Babcock Australia Ltd v Eraring Energy and Babcock International LtdEraring Energy v Babcock Australia Ltd and Babcock International Ltd

[2001] NSWDDT 5

Reported Decision (2201) 22 NSWCCR 141

Dust Diseases Tribunal

of New South Wales

CITATION:	Babcock Australia Ltd v Eraring Energy and Babcock International LtdEraring Energy v Babcock Australia Ltd and Babcock International Ltd [2001] NSWDDT 5
PARTIES:	Babcock Australia Ltd Eraring Energy Babcock International Ltd
MATTER NUMBER(S):	17 of 1992/1; 17 of 1992/2
JUDGMENT OF:	Curtis J at 1
CATCHWORDS:	Negligence :- Cross claims s 5 Law Reform (Miscellaneous Provisions) Act Knowledge of corporations Satisfaction Agency of state corporations
LEGISLATION CITED:	Law Reform (Miscellaneous Provisions) Act
CASES CITED:
DATES OF HEARING:	7/5/01-10/5/01, 14/5/01, 16/5/01-18/5/01, 21/5/01-24/5/01, 29/5/01, 30/5/01, 12/6/01, 13/6/01
DATE OF JUDGMENT:	07/19/2001
LEGAL REPRESENTATIVES:	Mr G Inatey SC with Mr D Miller instructed by Moray and Agnew appeared for Babcock Australia Ltd (the first cross-claimant and first cross-defendant to the second cross-claim) Mr B M Toomey QC with Mr J A Gracie and Ms T Moisidis instructed by Goldrick Farrell Mullan appeared for Eraring Energy (the second cross-claimant and first cross-defendant to the first cross-claim) Mr R J Burbidge QC with Mr S Kettle instructed by Mallesons Stephen Jacques appeared for Babcock International Ltd (the second cross-defendant to the first and second cross-claims)

JUDGMENT:

CONTENTS

INTRODUCTION

Par 1

BIL Par 4
BAL Par 14
Eraring Energy Par 20
The Wangi Contract Par 21

The System of Work Par 24
The Source of Asbestos Rope Par 46

Foreseeability Par 58
Knowledge of BIL Par 64
Duty Par 102

THE TORTIOUS LIABILITY OF BIL TO BAL Par 113

THE TORTIOUS LIABILITY OF ERARING ENERGY TO BAL Par 119

Par 120

Culpability Generally Par 121
The Culpability of Eraring Energy Par 128
The Culpability of BAL Par 148
The Culpability of BIL Par 150
Causal Potency Par 157
Conclusion Par 160

The Position of Eraring Energy Par 161
The Position of BAL Par 165

CALCULATIONS OF LIABILITY Par 181

ORDERS Par 184

JUDGMENT

CURTIS J

1. Robert William Royal contracted asbestos related diseases in the course of his employment with Babcock Australia Ltd (BAL) between 14 June 1955 and 22 March 1957 on the construction of the Wangi Power Station. The works were undertaken by the Commissioner for Railways as predecessor in title successively to The Electricity Commission (Elcom), Pacific Power (PP) and Eraring Energy. The Commissioner contracted the boiler construction to Babcock Australia Ltd (BAL) at the request of its parent company Babcock International Ltd (BIL). BIL had designed the boilers and tendered for their construction. This tender was accepted by the Commissioner who then consented to the novation of the contract to BAL. Mr Royal sued Eraring Energy and BAL in tort for damages and on 5 May 1999 he recovered judgment against the defendants in the sum of $145,000. The present proceedings relate to cross-claims generated by this liability.

2. BAL and Eraring Energy seek orders pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 apportioning liability between themselves. In addition they each seek a contribution from BIL pursuant to that statute, asserting that BIL as designer of the works and systems of work, and supplier of asbestos to BAL, owed a duty of care to Mr Royal. In addition, BAL claims damages from BIL and Eraring Energy, asserting that the economic loss comprising the judgment and costs ordered against it was suffered in consequence of the breach by BIL and Elcom of duties owed directly to BAL.

3. BIL denies it owed any duty to either the plaintiff or to BAL. BIL also asserts that the claims of Eraring Energy and BAL have been satisfied pro tanto by moneys paid by James Hardie & Coy to Eraring Energy and BAL in response to cross claims issued by those claimants against James Hardie & Coy in respect of the plaintiff’s judgment.

THE PARTIES
Babcock International Ltd

4. In 1867 two Americans, Messrs Babcock and Wilcox, patented the first water tube boiler to be produced commercially. This device permitted the raising of steam without the necessity of boiling a large tank of water in a shell boiler and constituted a significant advance in the provision of steam power. After trading as a partnership for some time the patentors incorporated Babcock and Wilcox Limited in New York in 1881 to exploit the new invention.

5. The development of this new and radically more efficient boiler happily coincided with the invention of the steam turbine in 1888 and the growing demand for electrical lighting and power.

6. By 1890 the rapid growth of business in Europe exceeded the capacity of the American parent to provide capital, and a new company, Babcock and Wilcox Limited was incorporated in London. This company purchased from the American company the patent rights in Britain, Belgium, France, Germany, Austro-Hungary, Switzerland, Spain, Russia, Italy, India, Australia and New Zealand. The British company had for its sphere of future operation the whole world outside the US and Cuba. (PPX1, vol 2 t 31)

7. The new company grew rapidly. A book published in its 11th edition by BIL in January 1927 reproduces photographs of Babcock and Wilcox boilers in South Africa, Australia, Peru, China, New Zealand, Mexico, Holland, Java, Italy, Sweden, Spain, Japan, Nova Scotia, Ireland, Belgium, India, Argentina, Chile, Brazil, Canada, Denmark and Russia. (PPX1 vol 2 t 3)

8. The original capital of the British company Babcock and Wilcox Ltd was £240,000. In1900 this was increased to £1,575,000. In 1939 the issued capital of BIL was £4,578,712. By September 1949 this had increased to £7,299,321; by November 1953 to £9,807,454 and by March 1958 to £11,688,553 (PPX1 vol 2 t 31).

9. In 1949, the year in which the Wangi contract was executed, BIL erected 36 power station boilers and 42 industrial boilers in the UK (PPX4 vol 3 t 6).

10. In 1954, the year in which Mr Henry Voss, a BAL employee, was sent to the UK for training by BIL prior to his assuming duties as control engineer at Wangi, BIL supplied 53.5 per cent of all new steaming capacity supplied that year to the British Electric Authority. (PPX 4 Vol 3 t17)

11. Of the total UK production of water tube boilers in 1957 valued at approximately £19,000,000, the Babcock and Wilcox production was in excess of £13,000,000. In that year BIL and its subsidiaries in the UK employed 15,000 men and women. The main works at Renfrew near Glasgow occupied a site of 165 acres. A separate site of five and a quarter acres contained a research facility with a floor area of 54,000 square feet employing 244 persons of whom 38 were graduates or equivalent (PPX1 vol 2 t 18).

12. BIL had since early years a substantial share of the market for marine boilers in naval and merchant ships (PPX1 vol 1 t 3, PPX1 vol 2 t 32 p 3). The 128,000 horse power engines of the battle ship "Renown" were driven by Babcock and Wilcox boilers (PPX1 vol 1 t 3 p 208). Between 1947 and at least 1959, all British frigates and guided missile vessels were built with Babcock boilers. (PPX1 vol 2 t 32).

13. BIL was in 1959 accurately referred to as "The giant of the industry" (per Upjohn J in re Water Tube Boiler Makers Association Agreement ((1959) 3 All ER 257 at 262)).

Babcock Australia Ltd

14. From its earliest years BIL conducted extensive business in Australia. An Australian board was formed on some date unknown but it conducted its 274th meeting on 29 September 1948 (PPX 7 t 8). In 1918 BIL was involved in negotiations with the Federal government concerning the appropriate tariff treatment of asbestos products asserting that "almost every class of boiler covering is composed of some kind of mixture containing proportions of fibrous asbestos." (PPX1 vol 1 t 1)

15. In 1923 BIL established an engineering works at Regents Park in New South Wales and between 1923 and 1928 the company constructed boilers for power stations at White Bay, Ultimo, Balmain, Port Kembla, Bunnerong and Yallourn. (PPX1 vol 2 t 38 p 18 to 20)

16. On 10 September 1948 BIL caused BAL to be incorporated in Australia as a wholly owned subsidiary to commence trading on 1 October 1948. BAL issued to BIL 670,000 1 shares and upon payment for this allotment applied the proceeds on account of the purchase price for the whole of BIL’s Australian assets of land, plant and equipment.

17. It is beyond dispute that BAL operated as the creature of BIL which exercised almost total control over its subsidiary. I have before me volumes of material evidencing the control of BAL by BIL, however, one instance is sufficient to illustrate that domination. On 12 April 1954 BIL and BAL entered a formal "Consultancy" agreement governing the use by BAL of BIL’s expertise and products (PPX 7 v 1 t 43). The agreement was expressed to continue for 20 years from 1 October 1948 (cl 28) and during that period BAL was to pay to BIL £5,000 per annum as a fee (cl 13). On 20 December 1957 BIL unilaterally demanded, and on 21 January 1958 BAL agreed, that the fee should be increased to £25,000 annually.

18. Notwithstanding this control, BAL was not a sham corporation but a result of legitimate commercial transactions by BIL intended probably to reduce its exposure to United Kingdom taxation.

19. I bear in mind that the control of BAL by BIL does not of itself create any duty by BIL to exercise that control, nor is it asserted by PP or BAL that BAL was the agent of BIL in the Wangi undertaking.

