Apache Energy Limited v Alcoa of Australia Limited
[2012] WASCA 201
•10 OCTOBER 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: APACHE ENERGY LIMITED -v- ALCOA OF AUSTRALIA LIMITED [2012] WASCA 201
CORAM: PULLIN JA
HEARD: 4 OCTOBER 2012
DELIVERED : 10 OCTOBER 2012
FILE NO/S: CACV 95 of 2012
BETWEEN: APACHE ENERGY LIMITED
First Appellant
APACHE NORTHWEST PTY LTD
Second AppellantHARRIET (ONYX) PTY LTD
Third AppellantAND
ALCOA OF AUSTRALIA LIMITED
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :LE MIERE J
Citation :ALCOA OF AUSTRALIA LTD -v- APACHE ENERGY LTD [2012] WASC 209
File No :CIV 1481 of 2011
Catchwords:
Appeal - Application for a stay of interlocutory orders pending hearing of application for leave to appeal
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court (Court of Appeal) Rules 2005 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
First Appellant : Mr D O'Callaghan SC & Ms P A Saraceni
Second Appellant : Mr D O'Callaghan SC & Ms P A Saraceni
Third Appellant : Ms C J Robertson
Respondent: Mr D Collins SC
Solicitors:
First Appellant : Middletons
Second Appellant : Clifford Chance
Third Appellant : Lavan Legal
Respondent: Tottle Partners
Case(s) referred to in judgment(s):
Barclay v Penberthy [2012] HCA 40
Chief Executive Officer, Department for Child Protection v S [2007] WASCA 230
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102
Mann v Dabelstein [2006] WASCA 176
Samuels v The State of Western Australia [2005] WASCA 193
Town of Port Hedland v Hodder [2012] WASCA 9
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
PULLIN JA: This is an application by the appellants for a stay of interlocutory orders pending the hearing of an application for leave to appeal against those orders. The appellant relies on Supreme Court (Court of Appeal) Rules 2005 (WA) which confers power on the court to make an interim order including an order staying proceedings in the primary court. See r 44(1) and r 3(1) which defines the expression 'interim order'.
The power conferred on the court to grant a stay pending appeal is unconfined by any express criteria, but 'generally applicable' principles or considerations relevant to a stay application were stated in Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308. They are that the successful litigant will ordinarily be entitled to enforce the judgment pending the determination of any appeal, that it is for the applicant for a stay to move the court to a favourable exercise of its discretion, and that the court will not grant a stay unless special circumstances are shown justifying a departure from the ordinary rule. The requirement that special circumstances be shown is an express requirement when an application is made for a suspension order under s 15 of the Civil Judgments Enforcement Act 2004 (WA). Speaking generally, the same considerations apply whether an application is made for a stay or a suspension order.
In determining whether special circumstances exist, the first issue usually considered is whether the grant of a stay is perceived to be necessary to preserve the subject matter or integrity of the litigation or whether the refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal; in short whether without the grant of a stay, the right of appeal, whether upon the grant of leave or not, will be rendered nugatory. If that can be established, the stay will generally still be refused unless it can be established that the appeal, whether upon the grant of leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant. A stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant.
These considerations are not inflexible or exhaustive. See Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [2011] WASCA 118 [15] (Newnes JA).
The circumstances leading to this application for a stay are as follows. Under a gas supply agreement, the second and third appellant and another supplied gas to the respondent. The first appellant was in control of the day‑to‑day operations and the management and maintenance of the pipelines through which the gas was delivered to the respondent.
On 3 June 2008 there was an explosion in a pipeline on Varanus Island which resulted in an immediate and total cessation of supply of gas to the respondent. As a result, the respondent, as plaintiff, sued the appellants and one other for damages. In the respondent's statement of claim, it pleaded that the first appellant owed a duty to exercise reasonable care and skill in operating, maintaining and/or repairing the pipeline to prevent a rupture of the pipeline and therefore avoid economic loss being suffered by Alcoa. The respondent also pleaded that the first appellant was guilty of a breach of statutory duty in failing to operate the pipeline in a proper and workmanlike manner and in accordance with good pipeline operating practice.
The respondent claimed against the second and third appellants that they were responsible for the operation of the Varanus Island hub facilities and that they owed a duty to exercise reasonable care and skill in supervising, overseeing and/or monitoring the operation, maintenance and/or repair of the pipeline to prevent rupture due to corrosion and thereby avoid economic loss being suffered by the respondent. The respondent also pleaded that the second and third appellants breached statutory duties.
