch SGL was likely to lead to a catastrophic rupture of other pipelines in the vicinity of the 12 inch SGL, including the 16 inch SGL, causing a total cessation of the supply of Sales Gas from the Varanus Island Hub Facilities for a substantial period; and
(c) a total cessation of the supply of Sales Gas from the Varanus Island Hub Facilities for a substantial period was likely to lead to Alcoa suffering substantial economic loss and damage.
The explosion
16 On 3 June 2008, during the course of production operations, the following series of events occurred at the Varanus Island Hub Facilities (the Incident). The 12 inch SGL ruptured at the Beach Crossing in the Pipeline Corridor (the Initial Rupture). The Initial Rupture caused a violent release into the atmosphere of a stream of highly pressurised Sales Gas, which ignited and resulted in an explosion and fire in the Beach Crossing area (the Initial Explosion and Fire). The Initial Explosion and Fire caused consequential ruptures of pipelines including the 16 inch SGL in and/or in the vicinity of the Pipeline Corridor.
17 The Initial Rupture at the Beach Crossing occurred due to a structural failure of the 12 inch SGL caused by significant corrosion damage to the external surface of the pipe. The Incident severely damaged, amongst other things, the 12 inch SGL, the 16 inch SGL and other parts of the Varanus Island Hub Facilities, resulting in an immediate and total cessation of supply of Sales Gas. Partial production of Sales Gas resumed in early August 2008. Production rates were progressively increased. Full production capacity was not restored until mid-2009.
(Page 10)
18 As a result of the Incident from 4 June 2008 until 5 August 2008 Alcoa did not receive any Sales Gas from the Varanus Island Hub Facilities under the Supply Contracts or otherwise, and from 6 August 2008 to 13 June 2009, whilst Alcoa received some Sales Gas from the Varanus Island Hub Facilities, the volume of Sales Gas received by it on a daily basis was insufficient to enable the Alcoa refineries to operate in the manner they would operate in the usual course on an ongoing basis under normal operating conditions.
Alcoa's claims
19 Alcoa pleads that Apache Energy owed Alcoa a duty to exercise reasonable care and skill in operating, maintaining and/or repairing the 12 inch SGL to prevent a rupture of the pipeline in the area of the Beach Crossing and thereby avoid economic loss being suffered by Alcoa by reason of any rupture to the pipeline in that area. Alcoa pleads that Apache Energy breached the duty of care by failing to exercise reasonable care and skill in operating and maintaining and/or repairing the 12 inch SGL in the area of the Beach Crossing to prevent rupture of the pipeline as occurred in the Incident.
20 Further, Alcoa pleads that by reason of the operation of reg 10 Apache Energy, as the entity in control of the day to day operation, management and maintenance of the 12 inch SGL, owed to Alcoa a statutory duty to operate the 12 inch SGL in a proper and workmanlike manner and in accordance with good pipeline operating practice. Alcoa pleads that in breach of that statutory duty Apache Energy failed to operate the 12 inch SGL in a proper and workmanlike manner and in accordance with good pipeline operating practice.
21 Alcoa pleads the Incident was caused by Apache Energy's breaches of duties referred to as a result of which Alcoa has suffered economic loss. Alcoa was forced to acquire alternative energy supplies in the form of alternative gas, diesel and electricity to make up for the shortfall in the supply of Sales Gas from the Varanus Island Hub Facilities in order to enable the normal operation of the Alcoa refineries. The cost of acquiring the alternative energy supplies exceeded the price payable by Alcoa for Sales Gas under the Supply Contracts by an amount of $137,190,838. Furthermore, Alcoa suffered other losses. Alcoa was forced to curtail production of the Kwinana and Pinjarra refineries for a period immediately following the Incident until sufficient daily alternate energy supplies could be required. As a result Alcoa was forced to purchase alumina on the spot market in order to meet its supply obligations at a cost
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- to Alcoa of $11,265,293. Alcoa was forced to 'short load' all ships for this period as a result of which it was forced to charter an external vessel in order to maintain sufficient alumina stockpiles at its Portland and Point Henry aluminium smelting and rolling facilities at an increased cost of $1,660,029. Alcoa also incurred 'dead freight' charges totalling $601,687. Alcoa also incurred a cost of $202,107 in recommissioning and certifying the diesel generators, fuel lines and storage tanks at the Kwinana and Pinjarra refineries. Alcoa incurred costs of delivery of the diesel fuel totalling $62,304 in the form of a pipeline rental from BP. Alcoa also 'hedged' the price of diesel fuel at a loss of $731,841. Also, as a result of the Incident, Alcoa incurred increased costs to purchase electricity totalling $6,428,998.
22 Alcoa claims against Apache Northwest that it was responsible for the operation of the Varanus Island Hub Facilities on its own behalf and for and on behalf of the other parties to the Varanus Island Joint Ventures, and that it knew, or ought reasonably to have known of the matters Alcoa has pleaded, or Apache Energy knew, or ought reasonably to have known. On that basis Alcoa pleads that Apache Northwest owed it a duty to exercise reasonable care and skill in supervising, overseeing and/or monitoring the operation, maintenance and/or repair of the 12 inch SGL to prevent rupture of the pipeline due to corrosion in the area of the Beach Crossing and thereby avoid economic loss being suffered by Alcoa by reason of any rupture to the pipeline in that area. Alcoa pleads that Apache Northwest breached that duty of care by failing to exercise reasonable care and skill in supervising, overseeing and/or monitoring the operation, maintenance and/or repair of the 12 inch SGL in the area of the Beach Crossing to prevent rupture of the pipeline as occurred in the Incident. Alcoa says that as a result of Apache Northwest's breaches of the duty of care it has suffered the economic loss referred to earlier.
23 Alcoa pleads that Tap and Kufpec, as well as Apache Northwest, owed to Alcoa a duty to exercise reasonable care and skill supervising, overseeing and/or monitoring the operation, maintenance and/or repair of the 12 inch SGL to prevent rupture of the pipeline due to corrosion in the area of the Beach Crossing and thereby avoid economic loss being suffered by Alcoa by reason of any rupture to the pipeline in that area. In essence, Alcoa says that a duty of care arose from the fact that Tap, Kufpec and Apache Northwest, as licensees, knew or ought reasonably to have known of the matters, which it is pleaded in the statement of claim, Apache Energy knew of and to which I have referred earlier. Alcoa pleads that Tap, Kufpec and Apache Northwest each breached the duty of care by failing to exercise reasonable care and skill in supervising,
(Page 12)
- overseeing and/or monitoring the operation, maintenance and/or repair of the 12 inch SGL in the area of the Beach Crossing to prevent rupture of the pipeline as occurred in the Incident. Alcoa pleads that the Incident was caused by those breaches of duty of care and as a result Alcoa has suffered the economic loss to which I have referred.
24 Alcoa pleads that each of Apache Northwest, Tap and Kufpec breached relevant statutory duties. Alcoa pleads that under the terms of the Act, and the Regulations, the licensees of PL12 were required to operate the 12 inch SGL in a proper and workmanlike manner and in accordance with good pipeline operating practice and/or maintain the pipeline in good condition and repair. Alcoa pleads that, as licensees under PL12, Tap, Kufpec and Apache Northwest owed to Alcoa statutory duties to operate the 12 inch SGL in a proper and workmanlike manner and in accordance with a good pipeline operating practice and to maintain the pipeline in good condition and repair. Alcoa pleads that in breach of those statutory duties each of Tap, Kufpec and Apache Northwest failed to operate the 12 inch SGL in a proper and workmanlike manner and in accordance with good pipeline operating practice and to maintain the pipeline in good condition and repair. Alcoa says that the Incident was caused by those breaches of statutory duties as a result of which Alcoa has suffered the loss and damage referred to earlier.