Eraring Energy

20. Eraring Energy is the successor in title to such assets and liabilities of the Commissioner for Railways and the Electricity Commission of New South Wales (Elcom) and Pacific Power (PP) as relate to the Wangi Power Station. Elcom came into existence on 22 May 1950 pursuant to the Electricity Act (1950). Elcom was established by that Act for the purpose of acquiring the major power generating organisations in New South Wales and amalgamating them into one system capable of supplying the needs of all electric distributing organisations within the state including those of the Commissioner for Railways. The Commissioner for Railways had originally established his own power stations to supply metropolitan traction needs and over the years came to supply electricity in bulk to local government bodies. It was the Commissioner who commissioned the power station at Wangi, however, the works were by force of the Electricity Act transferred to Elcom whose officers supervised construction.

The Wangi Contract

21. In 1945 the Commissioner for Railways contracted with BIL for the construction of two Babcock and Wilcox water tube boilers at White Bay Power Station. In 1948 he called for tenders for the construction of four similar boilers at Wangi. On 3 August 1948 BIL submitted a tender complete with specifications and plans to complete the Wangi works at a price of £1,632,304. On 7 October 1948 the Commissioner accepted this tender. On 10 September 1948 BAL was incorporated to commence business on 1 October 1948.

22. On 8 September 1948 BIL wrote to the Commissioner in relation to the White Bay contract advising of its intention to form BAL for the purpose of carrying on the business previously conducted by BIL in Australia through its Australian branch. BIL wrote that:

The new company is to be incorporated almost entirely for administrative reasons and the whole of the issued capital will be held by BIL under whose control the new company will carry on all existing contracts.

23. On 25 October 1948 the Commissioner wrote to BIL advising of his approval of the Wangi contract "being considered as having been placed with BAL." On 19 May 1949 a formal contract was executed between the Commissioner and BAL which contract recited this agreement.

24. The Wangi power station comprises six Babcock and Wilcox Water Tube boilers, each serving a turbine and a generator. The plaintiff for 92 weeks between 14 June 1955 and 22 March 1957 worked upon the construction of the furnaces for Numbers 2 and 3 boilers.

25. Each boiler consisted of a furnace chamber approximately 24 foot square and 100 foot in height, located over a continuously fed coal fire within which hot gases heated a maze of metal tubes comprising the primary and secondary super-heaters, in which steam was created to drive the turbine. The walls and roof of the chamber were thickly sealed with asbestos. A side aperture permitted the flow of gases to a smaller economiser chamber where fresh water was pre-heated before introduction into the system, the spent gases then escaping to a chimney. Each furnace produced steam at an outward temperature of 840 degrees Fahrenheit and consumed 200,000 pounds of water each hour.

26. No steam pipes intruded into that space comprising the lowest 18 foot of the furnace column. The walls of that space were constituted (before outside cladding) by a cage of vertical three and a quarter inch diameter metal tubes set two and three-quarter inches apart, connected to manifolds at top and bottom. It was into these tubes that the warmed water from the economisers was introduced into the system before transfer into the superheaters. To assist in heat transference to these tubes, cast iron blocks were bolted to them. The face of each block measured approximately six inches by four inches and the rear surface was moulded so as to sit snugly in contact with the curved surface of the tubes. Each block firmly abutted the neighbouring block beside it. The blocks were laid in horizontal rows with a vertical space of one-eighth of an inch between each row. The gaps between the pipes thus exposed were caulked by short sections of asbestos rope.

27. This arrangement of tubes and blocks was invented and patented by BIL and known as the “Bailey Water-cooled Furnace Wall”. In advertising material BIL claimed many "outstanding advantages” for the Bailey wall over conventional arrangements, including greater furnace efficiency and reduced maintenance.

28. Ninety per cent of the work performed by the plaintiff at Wangi was upon construction of the Bailey wall (PPX 22 par 5). Before the cast iron Bailey blocks were affixed to the water tubes the plaintiff abraded the surface of the tubes with emery paper. After the blocks were affixed it was his task to caulk the horizontal spaces between the rows of blocks with asbestos rope. The manner in which this caulking was to be performed was prescribed in a manual entitled "Bailey water-cooled furnace walls, erecting instructions", written and published by BIL some time prior to 1948. It was in use in the late 1930’s (Transcript pp 464.47-465.19). Page 28 of that manual contains this paragraph (PPX4 vol 2 t16, PPX3 vol 2 t 20):

This caulking must be carried out with three-eighth inch diameter 'Pluto' white asbestos plaited yarn - ref: WPS/30/80 (or its equivalent).The packing must be cut into lengths equal to the clearance dimension between the tubes - approximately two and three-quarter inches - and firmly stemmed in the one-eighth (nominal) horizontal gaps between the blocks working from the outside of the wall. The plaited packing must not be used in a continuous length.

29. It was the practice of the plaintiff to cut sufficient lengths of asbestos to caulk one row before moving on to caulk that row. The cutting, he said, would take 20 minutes to half an hour, the caulking of one row about two days.

30. The plaintiff hung the coil of asbestos rope over his shoulder and moved it forward as he cut each length. This was effected by striking the rope with a hammer over the sharp edge of a Bailey block. The plaintiff described the rope as comprising about 20 strands of asbestos contained within a stocking of mesh and said that "when you hit it the inside used to burst open on the stocking and create all this dust" (transcript 537.13). The plaintiff said that:

The area in which I did this work was quite confined. It was inside the boiler. After 10 minutes of this work there would be a great amount of dust from the asbestos rope visible in the air around me and my nose would become blocked and I would begin to find it difficult to breathe. My nose was so blocked with asbestos dust that I had to breathe through my mouth. (PPX 22 Plaintiff's affidavit paragraph 6).

31. After cutting the rope into lengths in this fashion the plaintiff proceeded to perform the caulking by driving the three-eighth inch rope into one-eighth inch gaps by use of a blunt chisel. He described the work in paragraph 10 of his affidavit:

There were thousands of gaps between the cast iron bricks and the Bailey wall located inside a boiler. I was the main employee of Babcocks who did this work filling in the gaps in the Bailey wall with the asbestos rope Other employees did this job occasionally. I would use hundreds of feet of asbestos rope filling in these gaps. This took up a large proportion of my time and for hours at a time inside the boiler in a very confined space I would cut asbestos rope and hammer it into the gaps between the cast iron bricks and the Bailey wall. Cutting the ropes created a fair bit of dust but hammering the rope into the gaps in the Bailey wall created an incredible amount of dust.

32. I accept the plaintiff in his evidence that the cutting and caulking work generated visible concentrations of asbestos dust. His evidence is corroborated by that of Mr Morton (Transcript 586). I believe the plaintiff to be an honest and essentially reliable witness whose account of the dusty conditions may be unconsciously exaggerated to some extent because of the elapse of time and the severity of its consequences upon his health.

33. The plaintiff was first employed at Wangi when Number 2 Boiler was partially caulked to the extent of perhaps five or six rows. He says that he caulked perhaps 90 per cent of Number 2 Boiler and well over 50 per cent of Number 3 Boiler before his employment ceased.(Transcript 546.28, 549.5).

34. Although 90 per cent of the plaintiff's work was on the Bailey wall not all of that work involved caulking. Much of his work was with the emery paper cleaning the tubes before the Bailey blocks were attached. The plaintiff says he spent "the greater part” (transcript 545.37) or “more” (transcript 547.28) of his time cleaning the pipes but the evidence does not permit an accurate finding of how much more. Doing the best I can I find that 25 per cent of his time was spent on cutting and caulking and the remaining 75 per cent upon abrading the tubes.

35. In addition to the asbestos dust generated by his caulking activities on Number 2 Boiler the plaintiff was exposed to the dust generated by asbestos laggers working upon that boiler. No laggers worked nearby when he worked on Number 3 Boiler (Transcript p539.39-43).

36. The walls of the furnace were insulated initially with layers of "composition" being a mixture of 15 per cent asbestos and 85 per cent magnesia supplied in powder form and mixed with water on site to form a slurry applied in successive coats of 1 inch or so in thickness and dried between coats. Outside this layer, 85 per cent magnesia asbestos blocks were laid, and then the whole furnace wall was clad with amosite asbestos sheeting. Pipes emerging from the furnace were insulated with composition applied as a slurry and reinforced with wire netting, and also with woven asbestos material and shaped blocks of 85 per cent magnesia. The mixing of the composition, the shaping of the blocks and the cutting of the asbestos material and board created asbestos dust which lingered in the atmosphere and fell to the ground to be stirred up by sweeping and the passage of feet outside the furnace. It should be remembered that it is the microscopic respirable fibres which linger in the air, rather than the particulate matter that falls quickly to the ground, which cause lung damage.

37. At paragraph 11 of his affidavit the plaintiff says:

I can recall quite vividly that when I was working inside the boiler on the Bailey wall that laggers were often working above me .I can recall on many occasions the dust from the asbestos materials which the laggers were using, mixing and cutting, would fall down right on top of me. I often came out of the boiler with the asbestos dust from the laggers covering my ears and my head and into my pocket and into my shoes. I was covered in the asbestos dust and I can remember it getting down behind the back of my shirt and covering me.

