(The Honourable Chief Justice Kourakis, The Honourable Justice Nicholson and The Honourable Justice Livesey)
21 December 2020
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE - REASONABLE FORESEEABILITY OF DAMAGE - PARTICULAR CASES - DANGEROUS THINGS OR SUBSTANCES
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - FINDINGS ON ISSUE OF NEGLIGENCE - GENERALLY
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - RIGHT OF APPEAL - WHEN APPEAL LIES - ERROR OF LAW - PARTICULAR CASES INVOLVING ERROR OF LAW - FAILURE TO GIVE REASONS FOR DECISION - ADEQUACY OF REASONS
The respondent plaintiff was exposed to asbestos from products manufactured by the appellant, James Hardie, whilst employed by fencing contractors retained by the South Australian Housing Trust between 1994 and 1997. The plaintiff was again exposed to asbestos when undertaking domestic renovations in 2000 and 2001 on his home at Pooraka, and again in 2004 when working on his home at Parafield Gardens. These products had been manufactured by James Hardie, and sold to and installed by others, many years before the plaintiff worked on them.
The plaintiff was diagnosed with a rare form of mesothelioma in August 2017, when he was just 40 years old. The plaintiff's mesothelioma was, for the purposes of the law of negligence, caused by his exposure to products manufactured by James Hardie. The plaintiff is now 44 years old and, based on evidence accepted by the trial Judge, has a life expectancy of a little more than two years, rather than the statistical average of in excess of 40 years.
At first instance, the trial Judge found James Hardie negligent and awarded damages of just over $3 million in the plaintiff's favour. James Hardie appealed to this Court, complaining that the trial Judge’s reasons were inadequate and that, in any event, the trial Judge should not have found that it owed the plaintiff a relevant duty of care, that it breached that duty of care, and nor that any breach caused the plaintiff's injury. James Hardie also complained that the assessment of damages was affected by error or manifestly excessive, particularly the assessment of $400,000 for non-economic loss, the assessment of Griffiths v Kerkemeyer damages, the assessment of Sullivan v Gordon damages, and the assessment of exemplary damages.
Held by the Court: allowing the appeal, but only to the extent of reducing the total damages award to $2,228,478.
Adequacy of Reasons
1. The provision of adequate reasons is an essential aspect of the judicial function and the failure to provide them is inimical to the open and transparent resolution of litigation.
2. It is most unwise to engage in wholesale copying of submissions without attribution. Whether the judicial function of furnishing adequate reasons has been satisfied is not determined by a mechanical assessment…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Amaca Pty Ltd v Werfel [2020] SASCFC 125
Case
[2020] SASCFC 125
Decision Date
CaseChat Overview and Summary
This case involved an appeal by Amaca Pty Ltd against a decision of a single judge concerning negligence and damages. The dispute arose from Mr. Werfel's claims for personal injury sustained due to exposure to asbestos products manufactured and distributed by companies within the James Hardie Group, including Amaca Pty Ltd. The appeal concerned both the finding of liability and the assessment of damages awarded to Mr. Werfel.
The primary legal issues before the Full Court of the Supreme Court of South Australia were whether the primary judge erred in finding Amaca Pty Ltd liable in negligence, and whether the quantum of damages awarded was excessive. The Court was also required to consider the adequacy of the primary judge's reasons for their decision, particularly in relation to the assessment of damages.
The Court dismissed the appeal against liability, upholding the primary judge's finding that Amaca Pty Ltd was negligent. However, the appeal against damages was allowed in part. The Court reasoned that while the primary judge's assessment of damages was broadly correct, certain components and the overall quantum required reassessment. The Court applied principles of assessing damages for personal injury, including allowances for pain and suffering, loss of amenities, and past gratuitous services, and made specific adjustments to the interest awarded on past losses. The Court also considered the corporate structure and financial capacity of the James Hardie Group in the context of its product liability responsibilities, drawing on findings from a Special Commission of Inquiry.