25 Alcoa also makes a claim in contract. There are two relevant gas supply contracts. The first is a gas supply and purchase agreement made on or about 20 August 2001, as varied in or about April 2005, by which Apache Northwest, Tap and Kufpec agreed to deliver and sell gas to Alcoa (the Harriet GSA). The second gas supply and purchase agreement was made on or about 12 June 2006 under which Apache Northwest agreed to deliver and sell an amount of gas to Alcoa (the John Brookes GSA). Alcoa pleads that in breach of the express terms of the agreements, Apache Northwest, Tap and Kufpec failed to deliver their percentage interest share of the Sales Gas they were obliged to supply and deliver to Alcoa in accordance with the terms of the agreements. Alcoa says that as a result of those breaches Alcoa has suffered direct and/or reasonably foreseeable losses.
26 The gas supply and purchase agreements contain liquidated damages provisions. Alcoa pleads that each of the liquidated damages provisions are void and unenforceable as a penalty. However, on the hearing of this application Alcoa stated that it does not pursue that claim. That is, Alcoa, no longer alleges that the liquidated damages provisions are void and unenforceable as a penalty. Alcoa says it is entitled to the payment of
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- liquidated damages from each of the Sellers according to their percentage interest pursuant to the relevant terms and conditions. The liquidated damages total $5,709,228.
Summary dismissal - legal principles
27 Order 16 r 1(1) provides the court, if satisfied that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily, may order that judgment be entered for the defendant.
28 The exercise of the power to summarily terminate a proceeding must be exercised with great care. A court will only dismiss a claim if the defendant can establish that the case of the plaintiff is so clearly untenable that it cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129 (Barwick CJ) and see Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 [24] (French CJ & Gummow J) [54] - [57] (Hayne, Crennan, Kiefel & Bell JJ).
29 In Mills v Sheahan [2007] SASC 365; (2007) 99 SASR 357 the Full Court of the Supreme Court of South Australia considered an appeal from an order striking out the plaintiff's statement of claim in a case involving the alleged liability of a company liquidator for economic loss to a third party. The primary judge had found that it was not arguable that the defendant owed a duty of care to the plaintiffs. The Full Court allowed the appeal holding that it was reasonably arguable that the defendant, acting in his capacity of a liquidator or trustee in bankruptcy, owed a duty of care to one or more of the plaintiffs and that whether the defendant did owe such a duty of care could only be finally determined at trial. Sulan J, with whom Layton J agreed, said:
In my view, the relevant question for consideration is not whether a duty of care would necessarily be established in the circumstances of the present case. The relevant question is whether it can be said that the plaintiffs' claim discloses no reasonable cause of action such that a duty could be said, with certainty, not to exist. As the judge observed, this test places a heavy onus on the defendant to establish that the pleadings disclose no reasonable cause of action, or that the plaintiffs' case is so untenable that it cannot succeed.
…
The acknowledgment by Australian courts - including the High Court in Perre v Apand - that this area of the law is developing and is not yet constrained by firm principles suggests that this Court should be reluctant
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- to preclude a plaintiff from brining an action in factual circumstances which are not closely analogous to those of previous authority.
No analogous cases were put to this Court to show that a duty of the kind claimed by the plaintiffs has been imposed on a liquidator by a court. It is clear that the factual circumstances differ from the leading cases which were presented during the course of argument. It is, however, not clear how the principles applicable in previous cases on pure economic loss would apply to the present case. Consequently, I consider that it is inappropriate for this Court to preclude the plaintiffs from bringing their case [101] - [111].
Defendants' case
30 The plaintiff's claim is for pure economic loss. The defendants submit that that, as a general rule, there is no duty to take care to avoid reasonably foreseeable pure economic loss: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180 [4] (Gleeson CJ), [33] (Gaudron J) [71], (McHugh J) [101]. That general rule is only displaced when the 'salient features' of the relationship between the plaintiff and the defendant take it out of the 'ordinary' and make it 'special': Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529 [558], [573], [576] - [577], [578] (Stephen J) [549], [554] - [555], [556] (Gibbs J). A relationship cannot be 'special' unless the plaintiff is 'vulnerable' to the damage claimed: Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515 (Woolcock).
31 The defendants submit that it is not arguable that the defendants owed to Alcoa a duty of care to avoid the pure economic loss which Alcoa seeks to recover for three reasons. First, vulnerability is a necessary, but not sufficient, reason to impose a duty of care to avoid pure economic loss and Alcoa is not vulnerable. Second, the relationship between Alcoa and the defendants is 'ordinary'. It is an ordinary and voluntary commercial relationship that does not differ from any other typical relationship between people in the supply chain of a good to its end consumer. There are not facts pleaded that take Alcoa's relationship with the defendants out of the ordinary. Third, the terms of the GSAs preclude a duty in tort. While the subject matter of certain types of contracts may in some circumstances give rise to an independent duty and tort, such a duty will only arise if it is 'concurrent' with a like contractual duty: Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 [107]. However, a concurrent duty in tort cannot arise if its nature and scope depend on specific obligations or duties created by the express terms of the contract or the manner in which an obligation or duty has been expressly and specifically defined by a contract or if its effect would be to
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- permit the plaintiff to circumvent or escape the contractual exclusion or limitation of liability for the act or omission that would constitute the tort: Central Trust Co v Rafuse (1986) 31 DLR (4th) 481, 521 - 522 (Le Dain J) cited with approval in Bryan v Maloney (1995) 182 CLR 609, 621 - 622 (Mason CJ, Deane & Gaudron JJ).
Vulnerability and duty of care
32 The defendants submit that vulnerability is a necessary, but not sufficient, reason to impose a duty of care to avoid pure economic loss. The defendants submit that Woolcock is authority for the proposition that vulnerability is a necessary element in establishing a duty of care to avoid pure economic loss.
33 When one person owes a duty of care to avoid harming another's pure economic interest is a vexed question. In Perre v Apand the High Court adopted a multi-factorial or salient features approach. The authors of the relevant chapter of the tenth edition of Flemings The Law of Torts, Professors Vines, Handford and Harlow describe the approach:
It is assumed that reasonable foresight must be established, but that the court finally determines whether a duty of care is owed in a novel case by an examination of the 'salient features' of the case (154).
34 In Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' the High Court held, although as a general rule damages for pure economic loss are not recoverable outside negligent misstatement, a duty of care might be owed in 'exceptional' cases (555) (Gibbs J). Such cases were termed 'special' in Bryan v Maloney (1995) 182 CLR 609, 619 (Mason CJ, Deane & Gaudron JJ). In Bryan v Maloney a majority of the High Court held the relationship between a builder and a subsequent purchaser of residential property was sufficient to attract a duty on the part of the builder to take reasonable care to avoid reasonably foreseeable economic loss that resulted from the diminution in the value of the dwelling which occurred when a latent, and previously unknown, structural defect first became manifest.
Woolcock
35 Woolcock involved economic loss to purchasers of commercial premises. An engineering company designed the foundations of a warehouse and office complex. Some years after the building was completed the property was sold. It became apparent that the building was suffering substantial structural distress due to the settlement of its foundations or the material below them. The purchaser sued the
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- engineering company and one of its employees who had acted as the project manager for negligence in the design or the supervision of the construction of the building. The Supreme Court of Queensland referred the matter to the Court of Appeal on the basis of agreed facts as a case stated requiring determination of whether the statement of claim disclosed a cause of action in negligence. The Court of Appeal concluded that Bryan v Maloney established that the builder of a dwelling may owe a duty of care to a remote purchaser; but those who built or designed commercial buildings did not owe any duty of care to subsequent purchasers and there was no good reason, in terms of principle or policy, to extend the decision in Bryan v Maloney to cases other than residential dwellings. The Court of Appeal held that the statement of claim did not disclose a cause of action in negligence.