38. While accepting that the atmosphere in which the plaintiff worked was fairly often contaminated with an asbestos haze from lagging activities I discount the evidence of the plaintiff that the laggers worked directly above him. The photographs taken of the persons working within the furnace applying a conductive compound to the Bailey blocks revealed no great concentration of asbestos dust . The men there depicted are working upon what appears to be a grid through which any dust would fall in any event. The plaintiff's work upon the Bailey wall was performed while he was inside its perimeter. No lagging was applied to the mass of pipes above him also within that perimeter. While some lagging was applied to the roof of the furnace and to pipes leading from that roof this work was not done until the metal sheeting comprising the roof had enclosed the furnace chamber in which the plaintiff worked (transcript 598.18, 598.29).

39. The laggers worked on the outside of Number 2 Boiler while the plaintiff was inside and the side walls incomplete (Transcript 539.2, 539.24). These laggers worked on the pipes emerging from the higher levels of the furnace (Transcript 544.4). That which drifted down upon the plaintiff was dust, "not a wet slurry" (Transcript 551.31) as would have been the case if the laggers worked directly above him.

40. It was the plaintiff's recollection that on those days when he was caulking he was exposed to a greater level of dust than on other days (Transcript 549.4). I bear in mind that on occasions when he was engaged in work other than the Bailey wall he fetched asbestos mats for laggers and assisted in the cutting of those mats. I do not know how frequently this occurred and as it is a proportion only of 10 per cent I discount it for practical purposes.

41. It is generally acknowledged that an airborne concentration of asbestos dust if visible exceeds the Dreesen standard of prudent exposure.

42. It may be concluded that the plaintiff was exposed to different concentrations of asbestos dust in the following activities.

1. When abrading the tubes in Number 3 Boiler he was not significantly exposed to asbestos.

2. When abrading the tubes in Number 2 Boiler he was exposed to asbestos dust from the activities of laggers working in his vicinity.

3. When caulking in Number 3 Boiler he was exposed to the asbestos fibre thrown up by this activity.

4. When caulking in Number 2 Boiler he was exposed to both the asbestos dust thrown up from that activity and the dust thrown up by the work of the nearby laggers.

43. Because in general dust concentrations disperse in the air exponentially relative to the distance from the source, (picture the dispersal of a pinch of flour dropped a distance of say 50 feet); because the work caulking brought the plaintiff's face a few inches from that source, and because the asbestos used in caulking was pure asbestos whereas the laggers worked mostly with composition which contained only 15 per cent asbestos, I believe that his pulmonary asbestos fibre burden as a result of his caulking activities was 10 times greater than that burden occasioned by the exposure to the dust thrown up by the laggers.

44. Accepting that only one quarter of all the plaintiff's work involved caulking and that two thirds of his work (while on the Number 2 Boiler) exposed him to dust from the laggers, it follows that over the 92 weeks that the plaintiff worked at Wangi the proportional contributions to his total fibre burdens were as follows:

23 weeks (one quarter of 92) weeks in caulking activities at 10 parts concentration	= 230
61 weeks (two thirds of 92 weeks) of dust from laggers’ activities at one part concentration	= 61
Total	= 291

45. It may be calculated that in rounded figures 80 per cent of the fibre burden occasioned to the plaintiff resulted from his caulking activities and 20 per cent from the lagging activities of others.

The Source of Asbestos Rope

46. Before the incorporation of BAL in October 1948 the Australian branch of BIL tendered for boiler contracts in Australia upon the basis that prefabrication of some components would take place at Renfrew and some at Regents Park. Similarly some materials necessary for the construction, such as asbestos, were supplied by Renfrew. For accounting purposes those structures and materials provided from Renfrew were invoiced to the Australian branch at cost less a discount. After the incorporation of BAL the agreed price in relation to materials purchased by Renfrew from an outside manufacturer for supply to BAL was cost to Renfrew plus seven and a half per cent. This reflected a discount of 5 per cent after duty was paid by BIL (PPX5 vol 1 t 11).

47. Renfrew purchased and held in store vast quantities of asbestos materials. For instance in 1954 Renfrew held in stock 50,000 feet of various sizes of asbestos tape and consumed 250,000 feet in one year ( PPX 4 vol 1 t 48). BIL designed an improved version of asbestos tape and commissioned its manufacture (PPX 5 vol 1 t 11). There is evidence that in 1950 BAL imported asbestos tape from Glasgow for use upon boiler construction in South Australia and disputed the rate of tariff imposed (PPX 3 vol 2 t 25). Glasgow is of course the home port of Renfrew.

48. BIL have discovered records kept at Renfrew relating to materials supplied to Lake Macquarie. An entry of 20 June 1951 (PPX3 vol 1 t 44) records an order for "direct" routing of 1,000 feet of three-eighth inch diameter asbestos rope (the type used by Mr Royal) for "side and rear wall casings". The same order records that some other materials are to be "supplied by Regents Park". An entry of 24 May 1951 records an order for "direct" routing of 320 pounds of three-eighth inch diameter asbestos rope for "Bailey Wall Furnaces".

49. In answers to interrogatories BIL admitted that "some asbestos rope seals may have been supplied" to the Lake Macquarie/Wangi power station between 1945 and 1958.

50. Against any suggestion that the two orders discovered would not supply sufficient asbestos rope for the six furnaces ultimately erected at Wangi, I note the 1957 lament of a Mr Patterson to Mr Archer, the production controller at Renfrew, that Erecting Engineers were being "strangled" by red tape and bureaucracy in obtaining materials. Mr Archer conceded that the system was and would be bypassed (PPX4 vol 3 tab 22 pp 166-167).

51. The erecting instructions supplied by BIL to BAL at Wangi to regulate the caulking of Bailey blocks at Wangi directed use of “Pluto white asbestos plaited yarn ref: WPS/30/80 or its equivalent”. I assume that “Pluto” is the trade name of a product manufactured in the United Kingdom.

52. On 18 August 1952 a memo was circulated by BIL pointing out that on certain contracts the wrong type of asbestos rope had been supplied causing serious troubles with boilers (PX4 vol 1 t 39). The expressed purpose of the circular was to “Ensure that all concerned are fully informed regarding the nature of asbestos material to be supplied”.

53. After specifying that the material to be used for caulking between Bailey blocks was “Pluto white asbestos plaited yarn packing WPS/30/80”, the memo continued:

...all relevant drawings should clearly specify the exact class of material to be used. . . `suppliers have instructions to attach a label giving a brief description of the location and purpose for which each type of material is to be employed.'

54. A diagram provided by BIL to BAL for Wangi entitled “Bailey Wall Block Assembly” (PPX 6) bears these instructions;

NOTE:-ALL HORIZONTAL JOINTS BETWEEN BLOCKS TO BE FIRMLY CAULKED WITH SHORT (NOT CONTINUOUS) LENGTHS OF ASBESTOS PLAITED YARN PACKING

¾ DIA “PLUTO” ASBESTOS PLAITED YARN (WPS 30/80) FOR MAIN AREAS OF WALL AND CONVEX BENDS

½ DIA “PLUTO” ASBESTOS PLAITED YARN (WPS/30/80) AT BACK OF CONCAVE BENDS

55. To my mind this memo of 18 August 1952, taken with the mandatory directions upon the Wangi drawings, supplant the latitude allowed in the erecting instructions permitting the use of an “equivalent” to “Pluto” asbestos rope.

56. Extracts from another BIL publication entitled "Erecting Instructions for Babcock and Wilcox Water Tube Steam Boilers" (PPX3 vol 2 t 5) upon which BIL sought to rely in another context, contain a photograph of a workman packing asbestos rope between headers. Below the photograph is a caption which reads "Asbestos rope is sent out with every boiler”. Mr Henry Voss, the Control Engineer at Wangi, remembers large deliveries from BIL, including insulation materials. Mr Royal recalled that the asbestos rope used by him came in cardboard boxes bearing writing in crayon of “ship and wharf destination” (Transcript 538.36).

57. I am persuaded upon the probabilities that BIL supplied to BAL the asbestos rope used by Mr Royal. Given the purchase arrangements between BIL and BAL it was obviously cheaper to supply the subsidiary with a proprietary English product direct rather than have BAL purchase the same product on commercial terms from an Australian importer.

THE LIABILITY OF BIL TO THE PLAINTIFF
Foreseeability

58. The test of foreseeability as a threshold test for liability in negligence was described by Windeyer J in Mt Isa Mines v Pusey ((1970) 125 CLR 383 at 402) as a “comfortable latitudinarian doctrine” pursuant to which “a risk which is not far fetched or fanciful is real and therefore foreseeable”. Glass JA in Shirt v Wyong Shire Council ((1978) NSWLR 361 at 461) spoke of “the undemanding test of foreseeability”.

59. Every class of boiler manufactured by BIL until some time after Mr Royal's exposure was insulated with asbestos or a mixture containing some proportion of asbestos. No other material was then known suitable for the purpose. Because of their size the boilers sold by BIL were prefabricated in sections and assembled on site where they were insulated with asbestos. It is apparent from the various photographs of BIL boilers ( PPX1 vol 1 t 3), and the work at Wangi, that the work insulating the power station boilers sold by BIL was work which would, in most if not all cases, require many months to complete. Enormous quantities of asbestos insulating material were required by BIL to effect its works.

60. Asbestos was sold by BIL directly to its clients, a price list published in 1930 is in evidence (PPX1 vol 1 t 5). BIL in one case designed a novel variant of asbestos tape for a particular purpose and commissioned its manufacture (PPX4 vol 1 t 48).

61. The efficient insulation of boilers required "the closest collaboration between design and erection engineers" and BIL took great care in design to specify the nature of asbestos required throughout the boiler structure and the manner of its application (PPX4 vol 4 t 17, see also PPX1 vol 2 t 37 p 24, PPX4 vol 3 t 7 p 16).