Finally, the respondent made a claim in contract. This was a claim against the second and third appellants and another, that they breached the terms of the gas supply agreement.
The gas supply agreement contained liquidated damages provisions. The respondent pleaded that each of the liquidated damages provisions were void and unenforceable as a penalty and that in consequence damages were at large. However, this claim was abandoned. The appellants contend that in view of that abandonment and some information put before the court and which the parties agreed should remain confidential (but which has not yet been made the subject of any confidentiality order in this court), the claim for liquidated damages will not have to be, or should not be, litigated in which case the negligence claim will be the only issue left. The appellants contend that the claim in negligence has no merit.
The appellants apply for summary judgment
The appellants applied for summary dismissal of the respondent's claim under O 16 Rules of the Supreme Court 1971 (WA). This came on for hearing before Le Miere J. The appellants argued that the plaintiffs' claim for pure economic loss based on a general law breach of duty and the claim for breach of statutory duty could not succeed. The decision of Le Miere J in Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209 recorded three reasons for the appellants' submission that it was not arguable that the appellants owed the respondent a duty of care to avoid pure economic loss. They were:
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 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).
As to the first reason, Le Miere J made further reference to the appellants' submissions, which was to the effect that the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, is authority for the proposition that 'vulnerability' is a necessary element in establishing a duty of care to avoid pure economic loss. His Honour said [44] that '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, but that the plurality in Woolcock expressly declined to 'identify or articulate the breadth of any general proposition about the important of vulnerability'. His Honour then looked to some decisions of intermediate courts of appeal for guidance, including the decision of Fugro Spatial Solutions Pty Ltd v Cifuentes [2011] WASCA 102 (which has subsequently been reviewed on appeal by the High Court. See Barclay v Penberthy [2012] HCA 40). After the review of those decisions, his Honour concluded [53] that the law was 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 features of the case. His Honour then went on to deal with the question of whether Alcoa was 'vulnerable'. His Honour concluded that 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' [61].
As to the second reason the appellants advanced, his Honour concluded that the matter should go to trial to determine the nature of the relationship between the appellants and the respondent and whether it was 'ordinary' or 'special' which would depend upon the analysis at trial of facts such as control, assumption of responsibility and vulnerability.
As to the third reason advanced by the appellants, which was that the terms of the sale contract precluded a tortious duty of care, his Honour concluded that, once again, this question involved examining not just the contract, but also the other salient features of the case.
In relation to the claim for breach of statutory duty, his Honour agreed with the appellants that such claims should be summarily dismissed, because a private cause of action was not conferred on the respondent by the legislation relied upon by the respondent.
His Honour concluded (at [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.
There was a further hearing before his Honour on 7 August 2012 which resulted in the settling of the orders to be made following the publication of the earlier reasons for decision. The orders provided for the striking out of the paragraphs alleging breach of statutory duty, and the paragraphs alleging that liquidated damages provisions in the contract in favour of the respondent were a penalty. The respondent was granted leave to serve a further amended statement of claim in accordance with a minute which excised the paragraphs alleging the breach of statutory duty and alleging that the liquidated damages provisions were a penalty. The appellants' application was otherwise dismissed. The appellants were ordered to pay a proportion of costs and were ordered to file and serve a defence by 15 October 2012. The respondent was ordered to file and serve a reply by 15 November 2012. There was also an order that there should be a directions hearing on 5 December 2012.
On 21 August 2012, the appellants filed an appeal notice seeking leave to appeal against the orders. On 12 September 2012, the application for a stay of proceedings was filed, supported by an affidavit of B D Luscombe.
The appellants' case sets out 15 grounds of appeal. The grounds repeat arguments advanced before Le Miere J and contend that his Honour erred by not accepting those submissions, and one ground alleges that his Honour did not address an argument advanced by the appellants.
The appellants contend that the application for leave to appeal (which will probably be heard with the appeal) is unlikely to be heard before February 2013 and that by then the appellants will be required to file their defences, the respondent will be required to file its reply and that there will have been a directions hearing. The appellants complain that the primary court has required the parties to confer about their positions on discovery and if agreement is not reached to address the court in December on the appropriate form that discovery is to take, and whether discovery should be given in stages. The appellants also point out that O 19 of the Rules of the Supreme Court requires a defendant to serve any third party notice before its defence is filed, failing which leave is required and that if the judgment appealed against is stayed, then the right of each party to join third parties without the need to obtain leave will be preserved. The appellants submit that if a stay is not granted:
[T]he defendants will face real and considerable practical difficulties because they will be forced to deploy considerable efforts and resources in order to deal with the consequences of the orders and the court's expectations in relation to discovery. Further, the plaintiff will also be put to effort and expense in complying with the orders and the court's expectations in relation to discovery.