The Court set aside the primary judge's award of $3,077,187 and substituted it with an award of $2,228,478. The Court indicated it would hear from the parties regarding the form of the final orders and costs.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
In our view, an appropriate award of exemplary damages in the circumstances of this case would be $35,000.Conclusions on damages We have indicated the assessments of damages that we propose to make on reassessment, for the reasons we have given. Nonetheless we have also reflected on the overall damages award in contemplation. In our view, it represents a reasonable allowance for the loss and damage sustained by Mr Werfel. Allowance must be made for interest on past losses. It is usual to apply interest over half the period to judgment so as to reflect the accruing nature of the loss.[428] On pain and suffering and loss of amenities, we apportion $175,000 of the $280,000 awarded to the past, and allow interest at 4 per cent. Accordingly, we allow the sum of $7,000.[429] [428] Wheeler v Page (1982) 31 SASR 1.[429] Section 30C, Supreme Court Act 1935, MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; Wheeler v Page (1982) 31 SASR 1, 6 (King CJ (with whom Jacobs and Prior JJ agreed). For past gratuitous services provided to Mr Werfel, the calculation must be at commercial rates.[430] The Judge used a rate of 6.5 per cent. Accordingly, the interest awarded on the $25,000 award for past gratuitous services is $1,625. For past Sullivan v Gordon damages in respect of the services that Mr Werfel would have provided to Mrs Werfel and their daughters, the allowance to trial is, for the first year, $20,800 and, for the second year until recurrence, $27,000. At a rate of 6.5 per cent the allowance becomes $3,107.[430] Grincelis v House (2000) 201 CLR 321. Accordingly, we set aside the Judge’s assessment and substitute the following award of damages: The appeal against liability is dismissed. The appeal against damages is allowed in part. The Judge’s award of $3,077,187 is set aside and replaced with an award of $2,228,478. We will hear from the parties regarding the appropriate form of the orders to be made and as to costs.Appendix: James Hardie – corporate structures and financial capacityJames Hardie was one of a group of companies, the shares in which were wholly or largely owned by James Hardie Industries Ltd (JHIL). James Hardie was a manufacturer and wholesaler of asbestos products generally and, relevantly to this matter, of asbestos-cement home building products in particular. It was one of the main operating companies of the companies controlled by JHIL (the James Hardie Group). James Hardie wound down its asbestos production in the 1980s, and finally ceased production and distribution in 1987.In 2001 the James Hardie Group established the Medical Research and Compensation Foundation (the MRCF), to make provision for personal injury claims arising out of its asbestos operations. On 27 February 2004, an inquiry into the establishment and operation of the MRCF was initiated under s 4(1) of the Special Commissions of Inquiry Act 1983 (NSW) (The Inquiry). Mr DF Jackson QC was the appointed commissioner. The report was received into evidence at Mr Werfel’s trial. The facts set out in this section are drawn from that report.The MRCF became the shareholder of Amaca Pty Ltd, which was then the name of James Hardie and of another company in the James Hardie Group then known as Amaba Pty Ltd (Amaba). In this judgment, the corporation which was first named James Hardie and later changed its name to Amaca Pty Ltd has been referred to as James Hardie. The net assets of both corporations as of 30 June 2004 were $179.2 million but were acquired by the foundation for no monetary consideration. Over time, JHIL made further contributions to the MRCF so that the value, as at the time of the Commissioner’s report, of the total assets acquired by it, were $293 million. Even though an amount of $63.01 million was set aside against those assets to meet currently notified asbestos‑related claims, Commissioner Jackson estimated the net present value of all future claims to be $1.5 billion. Commissioner Jackson found that the estimate of future liabilities, on the basis of which the MRCF was first funded, was calculated from overly favourable assumptions. Certain claims which James Hardie and Amaba might have against insurance companies was found to have a net present value of about $160 million. Commissioner Jackson found that MRCF’s funds would be exhausted by 2007 if its funds were not augmented. In October 2001, a scheme of arrangement was approved whereby the holding company of the James Hardie Group became James Hardie Industries NV (JHI NV), a Dutch company. The shareholders of JHIL became shareholders in JHI NV. The shares held by JHI NV in JHIL were only partially paid-up; JHIL was entitled to make a call for up to $1.9 billion if it were necessary for it to do so in order to maintain its solvency.In March 2003, JHI NV and JHIL agreed to cancel the partly paid up shares. A new Foundation (the ABN 60 Foundation) then became the sole shareholder of JHIL. At the time of that reconstruction, the net assets of JHIL were about $20 million. For some time after