62. BIL has conceded that it “ought to have known at the relevant time that workers working in conditions where asbestos dust exceeded the Dreesen recommendation were exposed to the risk of contracting asbestosis were adequate precautions not taken.”

63. The terms of BIL’s admission that it knew of risks “were adequate precautions not taken” to my mind satisfies the threshold question of foreseeability of harm to persons working with asbestos in constructing BIL boilers. In no sense was it far fetched or fanciful in 1957 to suppose that employers may fail to take adequate precautions to protect their employees.

Knowledge of BIL relevant to Duty

64. Once the test of foreseeability is satisfied, if it be established that the relationship between BIL and Mr Royal falls within a recognisable category of duty, BIL’s knowledge as to the facts and circumstances in which the risk may come home is relevant to the further question of how BIL might reasonably respond to the existence of the foreseeable risk.

65. As Mason J pointed out in The Council of the Shire of Wyong v Shirt ((1979-1980) 146 CLR 40 at 47), the remote possibility of a passerby being struck by a cricket ball lofted out of the ground constitutes a foreseeable risk (Bolton v Stone [1951] AC 850) but “the risk though foreseeable may be so small that a reasonable man would have been justified in disregarding it”.

66. In the present case BIL, conscious of the fact that it took no steps to protect Mr Royal from the risk of injury, asserts that such inactivity was reasonable because it neither knew, nor did it have cause to know, that the manner in which Mr Royal would go about his caulking work would liberate dust in excess of the Dreesen recommendation, nor did it know or have cause to know that while engaged upon his work Mr Royal would be subject to asbestos dust from other lagging activities in excess of the Dreesen recommendation.

67. The knowledge of BIL in relation to Mr Royal’s work at Wangi is then critical to the liability of BIL to Mr Royal and to BAL.

68. No contention is here advanced that the liability of BIL is purely vicarious liability founded upon breach by an identified servant of BIL of a personal duty owed to Mr Royal to be discharged in the course of that servant’s employment. The duty in question is a duty owed by a corporation. The question then arises: when is a fact known to a corporation?

69. A corporation is an abstraction, a fictitious person, and can only know and act through the agency of natural persons. Because culpability forms the basis of all liability in negligence, predicated as it is upon a failure to observe the standards of a reasonable man, the existence and the gravity of a corporation’s negligent failure to act reasonably is to be found by weighing the culpability of natural persons whose obligation it was as servant or agent to know and discharge the legal responsibilities of the corporation in respect of the transaction in question. If no person within the corporate structure had the functions corresponding to those of a person with such obligations, the culpability is that of the manager or managers who failed to ensure that there were such responsible persons appointed (Meridian Global Funds Management Pty Ltd v Securities Commission (1995) 3 WLR 413). In each case a natural person must be identified or postulated whose personal conduct is to be weighed against the reasonable person with his or her knowledge possessing his or her powers of control.

70. In the present case such a person has been identified. On 27 February 1930 a Mr H L Critchley was appointed General Works Manager of BIL resident at Renfrew “with control over all the company works in Great Britain”. Mr Critchley was provided with his own direct representative in the London office to act as a liaison officer with the technical departments (PPX 2 T 17 p 3). He cannot have been ignorant of the control exercised by BIL over the insulation of its boilers nor that the work required months of full time labour to complete. His duties included responding to complaints concerning the quality of workmanship on boilers installed by BIL (PPX 2 T 19).

71. On 22 December 1930 Mr Critchley was elected to the Executive Committee of the Glasgow based North West Engineering Trade Employers Association of which BIL was then the largest member (PPX 2 T 14 and T16). This association was in turn a member of the London based Engineering and Allied Employers National Federation.

72. Following upon the issue in 1930 by the Home Office of the Merewether and Price report upon the effects of asbestos in the lungs of workers in the asbestos industry, the government published a draft scheme for compensating workmen or their families where the disease of asbestosis caused disabling injury or death. On 23 January 1931 Mr W G Campbell, the joint secretary of the Engineering and Allied Employers National Federation wrote to the Undersecretary of State, Home Office, this letter:

The Asbestos Industry (asbestosis) Scheme 1931

As against consideration of the above scheme which has now been issued in draft we would be grateful for some explanation thereon.

The draft scheme is headed as applying to the asbestos industry only and we are therefore led to believe that the processes detailed in s 2 are applicable to those processes only when carried out in the asbestos industry. We would like to be assured that we are correct in this thinking. If this is not the intention of the scheme it would mean that in many cases the handling of asbestos within this industry for the purpose of insulating both the boilers, steampipe, electrical work, et cetera, might be taken to be processes coming under the scheme.(Emphasis added. PPX 2 T2)

73. On 5 February 1931 a Mr R R Bannatyne for the Home Secretary replied in these terms (emphasis added):

Asbestos Industry (Asbestosis) Scheme 1931

With reference to your letter of 23rd Ultimo I am directed by the Secretary of State to say that the application of this scheme is determined by par 2 and that the scheme is intended to apply to the processes defined in that paragraph not only when carried on in asbestos works but also when carried on in engineering works, shipyards or elsewhere. Be advised that besides asbestos works there are a number of firms who employ workmen on one or more of the processes under conditions likely to give rise to asbestosis and it is intended that such workmen should be within the scope of the scheme.(PPX 2 T4)

74. On 17 February 1931 the Secretary of the North West Engineering Trades & Employees Association distributed copies of the above letters to members of that association together with extracts from the draft proposed by the Home Office and concluded his letter with this paragraph:

In view of the reply from the Home Office I am desired by the Federation to request that you will let me know whether you are likely to be affected by the scheme and if so what processes you carry out which are calculated to bring you in its scope, forwarding at the same time any reasons you may wish to advance you are being excluded from the scheme.(PPX 2 t5)

75. The scheme entitled "The Asbestos Industry (Asbestosis) Scheme 1931” was promulgated on 30 April 1931. It applied to:

Workmen employed in any of the following processes:

(i) Breaking, crushing, disintegrating, opening and grinding of asbestos and the mixing or sieving of asbestos, or any admixture of asbestos, and all processes involving manipulation of asbestos incidental thereto ...

(vi) Sawing, grinding and turning in the dry state of articles composed wholly or partly of asbestos in the manufacture of such articles; ...

2(a) Provided that nothing in this scheme shall apply to the employment of any workmen -

76. I should here interpolate that in the process of insulating boilers, asbestos powder known as “composition” was mixed with water to create a slurry applied by laggers to steam pipes and boiler walls.

77. By letter of 13 May 1931 the Secretary of the North West Engineering Trades and Employers Association advised members that the scheme was to come into force on 1 June 1931. He pointed out that the National Federation had succeeded in securing the proviso contained in par 2(a) excluding casual use of asbestos. However, he added that:

The Federation advised that it is desirable that firms who come within the provisions of the schemes and are already insured against liability under the Workmans Compensation Acts under existing schemes should see that the extension of their liability under the new schemes is covered before 1 June on which date the new schemes will become operative.(PPX 2 t 7)

78. It is apparent from the minutes of a Board meeting of BIL held on 8 December 1931 that insurance matters fell within Mr Critchley’s field of responsibility. (PPX 2 T 15).

79. On 15 September 1931 the Under Secretary of State for the Home Office wrote to the National Federation of Engineering and Allied Employers, forwarding a draft of proposed regulations pursuant to the Factory and Workshop Act 1901 for protection of workers employed in certain processes involving exposure to asbestos dust. He referred to the two reports of Merewether and Price and to conferences with employers in the textile industry and went on to say:

The Secretary of State has decided to give effect to the recommendations contained in these two reports. For that purpose as required by s 79 of the Factory and Workshop Act 1901 he has formally certified as dangerous the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto and is now issuing the enclosed regulations in draft in accordance with the procedure laid down by s 80 of the Act. (emphasis added).(PPX 2 T 2)

80. The draft regulations applied to those same processes as were within the ambit of the asbestosis scheme.

81. A copy of this letter was distributed to members of the North West Engineering Trades Employers Association on 23 September 1931 by the secretary who said in his covering letter:

As against the meeting on 1 October I am desired to inquire whether you will be affected by the draft regulations, and if so to receive not later than the morning of Tuesday, 29th a note of any objections that you may desire to make thereon.(PPX 2 T8)

82. On 19 January 1932 members of the North West Engineering Trades Employers Association were advised the regulations would come into operation on 1 March 1932. (PPX 2 T 10). On 28 September 1932 the Secretary of the association wrote again to members in these terms:

Dear Sirs,

SILICOSIS AND ASBESTOSIS

Home office memorandum

I am desired by the Federation to call your attention to a memorandum issued by the Home Office on the industrial diseases of silicosis and asbestosis.

The memorandum deals with the origin and development of silicosis; the industries and processes in which silicosis occurs; the means of prevention;the provision of compensation; medical arrangements for examination and certification of cases; note on asbestosis and certain appendices are included.

Copies of the memorandum may be obtained direct from any of Her Majesty's stationery offices or through local booksellers price threepence net.(PPX 2 T 110)

83. This correspondence, all of which was directed to BIL as a member of the North West Engineering Employers Association, establishes, of course, that responsible officers of BIL should reasonably have known of the dangers to health created by the application of asbestos insulation to its boilers in factories, power stations and shipyards. However, it also establishes to my satisfaction that Mr Critchley, the Controller of all BIL’s works in Great Britain, had actual knowledge that the insulating works carried out by BIL by its servants and subcontractors pursuant to BIL’s designs and specifications occasioned to the persons engaged upon the work a real risk of death or serious injury.