36 A majority of the High Court confirmed that no duty of care was owed. The plurality, Gleeson CJ, Gummow, Hayne and Heydon JJ, said that it was important to identify the reasoning that underpinned the conclusion in Bryan v Maloney. The conclusion that the builder owed a subsequent owner a duty to take reasonable care to avoid the economic loss, which that subsequent owner had suffered, depended upon the anterior step of concluding that the builder owed the first owner a duty of care to avoid economic loss of that kind. This anterior step, and the conclusion drawn from it, depended upon considerations of assumption of responsibility, reliance and proximity. 'Most importantly, they depended upon equating the responsibilities which the builder owed to the first owner with those owed to a subsequent owner' [15]. In Woolcock, unlike Bryan v Maloney, the respondents did not owe the original owner of the land a duty to take reasonable care to avoid economic loss of the kind of which the appellant complained. Despite the first respondent obtaining a quotation for geotechnical investigations, the original owner of the land, by its manager, refused to pay for such investigations. The original owner directed the adoption of particular footing sizes. The relationship between the respondents and the original owner was not characterised by the assumption of responsibility by the respondents and known reliance by the original owner on the respondents such as in Bryan v Maloney. The appellant's contention that the respondents owed it a duty of care could not be supported by the reasoning which was adopted in Bryan v Maloney because the anterior step of demonstrating that the respondents owed a duty of care to the original owner was not made out.
37 The plurality held there were other reasons for concluding that the respondents owed no duty of care to prevent the economic loss of which the appellant complained. The other reasons were that neither the facts
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- stated in the statement of claim, nor those set out in the case stated, showed that the subsequent purchaser was vulnerable to the economic consequences of negligence in the engineers' design of the foundations.
38 McHugh J referred to the multi-factorial or salient features approach in determining a duty to prevent pure economic loss that he had adopted in Perre v Apand. In considering whether the respondent owed a duty of care McHugh J applied the five factors previously identified by his Honour in Perre v Apand as relevant to the determination of a duty in all pure economic loss cases, namely: reasonable foreseeability of loss; avoidance of indeterminate liability; protection of individual autonomy; vulnerability to risk of harm; and, a defendant's knowledge of the risk and its magnitude [74].
39 In holding that the respondents owed no duty to Woolcock to protect it from pure economic loss McHugh J found that Woolcock was not vulnerable in the relevant sense. His Honour stated that the most powerful reason for rejecting the proposed duty was that the first owners and purchasers of commercial buildings are ordinarily in a position to protect themselves from most losses that are likely to occur from defects in the construction of such buildings. Various steps were open to Woolcock to protect itself against pure economic loss and its failure to take reasonable steps that were open to it was not a ground for holding that the respondents owed it a duty to take care in respect of pure economic losses arising from the defects in the foundations of the building.
40 Callinan J held that the respondents owed no duty of care to the appellants and questioned the correctness of Bryan v Maloney itself. Kirby J found the appellant was vulnerable and that it was not appropriate to dismiss the appellants' claim without a full trial.
41 All members of the court recognised the importance of vulnerability to the finding of a duty of care to avoid economic loss. The plurality said:
Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed [23].
42 Their Honours referred to the vulnerability of the plaintiffs in Perre v Apand and Hill v Van Erp (1997) 188 CLR 159. Their Honours then said that in other cases of pure economic loss reference has been made to notions of assumption of responsibility and known reliance. Their
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- Honours referred to Bryan v Maloney and Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556; (1970) 122 CLR 628; [1971] AC 793 and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] (1981) 150 CLR 225. Their Honours said that it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. Their Honours then concluded:
It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so [24].
44 In the judgments in Woolcock, vulnerability is a key element in determining whether a defendant owes a duty to take reasonable care to avoid causing pure economic loss to a defendant. However, the plurality expressly declined to 'identify or articulate the breadth of any general proposition about the importance of vulnerability'. In the absence of a clearly articulated statement by the High Court of the importance of vulnerability a judge of this court may look to the decisions of intermediate courts of appeal for guidance.
Intermediate courts of appeal
45 A trial judge of this court must follow a decision of the Court of Appeal of this court. The first and second defendants referred to Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102 (Fugro) as a decision in which it was found that the absence of vulnerability was a basis upon which a finding of duty was denied. McLure P discussed the legal principles applicable to the existence of a duty of care to avoid economic loss. Martin CJ and Mazza J agreed with her Honour in relation to those matters. McLure P said that reasonable foreseeability of harm of the kind suffered is a necessary although insufficient condition for the existence of a duty of care: [101]. Her Honour then stated:
There are a variety of factors that are, or may be, relevant to whether it is reasonable to impose a duty of care, the relevance and weight of which may vary according to the nature of the case. Relevant factors include physical, temporal, relational and causal closeness, assumption of
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- responsibility, general reliance, control, vulnerability, and actual or constructive knowledge of relevant matters.
Assumption of responsibility and known reliance figure prominently in the establishment of a duty of care for negligent misstatement. The meaning and importance of vulnerability in the context of a claim for pure economic loss was most recently addressed by the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515. The plurality (Gleeson CJ, Gummow, Hayne & Heydon JJ) said:
'Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed …[23].'
The trial judge's finding that the test of foreseeability was satisfied in relation to Nautronix's property damage claim is not inconsistent with his finding that Mr Barclay did not owe a duty of care to Nautronix in relation to pure economic loss. Economic loss consequential upon injury to the person or property of the plaintiff is routinely awarded. That is not the case with pure economic loss, to which different considerations apply …
Whatever be the explanation, the case law demonstrates that the scope of liability for negligently caused pure economic loss is significantly narrower than liability for loss caused by physical injury to person or property. There is no single or fixed control mechanism for achieving this outcome. Nor are there different or additional rules that must be satisfied in order for liability for pure economic loss to attach.
For example, the content of the requirement of foreseeability (which applies to duty, breach, causation and remoteness of damage) does not alter. But if the minimum requirement of foreseeability is exceeded on the facts, that is a factor which may weigh heavily in the assessment of whether it is reasonable to impose a duty of care to avoid inflicting pure economic loss. That was so in Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' (1976) 136 CLR 529 and Perre.
The minimum requirement of foreseeability may be exceeded either because the specific plaintiff is foreseeable or because the specific type of economic loss actually suffered is foreseeable, or because the defendant was aware of and considered the actual risk which eventuated to an ascertainable class of plaintiff. At least one of these factors was present in Caltex and Perre. Further, in both those cases the vulnerability of the plaintiff was another weighty factor: the plaintiffs had no knowledge of the proposed conduct the source of the risk and there was no commercial relationship, or chain of commercial relationships, linking the plaintiff with the creator of the risk. The combination of factors in those cases rendered it reasonable to impose a duty to take reasonable care to avoid pure economic loss. Those factors were absent in Woolcock [102] - [106].
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46 McLure P said that vulnerability is an important factor in considering the existence of a duty of care to avoid pure economic loss but her Honour did not say that vulnerability is a necessary factor for the existence of such a duty of care. To the contrary, her Honour said that there is no single or fixed control mechanism for narrowing the liability for negligently caused pure economic loss nor are there different or additional rules that must be satisfied in order for liability for pure economic loss to attach.
47 The High Court held in Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 135, that trial judges in Australia should not depart from decisions of intermediate appellate courts in another jurisdiction unless they are convinced that the decision is plainly wrong. Counsel for the parties referred to a number of decisions of intermediate courts of appeal.