the establishment of the MRCF, the James Hardie Group refused to substantially increase its funding of the MRCF. In his report, Commissioner Jackson observed that there was no legal obligation on JHIL to fund the liabilities of James Hardie and Amaba simply because they were subsidiaries, but recognised the commercial interest of JHIL in making adequate provision for those liabilities. In a discussion which bears both on the commerciality of a large business accepting its product liability responsibilities and moving on, and on the public policy tensions between profit and responsibility for product liability which must be resolved within the law of negligence, Commissioner Jackson observed:The James Hardie Group has also indicated, subject to various matters dealt with in discussing Term of Reference 4 (including that it is under no legal obligation to do so), that it is prepared to fund the future asbestos liabilities of Amaca, Amaba and JHIL. In my opinion it is right that it should do so. There may have been no legal obligation on JHIL to fund the liabilities of Amaca and Amaba simply because they were its subsidiaries, but if it were thought, in the interests of JHIL, for it to be separated from those subsidiaries because of the shadow of asbestos liabilities they brought with them, it is hard to see why it would not have been in the interests of JHIL to provide the funding which was necessary to enable that to be done effectively. To do it effectively meant to do it in a way which would not result in the issue rearing its head again, as has happened here, with very adverse results to the public standing of James Hardie. If the interests of JHIL’s shareholders were thought to lie in cutting loose the asbestos liabilities, what seems to have been overlooked, is what Mr Peter Shafron (the Group’ Chief General Counsel) had said to the Board some twelve months before in his paper “Asbestos”:‘The overall US experience on reorganisations, as described by JH’s US attorneys, has some admittedly fairly obvious lessons for us:In sum, the US experience has shown thus far that a carefully planned reorganisation that makes fair provision for the asbestos claims has some chance of succeeding. But any attempt at reorganisation that does not leave significant assets for the asbestos claims will, at a minimum, spawn lengthy and costly litigation with the plaintiffs’ bar, and may ultimately be unsuccessful.’I add two observations.The first is that I can understand how, the manufacture of asbestos products having ceased in the 1980s (finally in 1987), asbestos liabilities came to be described within the James Hardie Group as ‘legacy issues’ or part of the ‘rump’. That mode of thought, however, tends to obscure the true legal situation. The negligence of the James Hardie companies occurred in the past, but the liabilities flowing from that negligence only arise day by day, now and in the future, as the diseases are acquired or manifest themselves. The exposure to asbestos may not even yet have occurred. The position in February 2001 was, as it remains, that members of the public will contract asbestos‑related diseases over many years because of the negligence of Amaca and Amaba. The notion that the holding company would make the cheapest provision thought ‘marketable’ in respect of those liabilities so that it could go off to pursue its other more lucrative interests insulated from those liabilities is singularly unattractive. Why should the victims and the public bear the cost not provided for?(Citations omitted)The third term of reference of the Inquiry was to consider the circumstances in which any corporate reconstruction or asset transfers occurred, within, or in relation, to the James Hardie Group, prior to the separation of MRCF from James Hardie Group to the extent that this may have affected the ability of MRCF to meet its current and future asbestos‑related liabilities. The effect on the ability of the MRCF to meet its future liabilities is, of course, not relevant to these proceedings. However, the evidence received by the Inquiry disclosed the financial resources available to James Hardie, out of which provision could have been made to fund its liabilities, or warn of the danger of asbestos products, in order to reduce those liabilities.In 1995 James Hardie sold its core technology to a dedicated research and development company in the James Hardie Group for $75 million. In the same year, it sold other business entities for a net profit of $38.255 million. James Hardie’s operating profit before income tax for the year ending 31 March 1996 was $109,369,000. There were retained profits of $57,775,000. After adjustments for income tax, and taking into account certain abnormal items, its total operating profit was $110,195,000. After an adjustment for a change in accounting policy, the total available for appropriation was $166,734,000. Two dividends were paid totalling $100,900,000 during that year to JHIL or other companies in the James Hardie Group. In the following financial year, James Hardie paid JHIL $43.5 million. James Hardie ceased to be an operating company in 1998, when its business was sold to JHI NV and its real estate was leased to another company or companies in the James Hardie Group.