84. In 1963 BIL subscribed to technical periodicals including “Engineering” “Mechanical Engineering” and “Mechanical World” and bound volumes of many periodicals were then kept in its library. In 1930 "Engineering" published the Merewether and Price reports. In 1933 "Mechanical Engineering" published two articles entitled "Dust in Industry”. One by J J Broomfeld discussed dusts which may produce injury to the respiratory system; the other by F Willson discussed precautions necessary in the presence of dangerous or poisonous dust, dust exhausting system, respirators, reluctance of workmen to employ safeguards, and problems with legislation in occupational diseases (PPX2 T 24).

85. Employing a presumption of continuance because of the existence of bound volumes I believe BIL received these issues. Although slight, this evidence has not been explained away by BIL who has power to prove what was and was not held in the bound volumes and is to be reweighted accordingly. (Hampton Court Ltd v Crooks (1957) 97 CLR 371)

86. On 30 July 1937 the parliament of the United Kingdom enacted the Factories Act (1937) to consolidate the Factory and Workshops Acts (1901) and subsequent amendments. S 47 of that Act was in these terms:

In every factory in which in connection with any process carried on there is given off any dust or fume or other impurity of such a character and to such an extent as to be likely to be injurious or offensive to the persons employed or any substantial quantity of dust of any kind all practical measures shall be taken to protect the persons employed against inhalation of the dust or fume or other impurity . . .(PPX 2 T 22)

87. In a paper entitled "Factory Acts - their implications" (PPX4 vol 3 t 5) delivered to a conference of BIL Erecting Engineers in 1948, a Mr Sealy, a BIL employee described as from "Labour Administration", after observing that “it is of course established that the Factories Act does apply to our sites as premises may be a factory though in the open air” went on to exhibit a detailed knowledge of this Act.

88. While Mr Sealy in this paper did not refer to the provisions of s 47(1) he did address as one topic "claims procedures in the case of industrial diseases" (at p 9).

89. At the 1949 Conference of Erecting Engineers Mr S J Butcher of BIL’s legal department traced the history of the factory laws from their inception to the present day (PPX4 v 3 t 8).

90. At the 1950 conference a Mr W S Dodd, after referring to the address of Mr Butcher the preceding year, delivered a paper entitled "Further Notes on Safety Measures" in which he discusses "practical application of the regulations to our sites”. He discussed death and injury caused by men or material falling. He did not mention industrial diseases.

91. At the 1954 conference Mr S J Butcher again delivered a paper. This one entitled "Contractual Obligations in Respect of Injury or Damage". In this he wrote under the heading "Use of Dangerous Material" that :

If men are to work with dangerous substances they must have proper appliances to safeguard them; the employer must set in force the necessary system by which they use the appliances and do his best to see they adhere to it; for instance if there is a risk of dermatitis, protective cream must be available and an employer must see it is used. (PPX4 v 3 t 18)
He further instructed the engineers that:
... any Act, Regulation, by-law and ' what have you' affecting the safety of persons or property applicable to the works must be observed by BIL.

92. BIL has admitted “that it did provide training to employees of BAL: by way of training in the UK and by way of instruction manuals”. This training was undertaken pursuant to a consultancy agreement between BIL and BAL (PPX 7 vol 1 t 43 cl 5(b)).

93. Mr Henry Voss commenced employment with the Australian branch of BIL in 1937 at the age of 16. He was trained by BIL engineers in the system of constructing Bailey walls and performed the rope caulking of Bailey Blocks in the same manner as that adopted by Mr Royal, excepting that he worked caulking from the outside of the furnace (Transcript 464-465). He was at that time furnished with the erecting instructions relating to caulking of Bailey walls.

94. Mr Voss rose to occupy the position of Erecting Engineer and Control Engineer within the system of hierarchy devised by BIL and continued by BAL in Australia. An Erecting Engineer was appointed to remain on each site and a Control Engineer supervised general sites.

95. In 1954 Mr Voss was trained by BIL in the UK preparatory to his assuming in 1955 the position of Control Engineer for sites including Wangi. While in the UK he was taken to BIL sites, including power stations at Castle Donnington, Newport, Wales and Battersea “to observe and gain experience and training in the current methods of construction and insulation”. (PPX 9 par 35).

96. Mr Voss said that the work carried out in the United Kingdom by BIL was performed in the same manner as it had been carried out by BIL’s engineers in Australia before 1948 and in the same manner as it was carried out at Wangi.

97. The duties of Erecting Engineers, in the judgment of BIL managers, included “Preparation and sequence dating of erection programs” (PX4 vol 3 t 12 p 4.6). In 1954 Mr S J Butcher advised the Conference of Erecting Engineers that a safe system of work may require coordination of different processes. (PPX 4 vol 3 t 18 p 11). Pursuant to the systems adopted by BIL before 1948 in which Mr Voss was trained and continued in the UK as late as 1954, men were permitted to work on the Bailey walls while laggers worked overhead. The men were neither advised nor required to wear respirators (Transcript p 501.38, p 502.37, p 503.48, p 498.19-26, p 517.25-42, p 517.4.).

98. It was the practice of BIL employees in the United Kingdom in 1954 to cut and stem asbestos rope in the same manner as that adopted by Mr Royal. This must have been known to BIL’s Erecting Engineers charged with supervision. (Transcript 465.14 p 517.36). Further, the engineers knew, if it were relevant, that workers at times, contrary to instructions in the erecting manual, stemmed Bailey walls from inside the furnace. (PPX4 vol 3 t 13 p 3.4)

99. BIL’s Erecting Engineers and senior management knew that the work of lagging would be done by unskilled, inattentive and presumably poorly educated labourers who were prone to error. (PPX8 C55 p 2(c), PPX4 vol 3 t 20 p 3).

100. BIL, in a notice filed pursuant to s 25B of the Dust Diseases Tribunal Act, asserted that the following judicial statements of a general character ought bind the parties to these proceedings.

Asbestos has been a well known hazard in industry for at least 60 years. (Beasley JA in Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307).

In 1930 principles of occupational hygiene were established, and effective precautions for the control of environmental exposure to asbestos were recommended. (CSR v Wren (1997) 44 NSWLR 643 at 472B.)

Precautions to reduce the dangers of exposure to asbestos and the consequences of such exposure were repeatedly made in literature published by each of the medical, scientific and industrial communities before 1950. (Per Johns J, Brown v Cockatoo Dockyard Pty Ltd & Anor DDT080799 par 98).

Those who undertake a dangerous activity or use a dangerous substance must use a commensurate degree of care. (Per Johns J Brown v Cockatoo Dockyard par 162).

101. It is not necessary to here consider the operation of s 25B. I regard these assertions as admissions by BIL.

102. The evidence has established the following facts and circumstances relevant to the existence of this duty:

1. Mr Critchley, the General Works manager of BIL with “control over all the company’s works in Great Britain” learned in 1931 that the manipulation of asbestos in the process of insulating boilers with that substance was dangerous to the health of workers engaged upon that work and that even occasional exposure should not exceed 8 hours in any one week.

2. Mr Critchley knew that workers employed to insulate boilers to BIL’s design and specifications were exposed to those dangers.

3. BIL’s engineers designed the Bailey wall furnace and BIL managers licensed BAL to erect six Bailey Wall furnaces at Wangi in accordance with the plans, specifications and erecting instructions supplied by BIL.

4. BIL’s engineers and managers knew that erection of the Bailey furnaces pursuant to those plans, specifications and instructions would (a) expose workers such as Mr Royal when engaged upon caulking work to heavy concentrations of airborne asbestos dust for periods exceeding 8 hours in any one day and (b) expose workers such as Mr Royal when either caulking or abrading pipes in the near vicinity of lagging operations to heavy concentrations of airborne asbestos dust additional to that inhaled while caulking, for periods exceeding 8 hours in any one week.

5. BIL’s managers and engineers knew that the work to be performed on the Bailey wall by persons such as Mr Royal would be performed by vulnerable, unskilled, presumably ill informed men, prone to error and requiring supervision.

6. Prior to the incorporation of BAL in 1948 engineers employed by BIL devised, instituted and trained BAL personnel in the system of work to be followed in the erection of Bailey furnaces and knew that pursuant to that system men worked in the presence of significant concentrations of airborne asbestos dust without respirators.

7. Pursuant to the terms of a consulting agreement between BIL and BAL, BIL’s engineers in 1954 trained in the United Kingdom Mr Henry Voss, an employee of BAL in his duties as supervising engineer for the Wangi site, which duties included, in the judgment of BIL engineers, the planned sequence of the works. BIL’s engineers demonstrated to Mr Voss a system of work for the erection and insulation of boilers identical to that effected by BIL engineers in Australia before 1948, and to that effected by BAL engineers at Wangi, pursuant to which men in the position of Mr Royal, without protection of respirators, were exposed to heavy concentrations of asbestos dust for periods in excess of 8 hours in any one week while laggers worked overhead.

8. BIL supplied asbestos rope for use by Mr Royal together with instructions for that use. BIL’s engineers and designers knew that compliance with those instructions would generate heavy concentrations of airborne asbestos dust. The engineers and designers ought to have known that such concentrations were dangerous to health if a worker were not equipped with a respirator. The engineers knew that consistently with the practices in which BAL engineers had been trained, that Mr Royal would be neither advised nor required to wear a respirator.