48 In Caltex Australia Petroleum Pty Ltd v Charben Haulage Pty Ltd [2005] FCAFC 271 the Full Court of the Federal Court held that vulnerability is a prerequisite for a duty of care to avoid pure economic loss. The court considered the principles for determining when a purchaser of land will have an entitlement to recover damages for economic loss from a defendant who provided services negligently to the purchaser's predecessor in title. After stating that the principles were by no means clear Tamberlin, Keifel and Emmett JJ said at [273]:
At least two prerequisites must be satisfied before liability can be established. In the present case it must be shown, first, that there was a relevant element of known reliance or dependence by Caltex on EES in carrying out the Works or an assumption by EES of responsibility to Caltex in carrying out the Works. Secondly, it must be shown that Charben was, in a relevant sense, vulnerable to the economic consequences of any negligence on the part of EES in carrying out the Works. That second requirement may involve demonstrating that Charben could not have protected itself against the economic loss that it alleges it has suffered. Vulnerability, in the relevant sense, is Charben's inability to protect itself from the consequences of want of reasonable care on the part of EES, either entirely or at least in the way that would cast the consequences of loss on EES (see Woolcock Street Investments Pty Ltd v CTG Pty Ltd (2004) 216 CLR 515 at [23], [24] and [26]).
- The court concluded that while the effect of the contract was to put Charben in a position of economic dependency in relation to the work EES was instructed to perform for Caltex, it was Charben's choice to be in that position. Charben was not vulnerable to economic loss as a consequence of negligence by EES until it had entered into the Caltex contract. In those circumstances, the prerequisites were not established
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- for EES to have a common law liability in tort to Charben for carrying out the works in a negligent fashion or in breach of a duty owed to Charben. No duty of care was established.
49 In Western Districts Developments Pty Ltd and Turnpike Land Pty Ltd v Baulkham Hills Shire Council [2009] NSWCA 283; (2009) 75 NSWLR 706 (Western Districts) the New South Wales Court of Appeal considered the circumstances in which a duty of care to avoid pure economic loss will be found. The appellants appealed from the dismissal by an associate judge of an appeal under the Local Courts Act 1982 (NSW). The appeal involved consideration of the duty of care owed by a local council when, as the principal certifying authority, it wrongly certified that the provisions of the Environmental Planning and Assessment Act 1979 (NSW) s 109J had been complied with and issued a subdivision certificate for a subdivision of land. The appellant purchased an allotment and suffered economic loss. The Court of Appeal allowed the appeal. Preston CJ of LEC applied the multi-factorial test stated by McHugh J in Perre v Apand for determining whether a duty exists in cases of liability for pure economic loss. One of the five principles relevant in determining whether a duty exists is vulnerability to risk. Preston LJ of LEC said that the vulnerability of the plaintiff is an important factor in determining the existence of a duty of care to avoid economic loss. His Honour found that the applicants were vulnerable. After considering the other factors identified by McHugh J in Perre v Apand as being relevant to determine whether a duty exists to avoid economic loss his Honour found that the council owed a duty of care. Giles JA expressly held that vulnerability is not a necessary factor for the existence of a duty of care to avoid pure economic loss. Giles JA said:
Further, while vulnerability is an important factor in whether or not a duty of care to guard against economic loss is owed, it is not the sole consideration. On current jurisprudence, the decision that a duty of care is owed or is not owed is arrived at in novel circumstances upon a 'multi-factorial' approach, with a close analysis of the facts bearing on the relationship between the plaintiff and the defendant and regard to 'salient features': see most recently Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 at 675 [101] - [108], per Allsop P. The Magistrate's decision could not, on the correct approach, be solely by regard to vulnerability. His decision that a duty of care was not owed involved (or should have involved) assessment of all salient features, only one (although a primary one) of which was vulnerability. If the decision was erroneous, it was erroneous in point of law although involving a factual finding that the applicants were corporations and the other factual findings [10].
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50 Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649 (Stavar) was not a pure economic loss case; it was an appeal, and cross-appeal, from a judgment of the Dust Diseases Tribunal of New South Wales, which included a finding that an oil refinery owed a duty of care to the wife of one of its employees where she had been exposed to asbestos dust and fibre from her husband's work clothes, in the family home and car, and had later contracted mesothelioma. Allsop P held that in determining whether a duty of care exists if the circumstances do not fall within an accepted category of duty:
The proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to the 'salient features' or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury [102].
- Having given a list of salient features, including 'the degree of vulnerability of the plaintiff to harm from the defendant's conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself' [103], Allsop P said:
There is no suggestion in the cases that it is compulsory in any given case to make findings about all of these features. Nor should the list be seen as exhaustive. Rather, it provides a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content [104].
In my opinion, these passages indicate that the primary judge approached the question on the basis that, in order to establish a duty of care, Makawe had to establish each of the elements of control, vulnerability and reliance; and in my opinion that is not the correct approach. These are three particularly important salient points to be considered in deciding whether there is a duty of care, but they are not all-or-nothing necessary elements to be satisfied if a duty of care is to be established. I accept that, for a duty
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- of care to exist, there must be some element of control in a defendant and there must be some vulnerability in the plaintiff in some sense or another (which is not necessarily the same sense as the word has been used in some of the cases); but in my opinion these are matters of degree to be taken into account in an overall assessment. Reliance may be completely absent: for example, I am unable to identify any relevant reliance in Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180.
In my opinion the reasoning of the primary judge was erroneous in that he found that Makawe's case failed because of absence of vulnerability (because there were avenues open to Makawe at the time of the purchase by which it could have protected itself) and because of absence of actual reliance, on the basis that these were each necessary requirements for the existence of a duty of care [21] - [22].
- Campbell JA generally agreed with the reasons of Hodgson JA. Simpson J applied the salient features approach outlined by Allsop P in Stavar. Simpson J accepted that one salient feature may be of overwhelming importance but, in effect, rejected that it is a necessary factor for the existence of a duty of care. Simpson J said:
It may be correct, as is suggested, that one salient feature may be of such overwhelming importance that others are unable to dislodge its impact. But that does not mean that it is not still necessary to consider all other salient features - it can not be known whether that feature is of such overwhelming importance as to have that effect unless and until it is analysed in context with all others. In any event, even if the proposition were correct, that is not this case. His Honour was correct in his assessment of the features of vulnerability and reliance. The only feature which favoured Makawe was control, and that, alone, given the absence of vulnerability and reliance, could not establish a duty of care [139].
52 The High Court's decision in Woolcock emphasises the centrality of the concept of vulnerability as a test for determining the existence of a duty of care in pure economic loss cases. However, the plurality held that it was not necessary in that case 'to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability' [24]. In Fugro the Court of Appeal of this court did not find that vulnerability is a necessary factor for the existence of a duty of care to avoid pure economic loss. Subsequent decisions by intermediate courts of appeal have denied that vulnerability is a necessary factor for the existence of a duty of care in pure economic loss cases, in the sense that an absence of vulnerability will necessarily, and without regard to any other features of the case, deny the existence of a duty of care.
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53 This is a summary judgment application. The proper approach is one of restraint. Kirby J said in Woolcock:
Where the law is uncertain and especially where it is in a state of development, it is inappropriate to put a plaintiff out of court if there is a real issue to be tried. The proper approach in such cases is one of restraint. Only in a clear case will answers be given, and orders made, that have the effect of denying a party its ordinary civil right to trial [138].
- The law is not sufficiently certain to hold on a summary judgment application that a plaintiff's claim must be dismissed if vulnerability is not established, without having regard to any other feature of the case.
Was Alcoa vulnerable?
54 Alcoa says that if, contrary to its submissions, vulnerability is a necessary element in establishing a duty of care to avoid pure economic loss, then, and in any event, it was in the relevant sense vulnerable to the economic consequences of any negligence of the defendants in operating and maintaining the Sales Gas Pipelines.
55 The plurality in Woolcock defined vulnerability as the plaintiffs' inability to protect itself from the consequences of a defendant's lack of reasonable care, either entirely or at least in a way which would cast consequences of loss on the defendant [23]. The plurality held that neither the facts alleged in the statement of claim nor those set out in the case stated showed that Woolcock was in the relevant sense vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. There was no evidence that Woolcock could not have protected itself, only that nothing had been done on the facts. The facts showed that no warranty of freedom from defect was included in the contract by which the appellant bought the land and there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. The pleading and the case stated were silent about whether Woolcock could have sought and obtained the benefit of terms of that kind in the contract. The facts showed that Woolcock did not obtain a pre-purchase inspection. It was not alleged that the defects could not have been discovered by inspection or some other investigation.