The appellants then contend:
All of that effort will be rendered nugatory in the event that leave is granted and the appeal succeeds.
Thus the appellants do not attempt to show that the appeal will be rendered nugatory if a stay is not granted. Clearly it will not. They merely complain that third parties 'may be affected' by the service of third party notices, and that the appellants will have to do work if the stay is not granted that costs orders might not fully compensate them for if they win the appeal. However, this latter point is not significant in this case. This is not a case like Mann v Dabelstein [2006] WASCA 176 where the appellant had very limited financial means and the incurring of expense pending appeal was significant.
The appellants submitted that the fact that the appeal will not be rendered nugatory if a stay is not granted, is of little or no relevance in this case. This submission was supported by a reference to my reasons for decision in Chief Executive Officer, Department for Child Protection v S [2007] WASCA 230 where I said:
The jurisdiction conferred by the SAT Act to grant a stay is unconfined by any express criteria. In Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308, 'generally applicable' principles or considerations relevant on a stay application were listed [9]. One of the considerations listed was whether or not, without the grant of a stay, the right of appeal would be rendered nugatory. This is particularly important where the judgment concerns money or property. See for example Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220 per Dawson J at 222 - 223. However, in a case where there is no property to be transferred nor money to be paid pursuant to the judgment, that consideration may be of little or no relevance. In this case a refusal of a stay would not render the appeal nugatory. The important considerations in this case are public interest considerations, the balance of convenience, whether the appeal has reasonable prospects of success and the principle that the respondent is entitled to the benefit of (or the 'fruits' of) the judgment appealed from. Public interest considerations will often be relevant when considering the right or freedom of a person to practice or work or fulfil a position pending a decision or appeal which calls that right or freedom into question. See for example Jemielita v The Medical Board of Western Australia (Unreported; WASC; Library No 920389; Ipp J; 24 July 1992) and Chief Executive Officer, Department for Child Protection v C [15].
That case concerned an application for a stay of orders made by the State Administrative Tribunal. The tribunal had overturned a decision by the appellant who had issued a negative notice under the Working with Children (Criminal Record Checking) Act 2004 (WA), the effect of which was to prevent the respondent from carrying out child‑related work. A decision was made to grant a stay after taking into account the public interest consideration of ensuring that the respondent was not free to continue his work as a coach with child athletes, pending the hearing of the appeal against the decision of the tribunal, which if not stayed, would have given him the right to do so. Considerations of that kind do not apply in this case. In this case it is relevant to consider the fact that this appeal will not be rendered nugatory in any respect if a stay is not granted.
The submission about third parties is merely that such parties 'may be affected'. There was no evidence that a decision had been made to join third parties.
In relation to the balance of convenience, the appellants submit that the only adverse effect on the respondent is that the proceedings at first instance might be delayed for a period of up to about three months if leave to appeal is not granted. That is not entirely correct because that does not take account of the time which will pass if judgment in the appeal is reserved.
Special circumstances have not been shown by the appellants. As already noted, the appeal will not be rendered nugatory in any respect if a stay is not granted. The fact that the appellants might not be fully compensated for their efforts in complying with orders by an award of costs and that they will have to comply with the case management orders does not establish special circumstances. Nor does the mere possibility that third parties might be joined, demonstrate that special circumstances exist. The only effect of a stay would be to interfere with case management orders. It is in the interests of all parties that a trial, if it is necessary, take place as soon as possible.
The appeal grounds do not have to be considered in detail. All that has to be shown is that there are reasonable prospects of success. Grounds of appeal that have a rational and logical prospect of succeeding, are grounds that are not 'irrational, fanciful or absurd': Samuels v The State of Western Australia [2005] WASCA 193; Town of Port Hedland v Hodder [2012] WASCA 9. The reason for this consideration is primarily so that a court may refuse a stay in circumstances where it is plain that the appeal is without merit and brought merely for the purpose of delaying compliance with the judgment under appeal. I will proceed by assuming that the grounds have reasonable prospects of success.
The balance of convenience does not strongly favour one or other party. The appellants say that they should not be put to work in relation to the trial pending the hearing of the appeal. The respondent on the other hand, says that if a stay if granted, the progress of the trial will be delayed. The balance of convenience does slightly favour a refusal of a stay because the respondent has a judgment in its favour. As a result the programming orders should be complied with.
The appellants' application for a stay pending the appeal is dismissed.
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