9. The burden upon BIL of discharging any duty to Mr Royal would have been minimal. BIL already provided instructions upon labels and plans and in printed erecting manuals. These instructions could easily have included warnings. Similarly BIL circulated memos to engineers and managers. One such memo could easily have alerted the engineers and managers to the dangers created by BIL’s work practices.

103. A supplier of a product known to be dangerous if precautions as to its intended use are not observed, owes a duty of care to a person using the product conformably with that intended use. (CSR v Wren (1998) ATR 81-461 at 64,829, Clark v Army & Navy Co-op Society (1903) 1 KB 155, Fisher v Harrods (1966) 1 LR 500, Vacwell Engineering Pty Ltd v BDHChemicals (1971) 1 QB 88). See also Fleming LR 8th edition p 493.

104. The negligence of another such as an employer is, consistently with both commonsense and principle, reasonably foreseeable in the contemplation of causal sequence. (March v Stramare (1991) 71 CLR 506, Krusich v Mahoney (1985) 156 CLR 522, Bennett v The Minister of Community Welfare (1992-1993) 176 CLR 408, McLean v Tedman (1984) 155 CLR 306, Voli v Inglewood Shire Council (1936) 110 CLR 74).

105. When BIL supplied asbestos rope for use by Mr Royal it had cause to know that use conformably with the instructions it also supplied would liberate substantial quantities of dust and that Mr Royal as an employee of BAL would probably not be supplied with a respirator.

106. I find that in those circumstances BIL’s failure to warn Mr Royal was unreasonable.

107. The duty owed by BIL to Mr Royal could and should have been discharged by including a warning on the labels which by "established practice" of BIL were attached to the coils of asbestos rope. (PPX4 vol 2 t 1 p 2). That warning need only be in terms that:

Inhalation of asbestos dust can cause death or serious disablement. Masks must be worn in any work situation where asbestos dust might be liberated.
A warning in similar terms could and should have been printed in the erecting instructions relating to caulking and upon the design plans after the words there appearing specifying the use of "Pluto asbestos yarn” .

108. I also find that BIL owed a duty of care to Mr Royal to protect him from the injurious consequence of inhaling asbestos dust thrown off by the laggers.

109. Gaudron J in Slivak v Lurgi (Australia) Pty Ltd (2001) 177 ALR 585 at 598 stated that:

The common law recognises an interest on the part of construction workers in the exercise of reasonable care and skill in the design of those structures upon which they work. (Voli v Inglewood Shire Council (1963) 110 CLR 74, Florida Hotels v Mayo (1965) 113 CLR 588, Clay v A J Krump & Son Ltd (1964) 1 QB 533.)

110. In Voli v Inglewood Shire Council Windeyer J said at 85:

That duty is cast upon [the architect] by law, not because he made a contract, but because he entered upon the work.
Importantly in the context of the present case Windeyer J went on to state that:
But if separate and independent acts or omissions of several persons have directly contributed to cause an injury, the first wrongdoer does not necessarily escape liability by proving that, though he was to blame, the injury would not have occurred but for the later negligence of another person. (at 88)

111. Upon the present facts a responsible servant of BIL learned over 20 years prior to the commencement of the work at Wangi that persons working upon or near the insulation of boilers built to BILs design and specifications faced risks of death or serious injury because of the manipulation of asbestos as required by those designs and specifications. BIL engineers thereafter devised and instituted the system and sequence by which the boilers at Wangi would be erected. The engineers specified the manner in which asbestos was to be applied to the structure. The engineers and managers knew that the workers were unskilled and probably ignorant of the unusual dangers. The engineers had cause to know that reasonably available precautions such as the provision of masks would obviate the danger. The engineers knew that workers engaged upon BIL’s works both in Australia before 1948 and in the United Kingdom as late as 1954 were exposed without respirators to the inhalation of injurious asbestos dust in the course of their work. BIL trained supervisors to be employed by BAL at Wangi both before and after the incorporation of BAL. BIL had cause to believe that BAL would adopt the same system of work as BIL.

112. BIL was subject to a duty as designer of the Bailey furnaces to exercise reasonable care and skill so that persons required to construct the furnaces to BIL’s design may do so safe from injury and risk to health. In the light of the facts of this case I am of the opinion that the scope of that duty extended to warnings directed to the designers and Erecting Engineers, and inclusion in the designs, plans, specifications, drawings and instructions, of printed warnings as to the dangers of asbestos dust and to the institution of an erection sequence in which lagging work would not be carried out while men were engaged in other tasks at lower levels.

THE LIABILITY OF BIL TO BAL

113. BIL supplied to BAL a product, asbestos rope, known by BIL to be dangerous if precautions as to its use were not observed. BIL also, for reward, supplied to BAL the design and specifications and instructions for the insulation of the boilers at Wangi, BIL then knowing that construction pursuant to that design and those specifications and instructions created dangers to the health of persons engaged upon the works if precautions were not observed.

114. At the time it supplied the asbestos rope and design and instructions to BAL, BIL had cause to believe that BAL and its employees were ignorant of the dangers created by the materials and operations contemplated by the design and that no precautions would be taken by workmen in using the rope or effecting the design.

115. The duty of BIL in those circumstances is to be found in the established category of those duties owed to a purchaser by a supplier of dangerous goods, (Vacwell Engineering v BDH Chemicals [1971] 1 QB 88, CSR vWren (supra)) or by an architect or engineer to his client (Voli Inglewood Shire Council (supra), Slivak v Lurgi (Australia) Pty Ltd (2001) 177 ALR 585).

116. It is beyond question that the economic loss occasioned to BAL by the injuries caused to Mr Royal were foreseeable by BIL. Such losses and claims were specifically addressed by Mr S J Butcher in his paper delivered to the Erecting Engineers Conference in 1954 (PPX 4 V3 T 18 p 6).

117. I have concluded that BIL is liable to BAL in respect of the losses occasioned by the plaintiff’s judgment against BAL.

118. It is apparent that the entitlement of BAL to damages consequent upon that breach is to be reduced because of contributory negligence. In the circumstances of this case I believe it to be just and equitable that BAL’s entitlement to damages be reduced to accord with that sum to which it may otherwise be entitled to recover from BIL pursuant to the Law Reform (Miscellaneous Provisions) Act 1946. This reflects a finding of 17 per cent contributory negligence. (See par 160).

LIABILITY OF ERARING ENERGY TO BAL

119. The submissions of BAL in support of a contention that Elcom owed a duty of care to BAL were premised upon my finding that Elcom had “actual knowledge” of the dangers faced by Mr Royal. I am unable to make such a finding. In any event the proposition that a purchaser of skill and expertise owes a duty to the vendor of those services is sufficiently novel for me to reject it in the absence of compelling authority to the contrary.

APPORTIONMENT

120. S 5(2) of the Law Reform (Miscellaneous Provisions) Act 1946 directs that apportionment of liability between BIL, BAL, and Eraring Energy proceed by comparison of both the culpability of each party, ie the extent to which each departed from the standard of the reasonable man, and the relative importance of the acts of each party in causing damage (Macquarie Pathology Services Pty Ltd v Sullivan (NSWCA unreported 28 March 1995), Podrebersek v Australian Iron and Steel Ltd (1985) 59 ALJR 492, Wynbergen v Hoyts Corporation Pty Ltd (1997) 72 ALJR 65 at 68).

Culpability Generally

121. It is difficult to explain the disaster caused by the widespread but ill informed use of asbestos after 1930. It should never have occurred. As the evidence in this case established, the English Home Office in 1930 advised engineering companies, including BIL, that handling of asbestos for the purpose of insulating boilers was dangerous. As early as 1933 the reluctance of workers to wear respirators was discussed in relevant trade journals. As Beasley J said in Bendix Mintex v Barnes ((1997) 42 NSWLR 307 at 329):

Asbestos has been a well known hazard in industry for at least 60 years. Numerous studies and papers had been published from the 1920’s onwards in respect of its dangers

122. How is it that on large sites such as Wangi as late as 1957 no precautions were taken by the engineers employed by a subsidiary of BIL, a “giant” in an industry which consumed copious amounts of asbestos, or by Elcom, a well resourced state enterprise?

123. I have no cause to believe that the engineers employed by BIL, by BAL, or the supervisors of Elcom, were uniformly wilfully blind to the dangers or unconcerned with the health of the men. Their failures were failures to keep abreast of contemporary literature upon the safety aspects of their profession and to recognize the necessity for dust measurements at the Wangi site. The failure of their employers was a failure to appoint a person whose duty it was to collate and circulate to the engineers and inspectors, publications relevant to the safety aspects of the work.

124. The dangers posed by long term inhalation of asbestos dust are unique in ways that do not call for immediate comment and intervention such as the dangers of explosion, electrocution or falling from heights. The men involved in the works such as Mr Voss of BAL or Mr Curson of PP believed only that “if you breathed in great quantities of dust that eventually it might do you some harm” (Voss Transcript 494.39) or that “if a worker were exposed for considerable periods to heavy concentrations of dust I would imagine that he could quite easily suffer very serious lung damage but I would imagine or my belief was that it would have to be heavy exposure for long periods and I put asbestos in that category” (Curson transcript 697.22).

125. A concentration of airborne asbestos dust and fibre may exceed the Dreesen standard yet not be visible. Mr Voss did not realize in 1956 that there may be dangers posed by dust that could not be seen. These men no doubt believed that too much exposure to asbestos may cause lung damage as they would later come to believe that too much exposure to the sun may cause skin cancer. What they did not know was how much was too much. That judgment required scientific assistance.