56 McHugh J defined vulnerability to risk to mean not that the plaintiff was exposed to risk but that by reason of ignorance or social, political or economic constraints, the plaintiff was not able to protect him or herself from the risk of injury [80]. McHugh J said that cases where contractual protection will be found deficient are likely to be the exception rather than
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- the rule [112]. McHugh J recognised that a plaintiff's capacity to protect itself from damage by means of contractual obligation is often a strong policy reason for rejecting the existence of a duty of care for economic loss. McHugh J held, in effect, that the facts did not establish that the subsequent purchaser could not protect itself by means of contractual obligation and therefore was not vulnerable.
57 Alcoa says that it was vulnerable and susceptible to suffering economic loss from a cessation in the supply of Sales Gas from the Varanus Island Hub Facilities for a substantial period in the event that the Sales Gas Pipelines were not operated and maintained in a proper and workmanlike manner and in accordance with good pipeline operating and maintenance practice. That plea of vulnerability is based on the following. First, Alcoa had no means of monitoring the condition of the Sales Gas Pipelines and relied on the operator of the Sales Gas Pipelines, Apache Energy, to operate and maintain them in a proper and workmanlike manner, and in accordance with good pipeline operating and maintenance practice so as to preserve and maintain the structural and operational integrity of the Sales Gas Pipelines, and their capacity to function as such. Second, Alcoa required a large volume of gas to be supplied on an ongoing basis to enable the Alcoa refineries to operate under normal operating conditions. Third, at no material time could Alcoa obtain a 'back up' supply of gas to enable the Alcoa refineries to operate under normal operating conditions in the event of a total cessation of gas supplies from the Varanus Island Hub Facilities for a substantial period. Fourth, the cost of acquiring alternative fuels to enable the Alcoa refineries to operate in the event of a total cessation of gas supplies from the Varanus Island Hub Facilities for a substantial period was significantly higher than the cost of gas acquired under the Supply Contracts and/or any other long term gas supply contract. Fifth, at no time were any of the Sellers prepared to enter into a contract with Alcoa to compensate it for the increased cost of acquiring alternative fuels to enable the Alcoa refineries to operate in the event of a total cessation of Sales Gas from the Varanus Island Hub Facilities for a substantial period. Alcoa says that each of the defendants knew, or ought reasonably to have known, of all of these matters.
58 In Woolcock the plurality said that vulnerability is a reference to the plaintiff's inability to protect itself from the consequences of a defendant's lack of reasonable care. The defendants concede that Alcoa was contractually exposed to the risk that it consensually negotiated and assumed but say that that risk is not vulnerability as that expression is used in the cases. The defendants submit the required inability does not
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- mean that the plaintiff was exposed to risk, that is it was not 'by reason of ignorance or social, political or economic constraints, … not able to protect [itself] from the risk of injury': Woolcock [80] (McHugh J). The defendants say Alcoa was not vulnerable in the relevant sense because it was able, through contractual negotiation, to protect itself against the risk of damage. The defendants say if Alcoa is not prepared to accept the risk to be allocated to it under the contract in light of the agreed price and other terms, its remedy is not in tort but to 'walk away from the negotiations': Woolcock [110] (McHugh J), [31] - [32] (Gleeson CJ, Gummow, Hayne and Heydon JJ), [209] - [210] (Callinan J).
59 Alcoa says that it was not practically able to protect itself against the risk of damage by contract. Alcoa says that the Sellers were not prepared to enter into a contract with Alcoa to compensate it for the increased costs of acquiring alternative fuels to enable the Alcoa refineries to operate in the event of a total cessation of Sales Gas from the Varanus Island Hub Facilities for a substantial period.
60 The defendants argue that Alcoa was able, and did, protect itself against the relevant risk by obtaining alternative supplies of energy. Following the interruption to the supply resulting from the Incident, Alcoa purchased some gas it required that was available to it in the market in Western Australia and acquired alternative sources of energy, albeit at a higher price.
61 It is not appropriate to summarily determine whether or not Alcoa was vulnerable. In Perre v Apand McHugh J said:
The degree and nature of vulnerability sufficient to found a duty of care will no doubt vary from category to category and from case to case. Although each category will have to formulate a particular standard, the ultimate question will be one of fact [129].
- In Western Districts Giles JA said at [8] that by the ultimate question being one of fact, McHugh J meant that the degree and nature of vulnerability depended on the facts but the characterisation as vulnerability sufficient to find a duty of care is not a question of fact, it involves a legal standard. Alcoa has pleaded that at no time were any of the Sellers prepared to enter into a contract with Alcoa to compensate it for the increased costs of acquiring alternative fuels to enable the Alcoa refineries to operate in the event of a total cessation of Sales Gas from the Varanus Island Hub Facilities for a substantial period. Whilst that is a fact, it is a fact at a high level of generality. At trial there will be evidence in relation to the efforts made by Alcoa to obtain contractual protection
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- against the relevant risk of damage and the responses of the defendants in relation to that matter. Senior counsel for Alcoa also stressed that at trial there will be evidence of the market in Western Australia for gas which is relevant, amongst other things, to Alcoa protecting itself against the risk of damage through contractual negotiation, the availability of alternative sources of gas and energy and the practicality or reasonableness of Alcoa 'walking away from negotiations'. The characterisation of the degree of vulnerability should be determined in the light of evidence concerning the primary facts relating to the matters pleaded by Alcoa.
Special relationship and salient features
62 The second reason why the defendants submit it is not arguable that the defendants owed to Alcoa a duty of care to avoid pure economic loss is that the relationship between Alcoa and the defendants is ordinary, it is not a special relationship which is required to give rise to a duty to take care to avoid reasonably foreseeable pure economic loss.
63 In Stavar Allsop P referred to a number of cases on the question of the existence of a duty of care including Perre v Apand and Woolcock. Allsop P held that in circumstances which do not fall within an accepted category of duty, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to the salient features or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury [2]. That approach was applied by the New South Wales Court of Appeal to a pure economic loss case in Makawe. In Fugro McLure P said that there are a variety of factors that are, or may be, relevant to whether it is reasonable to impose a duty of care, the relevance and weight of which may vary according to the nature of the case [102].
64 If the posited duty of care does not fall within an established category of case it will often be inappropriate to summarily determine whether or not a duty of care exists. It is inappropriate in this case. That task should be undertaken by a close analysis of the facts. The facts pleaded in the statement of claim to give rise to the claimed duty of care are at a high level of generality. Whether or not a duty of care exists should be determined having regard to findings of fact made at trial.
65 As I have said, the defendants submit that there is no duty to take care to avoid reasonably foreseeable pure economic loss unless the salient features of the relationship between the plaintiff and the defendant take it out of the 'ordinary' and make it 'special'. The defendants contend that the relationship between Alcoa and the defendants is ordinary. It is an
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- ordinary and voluntary commercial relationship but does not differ from any other typical relationship between people in the supply chain of a good to its end consumer. The defendants say that there are not facts pleaded that take Alcoa's relationship with the defendants out of the ordinary.
66 Alcoa contends that the salient features of the case give rise to a duty of care. Counsel for Alcoa referred to the statement of principle by Ormiston and Ashley JJA in Moorabool Shire Council v Taitapanui [2006] VSCA 30; (2006) 14 VR 55 [71] - [73]:
The categories of case in which a duty of care with respect to pure economic loss is to be found are properly to be seen as special. Foreseeability of loss, and an unbroken chain of causation, are necessary elements, but by themselves are not sufficient. An additional element which must be present has been variously described as involving one or more of known reliance or dependence of the plaintiff; the assumption of responsibility by the defendant; or the control exercised, or exercisable, by the defendant over the circumstances affecting the plaintiffs interests. What ultimately determines whether a duty of care arises is the character of the relationship between the plaintiff and the defendant. Matters such as those which we have just mentioned, and others, bear upon the resolution of that question in the particular circumstances of particular cases; though not all of those matters will be at the forefront in every case. The question to be answered is whether, having regard to the salient features of the particular case, the connection between the parties is sufficiently close - though not necessarily physically close - as to give rise to a duty of care. When the defendants acts or omissions arise in connection with the discharge of statutory duties or the performance of statutory functions, the statutory framework is itself a salient feature to which consideration must be given.
To those considerations should be added the following: Three policy considerations are pertinent in every case. First, that the effect of a decision should not lay a defendant open to claims which are indeterminate as to the class or number of potential claimants, time or amount. Second, that the effect of a decision should not be to unduly hinder ordinary commercial transactions (or, be inconsistent with normal business standards). Third, that a decision should not have the effect of intruding into another area of the law.
Also to be borne in mind is the fact that the pertinent law has been developed cautiously, incrementally, and by analogy. So, for example, in Perre v Apand Pty Ltd McHugh J said this:
'… We have the established categories, a considerable body of case law and the useful concept of reasonable foreseeability. If a case falls outside an established category, but the defendant should
- reasonably have foreseen that its conduct would cause harm to the plaintiff, we have only to ask whether the reasons that called for or denied a duty in other (usually similar) cases require the imposition of a duty in the instant case.'
67 In Stavar Allsop P referred to the rejection by the High Court of its previously enunciated general determinate of proximity, the two stage approach in Anns v Merton London Borough Council [1978] AC 728, the expanded three stage approach in Caparo Industries Plc v Dickman [1990] 2 AC 605, and any reformulation of the latter two approaches, and said:
This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the 'salient features' or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.
These salient features include:
(a) the foreseeability of harm;
(b) the nature of the harm alleged;
(c) the degree and nature of control able to be exercised by the defendant to avoid harm;
(d) the degree of vulnerability of the plaintiff to harm from the defendant's conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;
(e) the degree of reliance by the plaintiff upon the defendant;
(f) any assumption of responsibility by the defendant;
(g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;
(h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;
(i) the nature of the activity undertaken by the defendant;
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- (j) the nature or the degree of the hazard or danger liable to be caused by the defendant's conduct or the activity or substance controlled by the defendant;
(k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;
(l) any potential indeterminacy of liability;
(m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;
(n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one's own interests;
(o) the existence of conflicting duties arising from other principles of law or statute;
(p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and
(q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.
There is no suggestion in the cases that it is compulsory in any given case to make findings about all of these features. Nor should the list be seen as exhaustive. Rather, it provides a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content [102] - [104].
68 The statement of claim pleads the features of the case which Alcoa says gives rise to the relevant duty of care. Those pleadings include a pleading of assumption of responsibility by the defendants and vulnerability of Alcoa. It is not appropriate to analyse the facts alleged by Alcoa in terms of those concepts and the other salient features identified by the judgments in the High Court in Perre v Apand and Woolcock and elaborated upon by Allsop P in Stavar. The question on this application is whether such an analysis should be permitted to go to trial. Alcoa pleads that Apache Energy was in control of the day-to-day operation, management and maintenance of the Varanus Island Hub Facilities including the Sales Gas Pipelines, and that further and alternatively, the other defendants were responsible for the operation of the Varanus Island Hub Facilities. The particulars given in support of that plea include that, as licensees of the pipelines, they were responsible for their operation, management and maintenance. Alcoa also relies upon matters in affidavits sworn on behalf of the Apache companies in proceedings in Texas. Alcoa accepts that its pleading against Apache Northwest, Tap
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- and Kufpec is deficient but that the intention of the pleading was to plead that each of those defendants assumed responsibility to operate and maintain the Sales Gas Pipelines in a proper workmanlike manner and in accordance with good pipeline operating and maintenance practice, and that in relation to each of those defendants, Alcoa was vulnerable in the relevant sense.
69 The question of whether each of the defendants owed Alcoa a duty of care should be resolved in light of the facts established at trial. The issues of control, assumption of responsibility and vulnerability should be analysed and determined in light of the facts established at trial.
Is duty of care excluded by contract?
70 The third reason advanced by the defendants why it is not arguable the defendants owed to Alcoa a duty to take care to avoid the pure economic loss which Alcoa seeks to recover is that the terms of the GSAs preclude a tortious duty of care.
71 In Perre v Apand McHugh J said that a court should be slow to impose a duty of care on a defendant where another body of law can effectively deal with economic loss and this is particularly important where to do so would interfere with a coherent body of law in another field [120]. His Honour said that contract law is ordinarily a better means for determining parties' rights than imposing duties of care through negligence law. Nevertheless, McHugh J said that it is not the law of Australia that the existence of obligations under a contract denies liability in tort for pure economic loss [122]. Nevertheless, his Honour said that:
… courts must keep the contractual background in mind in determining whether a duty of care should be imposed on the defendant in pure economic loss cases [122].
- Gleeson CJ said that a consideration, which is important in restraining acceptance of a duty of care in cases where loss occurs in a contractual setting, is that the consequences of such conduct are governed and limited by the contract. The Chief Justice said there is no bright line rule which prevents recognition of a duty of care in any case where the negligent conduct caused financial loss to another, but the considerations underlying the exclusionary rule remain cogent even if they are no longer seen as absolutely compelling [5] - [8].
72 In Johnson Tiles Pty Ltd v Esso Australia Ltd (No 2) [2000] FCA 212; (2000) 97 FCR 175 Esso had a monopoly for the supply of gas in Victoria. Under a contract Esso sold gas to Gascor, a statutory body,
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- which resold it to the public. Under the contract an exclusion clause protected Esso from liability to Gascor for economic loss arising out of a negligent failure to supply gas to Gascor. The applicants were members of the public who sought damages from Esso for economic loss arising from the negligent failure by Esso to supply gas to them. The gist of the claim was that Esso was under a duty of care when designing, installing, operating and maintaining the Longford gas plant to avoid causing pecuniary loss of the kind suffered by the applicants and was liable to the applicants for that loss because of their breach of duty. Esso contended that it was not open to the applicants to claim a duty of care was owed to them for economic loss for which Esso was expressly not liable under the terms of the contract by which it sold gas to Gascor, which was subsequently resold by Gascor to the applicants. The principle for which Esso contended was that a contractual exclusion of liability and negligence for economic loss in a contract between A (for example, a producer of goods) and B (for example, a distributor) operates to exclude such liability in respect of C (for example, a purchaser of the goods from B) irrespective of whether C was, or ought to have been, aware of the contract or the terms of the contract by which B acquired the goods from A. Esso sought to strike out the applicants' claim on the basis that the claim that it owed a duty of care to the applicants was untenable. After reviewing relevant authorities, including Perre v Apand, Merkel J concluded:
95 There are a number of provisions of the Act which lead to the conclusion that the duties they impose are imposed for the benefit of or protection of a particular class of persons. Sections 39 and 57 impose duties principally for the benefit or protection of landowners affected by pipelines entering or crossing their land. The Petroleum Pipelines Act expressly confers a private right of action in those cases.
96 The Act does not, in its terms, confer any benefits upon or for the protection of consumers of petroleum conveyed by a pipeline. The class of the ultimate consumers of petroleum conveyed by the pipeline is a large section of the public. It could not be properly described as a limited class of the public such as to give rise to the conclusion that the Parliament intended to confer on members of that class a private right of action for breach of the duties created by the Act. Alcoa says that s 36A, s 38 and reg 10 were imposed for the protection of a more limited class, commercial consumers of gas conveyed by the pipeline. There is nothing in the text or context of those statutory provisions to indicate they were intended to confer a benefit upon or were for the protection of commercial consumers of gas conveyed by the pipeline.