126. I reject the submission of BIL that in 1957 the dangers created by asbestos dust at Wangi were “glaringly obvious” to the supervisors of BAL and Elcom. If those dangers were so obvious BIL would no doubt have taken steps in Australia before 1948 and in the UK by 1954 to ensure that its workers exposed to asbestos dust were advised of the dangers and required to wear respirators. The terms of BIL’s admission that it ought to have known of dangers “if asbestos dust concentrations exceeded the Dreesen recommendations” illustrate the unusual nature of the risk. The Dreesen recommendations had not been formulated in 1931 when Mr Critchley was advised that insulating BIL’s boilers with asbestos posed a risk to the health of those doing the work. Informed application of the Dreesen recommendations required scientific assistance by dust measurement on each site to determine whether a given concentration of asbestos was safe.

127. The cause of the high incidence of asbestos related diseases after 1930 was systemic. There was a world of informed medical practitioners and scientists talking effectively to each other, and a separate world of practical men engaged in industry too distracted by the need for doing to enquire whether that which they were doing was safe. These latter men readily identified and responded to dangers such as explosions, electrocution and falls because they were immediate and apparent: recognition required no specialised knowledge. The failure of their employers to establish a process whereby unusual dangers such as unsafe concentrations of asbestos dust would be identified and obviated in the execution of this work, was a failure on the part of management which, given the gravity of its consequences, is sufficient to render the employer liable. As Deane J observed in Jaensch v Coffey ((1983) 155 CLR 549 at 607) “the general underlying notion of liability in negligence is a general sentiment of moral wrongdoing for which the offender must pay”.

The Culpability of Eraring Energy

128. Eraring Energy admits that it is culpable because at all relevant times Elcom ought have known of the dangers created by the inhalation of asbestos dust. BAL and BIL assert that Elcom had actual knowledge of the dangers faced by Mr Royal when employed at Wangi yet still failed to protect him. The purpose of the submission is to colour Elcom’s breaches of duty to Mr Royal with greater culpability than that appropriate to a finding that it merely failed to inform itself of the dangers faced by him.

129. Evidence of actual knowledge by Elcom is said to be found in testimony by Donald William Curson and Colin Knox. Mr Curson spoke of an event in 1955 when he, as an Elcom safety officer, accompanied a scientific officer from the NSW Department of Health upon a test of airborne dust at Bunnerong Power Station. The Scientific Officer had been summoned following complaints about brick dust generated by a brick cutting machine, however tests were also conducted in a lagging room when asbestos powder was mixed with water to form a slurry for repairs and at a place where old asbestos lagging was being removed from steam pipes.

130. The result of the tests was not communicated to Mr Curson, however his superior at some later time said to him that “we have got the information from the Department of Health. If the laggers wear cartridge respirators and have their exhaust fans going they will be safe mixing up the lagging” and “If the men stripping the lagging off, wet the lagging down with knapsack sprays while they work they will be safe from dust”.

131. Mr Curson said that thereafter he was careful to ensure that during his attendances at power stations any worker mixing lagging in lagging rooms or in confined spaces wore cartridge respirators and that workers removing lagging used knapsack sprays.

132. In cross examination Mr Curson said that even after he had learned of the advice of the officer of the Department of Health he regarded asbestos dust as a “nuisance” dust occasioning no risk to health unless a man was “exposed for considerable periods to heavy concentrations” of the dust. (Transcript 647). He said that in the 1950’s there was no concerted effort by the safety officers to require the men to wear masks. At p 698 he gave this evidence:

Q Was it resistance from the individual men or union resistance that resulted in them not wearing masks all the time?

A No, it wasn’t considered essential that they wear masks, it was viewed as a nuisance dust in those days and it wasn’t considered esential for their health that they wore them, but at the same time we wanted to provide them with something that would give protection from the nuisance dust and something that was as comfortable as possible for them to wear.

Q Does this sum up the position in the middle 1950’s that the safety officers were endeavouring to have the men wear masks but did not take the view that it was essential for their health that they should do so?

A Correct

At 705:

Q Was your position then to encourage them to wear masks?

A To encourage them, but I didn’t consider it was that important because I didn’t think it was a lethal dust.

133. Mr Colin Knox was employed by Elcom in 1956 as a protection officer. He had formerly been employed by the NSW Fire Brigade. He was personally unaware of the hazards of asbestos until, in 1977 when working as a safety supervisor, he was asked to prepare a memorandum for the acting Assistant Secretary of Elcom in answer to the question “When did we first become aware of the danger of asbestos ?”

134. A copy of his memorandum dated 22 July 1977 is in evidence (BAL2 tab9 doc4). It relevantly reads as follows:

The development of asbestosis from exposure to asbestos dust has been known for approximately 25 years and the use of dust respirators has always been recommended by the Safety and Controlling Division Officers as for all nuisance dust.

These respirators were illustrated and recommended for any form of nuisance dust in early issues of “Safety Bulletin” as in 1967. Asbestos dusts were and at present are only covered by a general regulation in the Factories Shops and Industries Act, for all fumes and dusts.

135. In evidence Mr Knox said that the only basis upon which he expressed the opinion contained within the memorandum was a discussion with Mr Trevor Jones, a Scientific Officer employed by the Department of Health who measured asbestos dust in Elcom’s power stations in the late 1950’s, and a safety bulletin published in 1967 describing asbestos as a nuisance dust. (transcript 751.42-752.3). I do not believe that Mr Knox was sufficiently qualified by that material to form the opinion expressed in the memorandum.

136. In the 1950’s the business of Elcom was primarily the operation and maintenance of power stations. Responsible officers of Elcom knew that occasional lagging repairs were carried out by maintenance men upon these power stations. I am unpersuaded on the evidence that any responsible officer of Elcom so appreciated the dangers to which workers were exposed as to bear a culpability greater than that appropriate to a failure to inform himself as to how much exposure was too much exposure.

137. Similarly I am unpersuaded that those employees of Elcom who supervised the construction at Wangi possessed actual appreciation of the dangers to which Mr Royal was exposed.

138. The further submission of BAL and BIL relevant to the knowledge and culpability of Elcom is that between 1951 and 1957 Elcom was the Crown in right of the state of New South Wales and that Elcom both in fact and in law had the actual knowledge of the state of New South Wales, particularly that of the Department of Health, as regards the danger arising from the inhalation of asbestos.

139. The argument proceeds as follows: S 7 of the Electricity Act 1950 provides that “In the exercise and discharge of its powers, authorities, duties and functions the Commission shall be subject in all respects to the control of the Minister”. Street CJ in Electricity Commission of NSW v Australian United Press Ltd ((1955) 55 SR (NSW) 118) held that, so constituted, the Electricity Commission, although enjoying a separate legal persona, was intended by Parliament to function as an agency of the Crown so as to enjoy Crown immunity from the operation of the Landlord and Tenant Act 1948-1952, s 5 of which provided that “this Act shall not bind the Crown”.

140. The High Court (Williams, Webb, and Taylor JJ) in Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) ((1955) 93 CLR 376), held that the Commissioner for Railways also enjoyed immunity from operation of that Act because he was by virtue of s 4(2) of the Transport (Division of Functions) Act (1932-1952) deemed “a Statutory Body representing the Crown”.

141. The judgment of the High Court first observed that “the only way a statutory body could represent the Crown would be to act as the agent or servant of the Crown and this must be the meaning of the word ‘represent’ in the special provisions”. It then marked that the Minister by s 5(5) of the Transport (Division of Functions) Act was “subject to the control and direction of the Minister” and at 385 said:

. . the complete subjugation of the Commissioner to Ministerial control in all his activities by the legislation . . .would . . .tend strongly to prove an intention on the part of the Parliament of NSW to create a corporation in the person of the Commissioner not so that he would thereby become a separate independent entity but in order to set up an agency of the Crown, constituting a branch of the department of the Ministry of Transport, capable of acquiring property and suing and being sued and having the administrative capacity to carry on in a convenient and permanent form an executive activity of the State

142. In the submission of BAL this authority establishes the proposition that “the Electricity Commission did not have, and was intended [by the legislature] not to have, a legal personality distinct from the Crown in respect of tortious liability”. In consequence, it is argued the actual knowledge of the Crown through the NSW Department of Health is to be imputed to the Electricity Commission. This is a very difficult area of the law and I have not been assisted by submissions from PP. Nevertheless, I am of the opinion that the argument is unsound.

143. The authorities upon which BAL relies relate to the “Shield of the Crown” doctrine which has evolved as a means of ascertaining whether an agency or instrumentality “represents” the Crown for the purpose of determining whether it is bound by a particular statute. In those cases “the doctrine is in essence an aid to the process of statutory interpretation whereby the courts seek to ascertain the legislative intent of Parliament”. (Department of Taxation v State Bank (NSW) (1992) 174 CLR 219). Where legislation creating a corporation does not contain any express statement as to the extent to which it is to enjoy or suffer a Crown attribute for a particular purpose, the question whether the corporation is the Crown for the postulated purpose has been resolved by a “consideration of the purpose and effect of the particular Act by which the corporation is established and of any other Acts which relate to its corporate functions duties and powers.” (Wynyard (supra) at 383).