97 Section 36A provides:
A licensee shall operate the pipelines specified in the licence of which he is the registered holder in a proper and workmanlike manner and shall secure the safety, health and welfare of persons engaged in operations in connection with the pipeline.
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- Penalty: a fine of $10,000.
98 If s 36A creates a single duty to operate the pipeline in a proper and workmanlike manner and secure the safety, health and welfare of persons engaged in operations in connection with the pipeline then the duty is one for the protection of and benefit of persons engaged in activities in connection with or in the vicinity of the pipeline and whose safety, health and welfare is, or may be, affected by the operation of the pipeline. That does not include persons whose only connection with the pipeline is to receive gas transmitted by it and who are affected by the failure to operate the pipeline in a proper and workmanlike manner only in that they suffer economic loss.
99 Alcoa submits that two obligations are created by s 36A. The first is to operate the pipeline in a proper and workmanlike manner and the second is to secure the safety of workers on the pipeline. Alcoa submits that it can be inferred that the first obligation is directed towards protecting commercial gas consumers and the second towards protecting the health and safety of workers on the pipelines. That is a strained construction. Section 36A consists of a single sentence. It has a single subject matter: the manner of operating the pipeline. The section prescribes a single penalty for its contravention. The section does not create two different duties for the benefit or protection of two separate classes of persons. It creates a duty for a single class of persons: persons engaged in operations in connection with the pipeline whose safety, health and welfare may be affected if the pipeline is not operated in a proper and workmanlike manner. Primarily, that will be workers carrying out work on or in the vicinity of the pipeline. The section is inapposite to confer any protection or benefit on persons whose only connection with the pipeline is to receive gas conveyed along it and who may be affected by the manner in which it is operated only by suffering economic loss. On its proper construction, s 36A is not for the protection or benefit of commercial gas consumers.
Penalty and alternative remedy
100 An action for breach of statutory duty is more readily allowed where there is no other adequate remedy. In Sovar v Henry Lane Pty Ltd Kitto J said:
A particular difficulty arises where the enactment which prescribes the conduct is accompanied by the express provision of a criminal sanction for the enforcement of its requirements. On the prima facie principle that expressio unius est exclusio alterius there is ground for a countervailing
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- inference of an intention that in the event of a contravention the specifically provided remedy shall be the only remedy (407).
- In X (Minors) v Bedfordshire County Council Lord Browne-Wilkinson said if the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action, although the mere existence of some other statutory remedy is not necessarily decisive (731). In Cutler v Wandsworth Stadium Ltd [1949] AC 398, 408, Lord Simonds observed that, where the statutory remedy was by way of criminal proceedings for a penalty, it could be argued that the criminal sanction emphasises that the statutory obligation is imposed for the public benefit and, hence, that the breach of it is a public rather than private wrong.
101 Sections 36A and 38 of the Act each provide for a penalty of $10,000 for a contravention of each section. Regulation 27(1) provides for a financial penalty for a contravention of the regulations, including reg 10. Furthermore, s 24 provides that noncompliance with provisions of the Act and the regulations may be enforced by cancellation of the licence. These provisions point to the conclusion that s 36A, s 38 and reg 10 are to be enforced by the relevant authority rather than by individuals raising private actions.
102 That inference is reinforced by the existence in the Act of provisions that create private rights of action in relation to specific matters. Section 7 provides that the owner of any land entered upon under the authority granted by the Minister under that section and injuriously affected or suffering damage is entitled to full compensation. The amount of compensation, if not agreed upon, is to be determined by a court of competent jurisdiction. Section 25 provides for the Supreme Court to determine whether a licensee should recover from the appropriate body any of the costs of complying with a direction to change the position or route of a pipeline and if so the amount of the payment. As I have said, s 39(1) provides that where a pipeline crosses agricultural land the licensee must restore the land to enable it to be used as far as practicable for the purposes for which it was used immediately before the construction. Section 39(2) provides a civil remedy to a landowner by providing that where the licensee fails to restore the land as required, a person with an interest in the land may restore the land and recover from the licensee in any court of competent jurisdiction the expenses reasonably incurred in carrying out that restoration. That provision is, like s 36A and s 38, found in pt III, which deals with matters relating to the
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- construction and operation of pipelines. Section 57 also confers upon a landowner a right to obtain compensation from a court for any damage sustained by a licensee in maintaining or operating a pipeline.
Private cause of action not expressly created
103 The defendants submitted that it is generally expected that conferral of a private cause of action for breach of a statutory duty occurs expressly: Byrne and Frew (458). It will be rare for such a legislative intention to be inferred: Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59; (1999) 200 CLR 1 [157]. The terms of the Act and the Regulations relied on by Alcoa do not expressly confer a private cause of action on anyone.
104 In answer to that submission Alcoa says that it is not generally expected that conferral of a private cause of action for breach of a statutory duty will occur expressly. The observations in Byrne and Frew referred to by the defendants apply to situations where a question arises as to the creation of new rights and liabilities which engage ch 3 of the Constitution and do not apply where only State legislation is involved. The defendants refer to the observations of Gleeson CJ, Gummow and Hayne JJ, in Slivak v Lurgi (Australia) Pty Ltd [2001] HCA 6; (2001) 205 CLR 304 [28].
105 In Crimmins v Stevedoring Committee Gummow J said there were three difficulties with any argument that the Stevedoring Industry Act 1956 (Cth) had conferred upon a wharf labourer a cause of action for the recovery of damages for breach of duties imposed by the Act. The second and third were:
Secondly, 'there is no action for breach of statutory duty unless the legislation confers a right on the injured person to have the duty performed' [Northern Territory v Mengel (1995) 185 CLR 307, at 343 - 345] and, as Dixon J pointed out in O'Conner v SP Bray Ltd [(1937) 56 CLR 464 at 477 - 478], the legislation will rarely yield the necessary implication positively giving a civil remedy. Thirdly, as indicated by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd [(1995) 185 CLR 410 at 458], where the legislation is a law of the Commonwealth, and the question is one respecting the creation of new rights and liabilities to engage Ch III of the Constitution, it is to be expected that the Parliament would clearly state its will [157].
- The third factor referred to by Gummow J does not apply to State legislation. However, the second factor referred to by Gummow J applies to State legislation as well as federal law. In O'Connor v SP Bray Ltd
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- (1937) 56 CLR 464, Dixon J considered a cause of action for breach of statutory duty founded upon State legislation. Dixon J said:
The received doctrine is that when a statute prescribes in the interests of the safety of members of the public or a class of them a course of conduct and does no more than penalize a breach of its provisions, the question whether a private right of action also arises must be determined as a matter of construction. The difficulty is that in such a case the legislature has in fact expressed no intention upon the subject, and an interpretation of the statute, according to ordinary canons of construction, will rarely yield a necessary implication positively giving a civil remedy (477 - 478).
For a statutory duty to give rise to a private cause of action the text of the provision, having regard to the nature, scope and purpose of the legislation, must yield a necessary implication positively giving a civil remedy. The necessary implication has more readily been found in occupational health safety and welfare legislation than in other legislation. That may be because such legislation may more readily evince an intention to benefit or protect a limited class of persons and hence may more readily evince an intention to create a private right of action than legislation enacting a scheme to regulate activities that more directly affect the public in aggregate or a significant section of the public. The text of s 36A, s 38 and reg 10 do not expressly confer a private cause of action and the nature, scope and purpose of the Act does not yield a necessary implication that a cause of action against licensees or operators who cause loss to commercial consumers of gas conveyed by the pipeline is conferred in favour of commercial consumers of the gas.
Duties are general
106 Furthermore, the general nature of the duties created by s 36A, s 38 and reg 10 indicate they are not intended to create a private right of action. Section 38 provides, amongst other things, that a licensee shall maintain the pipeline in good condition and repair. This provision creates a general rather than a specific or definite duty. It prescribes the end but not the means. It does not identify any specific precaution or measure which the licensee is to take to maintain the pipeline in good condition or repair. In McDonald v Girkaid Pty Ltd [2004] NSWCA 297 the New South Wales Court of Appeal held that reg 18(e) and reg 19(e) of the Dangerous Good Regulations 1978 (NSW) which required an occupier to take all practicable steps and all practicable measures to prevent fire created a private cause of action but reg 19(g) which required an occupier not to do any act that may cause fire. McColl JA, with whom Beazley JA and Young CJ in Eq agreed, said:
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- However, the question whether a statutory duty confers a correlative private right of action also turns on whether the statute imposes a duty to take a 'specific precaution' (O'Connor v SP Bray Ltd) or 'measures for the safety of others' (John Pfeiffer Pty Ltd v Canny).
…
Although the question whether a statute confers a private cause of action ultimately turns on the terms of the particular legislation, Slivak v Lurgi (Australia) Pty Ltd is persuasive authority supporting the view that the requirements in regs 18(e) and 19(e) to take 'all practicable steps' and 'all practicable precautions' sufficiently identify specific precautions or measures to support the primary judge's conclusion that, taken with the purpose of the dangerous goods legislation, those regulations created a private cause of action …
Regulation 19(g) is in a different category. It prescribes the end but not the means. It does not identify any specific precaution or measure which the occupier is to take for the safety of others. It is a blanket prohibition on doing the act in question. It does not tell the occupier what measures must be taken: cf Utah Construction & Engineering Pty Ltd v Pataky [1966] AC 629 at 641. In my view, the absence of identification of specific precautions means that regulation 19(g) should not be construed as conferring a correlative private cause of action … [174] - [177].
107 The general nature of the duty created by s 38 is not conclusive but it tends against the section creating a private right of action.
108 If s 36A is for the benefit or protection of a particular class of persons then it is persons engaged in operations in connection with the pipeline. If, as Alcoa contends, the provision creates two separate duties, that is a duty to operate the pipeline in a proper and workmanlike manner and another duty to secure the safety, health and welfare of persons engaged in operations in connection with the pipeline, then the second duty does not give rise to a private cause of action because it creates a general duty and specifies the ends to be achieved not the means to achieve it. If s 36A creates two duties and the second duty does not create a private cause of action then it is unlikely that by the same section of the Act the Parliament intended to create a separate duty that gives rise to a private cause of action. That is all the more so when the section prescribes a penalty for the contravention of the section.
Statutory provisions do not create private cause of action
109 Section 36A is not a provision for the benefit or protection of a limited class of persons. It is a provision for the general good. If it were for the benefit or protection of a limited class of persons then that class
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- would be persons engaged in activities in connection with or in the vicinity of the pipeline and whose safety, health and welfare is, or may be, affected by the operation of the pipeline. That does not include commercial consumers of gas conveyed by the pipeline. The Act provides means for enforcing the statutory obligation other than by private cause of action. Those means are the imposition of a penalty for breach of the Act or cancellation of the licence for noncompliance with the statutory obligation. The fact that the Parliament has expressly conferred a private right of action on landowners injuriously affected by the construction or operation of the pipeline but has not expressly conferred a private right of action on commercial, or other, consumers of gas adversely affected by its operation further points to an intention not to confer a private right of action on such persons.
110 On its proper construction, s 38 is not for the benefit or protection of a particular class of persons. It is a provision for the general good. If the duty created by s 38 is for the benefit of any particular class of persons then it would be persons who have an interest in the land over which the pipeline passes. That is seen from the context of s 38. It deals with the marking of the pipeline route and removal of things not being used in connection with the operation of the pipeline. Like s 36A, a penalty is prescribed for contravention of the section. It does not give rise to a private cause of action by commercial consumers of gas.
111 Regulation 10 is in similar terms to s 36A except that it extends to the construction of a pipeline as well as its operation. A duty to construct a pipeline in a proper and workmanlike manner is no more likely to be for the protection or benefit of commercial consumers of gas than a duty to operate the pipeline in a proper and workmanlike manner. The regulation, like s 36A, is enforceable by a penalty. It does not give rise to a cause of action by commercial consumers of gas.
Regulation 10
112 If reg 10 does, on its proper construction, give rise to a private cause of action then it is beyond the power conferred by the regulation making power. Alcoa submits the regulation confers a private cause of action on commercial consumers of gas and that it is within power. That submission requires that the Parliament must be taken to have intended to permit the Governor to impose an obligation upon all licensees to make them liable for any accident, whenever and however occurring as a result of which any commercial consumer of gas has suffered loss or damage in any amount. If it had been the intention of the Parliament to confer upon
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- the Governor power to make such a regulation then I think it would have expressly so provided and the fact that the only power expressly given is a power to impose penalties implies that the Parliament did not intend to give the Governor power to create new civil obligations. The Act creates duties and obligations for the general good. The Parliament has expressly created civil remedies where they are for the benefit or protection of a limited class, landowners injuriously affected. The regulation making power expressly confers power to impose penalties but not to create civil remedies.
Summary dismissal
113 An application for summary judgment for a defendant or to strike out a cause of action should be approached with great caution. A claim may be struck out even where extensive argument is necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. In Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 [46] Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] which included the following:
Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways … but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.
114 In Matthews v SPI Electricity Pty Ltd (No 2) [2011] VSC 168 [64] J Forrest J said that a claim asserting breach of a statutory duty is more amenable to summary dismissal than an application to dismiss a claim alleging common law negligence. His Honour cited Preston Star City Pty Ltd [1990] NSWSC 1273 and McGuirk v University of New South Wales [2009] NSWSC 1424 in support of that proposition. His Honour said this is because the question as to whether a statute confers a private right is one of construction and not dependent upon a substratum of facts.
115 In proceedings in the Federal Court applicants contended that the respondents, CASA and Officers of CASA, had breached the Civil Aviation Act 1988 (Cth) (CAA) and the Civil Aviation Regulations 1988 (CAR) and were liable in damages to the applicants for, amongst other things, breach of statutory duty. The respondents moved for summary
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- judgment or alternatively striking out the statement of claim. McKerracher J held that there was no valid basis established for a claim in damages for breach of statutory duty, struck out the statement of claim and disallowed a proposed further amended statement of claim: Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2009] FCA 1487. The applicants applied for an extension of time and for leave to appeal from the judgment refusing further amendments to the statement of claim. Gilmore J held that part of the proposed appeal which sought to proceed with a claim for damages for breach of statutory duty had no prospect of success and refused leave in relation to that part of the proposed appeal.
116 The issue of whether s 36A and s 38 of the Act and reg 10 of the Regulations creates a cause of action against the defendants for economic loss suffered by Alcoa has been fully argued. I have come to the conclusion that Alcoa's claim for damages for breach of statutory duty cannot succeed and should be struck out. I consider that it is not arguable that a breach of s 36A or s 38 or reg 10 confers a private right of action. I also consider it is not arguable that Alcoa falls within the class of the public for whose benefit those statutory provisions were enacted. I also consider that the damage suffered by Alcoa does not fall within the intended scope of those provisions. Those questions are questions of construction and not dependent upon a substratum of facts.
Conclusion
117 Alcoa no longer pursues its claim that the liquid damages provisions are unenforceable as a penalty. That claim should be struck out. Alcoa's claim for damages for breach of statutory duty is unsustainable. Those paragraphs of the statement of claim that relate solely to the claim for damages for breach of statutory duty should be struck out. I will hear the parties as to which paragraphs should be struck out. The defendants' claim for summary judgment and to strike out Alcoa's claim for damages for economic loss sustained as a result of the defendants' breach of duty should be dismissed.
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