144. In the cases upon which BAL relies the courts decided that because the generation of electricity and the operation of a railway system were each governmental activities and because the executive controlled the Commission and the Commissioner respectively, the corporations were the agents of the government activity. Parliament may therefore be presumed to have intended that the corporation enjoy certain advantages as a landlord that would accrue to the government if it carried out these activities directly. So much may be conceded. However, the Parliament also intended when enacting the Electricity Commission Act 1950 that Elcom have distinct legal personality able to own property (s 14) and enter contracts (s 11). A simultaneous intention of reserving tortious liability is to my mind incompatible with independent legal existence.

145. If the proposed imputation of knowledge is to have any legal basis at all it must be found in the law of agency. The real complaint of BAL is that the Minister of Health, or his officers, failed to alert Elcom to the dangers faced by workers at Wangi using asbestos.

146. A principal may be under a duty to a third party to inform the agent of the principal of matters relevant to the relationship between the principal and the third party. However “an agent cannot be made liable on an obligation incurred by or cast upon the principal in his own name and not in the name of the agent.” (Per Knox CJ, Gavan Duffy, Starke JJ in TheRailway Commissioners (NSW) v Orton and Knight (1922) 30 CLR at 422)

147. I conclude that the knowledge of the Crown residing in the Minister of Health at the relevant time is not to be imputed to Elcom and that any culpability on the part of the Minister in failing to communicate his knowledge to Elcom is irrelevant to the assessment of the culpability which is personal to Elcom.

The Culpability of BAL

148. BAL has been found liable to Mr Royal upon the basis that it failed to take reasonable measures to protect him from the dangers of asbestos when it ought to have known of those dangers. Neither BIL nor Eraring Energy asserts that the culpability of BAL is founded upon a breach of duty in the face of actual knowledge of the dangers.

149. Upon the facts of this case the culpability of BAL and Elcom was the culpability of those managers who failed to set up a system for the acquisition and dissemination of information relevant to industrial safety.

The Culpability of BIL

150. I regard the culpability of BIL in a different light. The failure of BIL is also the failure of Mr Critchley. To my mind it is quite apparent that Mr Critchley, fully aware of the dangers faced by workers insulating with asbestos the boilers sold by BIL, did nothing to obviate the danger. Mr Voss was first employed by BIL in 1937, only 5 years after Mr Critchley was alerted to the dangers, yet no systems were then in place to protect Australian employees of BIL from the dangers associated with inhalation of asbestos dust. No systems were in place in the UK as late as 1954.

151. Those well meaning though negligent lawyers and engineers who addressed the annual conferences of BIL Erecting Engineers in the UK between 1948 and 1955 ought to have been aware of the problem, yet displayed no knowledge consistent with their having been informed that the handling of asbestos within BIL’s industry for the purpose of insulating boilers and steampipes was dangerous, and that even occasional exposure to asbestos materials should not exceed 8 hours in any one week. That failure would be incomprehensible if those men had been furnished with copies of the correspondence emanating from the Home Office that had been placed in the hands of Mr Critchley in 1931.

152. It is unnecessary to decide whether Mr Critchley was wilfully blind to the matter or whether considerations of cost, labour relations, insurance, or sheer laziness conditioned his inactivity. Mr Burbidge for BIL has submitted that asbestosis was in 1956 “a disease within a class long recognized and tolerated within industry . . .believed to do no more than introduce modest disability in consequence of impairment of lung function.” If this was the belief of BIL’s engineers when plans and instructions were prepared for the work at Wangi, that belief was not only lamentably ill-informed but also a direct result of Mr Critchley’s want of care.

153. Mr Critchley was informed in 1931 that the Secretary of State had “formally certified as dangerous the manipulation of asbestos”. He was also informed that the Government of the UK had instituted a scheme for compensating workmen or their families where the disease of asbestosis caused total disablement or death. In the light of this knowledge his failure to institute a system pursuant to which BIL’s designers and Erecting Engineers would be informed of the dangers, and pursuant to which conditions in the workplace would be immediately and permanently ammeliorated is egregious.

154. The suggestion by Mr Burbidge that the controller of an industrial process may be reasonably permitted to recognize and tolerate a preventable disease without incurring a duty to do so little as to warn the unsuspecting workers known by the controller to be at risk in the execution of the process, is alarming.

155. I am conscious of the proper reluctance with which a tribunal of fact may make an adverse finding involving an unrepresented party, however it is certain that Mr Critchley is now dead and his interests in this matter merge with those of BIL. As I said earlier the issue which I have to decide requires that I make findings of culpability on the part of natural persons whose duty it was to know and discharge the legal responsibilities of BIL in respect of the transaction in question. Such a person was Mr Critchley.

156. I regard the culpability of BIL as substantially greater than that of either Elcom or BAL. In the case of BAL this is patently so because BAL is itself a victim of Mr Critchley’s failure to institute a safe system of work. The culpability of Elcom is less than that of BAL because it was after all the client of BAL and not subject to the duties of an employer.

Causal Potency

157. For reasons already expressed I have found that the greatest contribution to Mr Royal’s damage came from the fibres liberated from asbestos rope in his caulking activities. This rope was supplied exclusively by BIL as were the detailed instructions for use. It was not possible to follow those instructions without generating dangerous concentrations of respirable asbestos fibre. The supply of the rope without warnings and the publication of the Erecting instructions without instruction to wear a respirator are primarily responsible for the damage. The tortious omissions on the part of BAL and Elcom in this regard, being failures to supervise the caulking work, pale in comparison.

158. I am conscious of the high standards of care imposed by the law upon BAL as the employer of Mr Royal (McLean v Tedman (supra), Bankstown Foundry v Braistina (1986) 160 CLR 301). However in the instant case, BIL is largely responsible for the ignorance demonstrated by BAL in its failure to discharge those duties.

159. Similarly the failure by Elcom to insist upon a safe system of work at Wangi was a failure to be seen in the light of Elcom’s position as a client, and BIL’s failure over the many years since 1931 to themselves devise and institute such a system, and the failure by BIL to train BAL staff in general before 1948 and Mr Voss in particular in 1954 in the maintenance of such a system.

Conclusion

160. I apportion liability 10 per cent to Eraring Energy, 15 per cent to BAL and 75 per cent to BIL.

SATISFACTION
The Position of Eraring Energy

161. On 5 May 1999 Eraring Energy suffered judgment at the hands of the plaintiff jointly with BAL in the sum of $145,000. On 4 December 1998 it issued cross claims against BAL, BIL, and James Hardie & Coy. On 5 December 2000, before the commencement of this trial, Eraring Energy and James Hardie entered terms of settlement which read relevantly as follows:

1 James Hardie & Coy Pty Ltd acknowledge and agree, for the purpose of these terms of settlement that it is liable pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 to contribute in the proportion of 15 per cent to the full extent of the plaintiff’s damages crystallised in the judgment sum of $145,000.

2 In respect of the liability and proportion agreed to in term 1 hereof James Hardie & Coy Pty Ltd agree to pay to Eraring Energy on Eraring Energy’s claim for contribution pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 the sum of $21,750.

The assertion by James Hardie that it is liable to contribute 15 per cent to the full extent of the plaintiff’s damages is entirely irrelevant to the apportionment of liability between BAL and BILand Eraring Energy.

162. Judgment was entered in these terms:

That the fourth cross defendant James Hardie & Coy Pty Ltd pay to the second cross claimant Eraring Energy the sum of $90,000 inclusive of costs.

163. It is common ground that the sum of $21,750 paid by James Hardie to Eraring Energy is to be brought into account in the final reconciliation of the orders I am to make for judgments between the parties in money sums.

164. To my mind the only rational way to do this is to ascertain the provisional judgment sum payable to Eraring Energy pursuant to an apportionment of the plaintiff’s judgment of $145,000 between the present parties and to deduct from that sum the amount of $21,750. This is because the claim by Eraring Energy in respect of its contribution to the judgment debt of $145,000 has been satisfied to the extent of $21,750.

The position of BAL

165. After suffering judgment at the hands of the plaintiff, BAL cross claimed against BIL, Eraring Energy and James Hardie. Shortly before the commencement of this trial BAL and James Hardie came to terms expressed in a deed of release and indemnity which recited that:

It has been agreed between Babcock and James Hardie that James Hardie would pay to Babcock the sum of $72,500 in full and final settlement of any claim Babcock has or had against James Hardie arising out of the injury sustained by Mr Royal and Babcock hereby remises, releases and forever quits claim upon James Hardie in all manner of actions, suits, causes of action, arbitrations, claims, debts, duties and demands whatsoever both at law and in equity which Babcock now has or but for this deed would or might have had at any time or times hereinafter against James Hardie arising from any injury sustained by Mr Royal.

166. This deed was tendered by BIL upon an application for summary judgment against BAL and Eraring Energy before this trial commenced. That application was dismissed for reasons given on 14 May 2001. Although the deed has not been formally placed in evidence in the trial, its existence and terms are not in dispute. I assume that the sum of $72,500 has been paid by James Hardie to BAL.

167. Upon this material BIL submits that the claims of BAL have been satisfied pro tanto to the extent of $72,500. BAL in response asserts that:

(a) no defence of partial satisfaction is pleaded, and

(b) “there is no objective or other basis for treating the whole or any substantial part of that inclusive $72,500 sum as being in (whole or partial) satisfaction of or diminution of, BAL’s total claims for contribution from all the parties to the proceedings”.

168. It is true that in the defence to the further amended cross claim filed by BAL on 31 May 2001 partial satisfaction was not pleaded. At that time BAL had not come to terms with James Hardie. However it is also true that upon learning of the deed between James Hardie and BAL, BIL unsuccessfully opposed the application by BAL to discontinue its cross claim against James Hardie and thereafter, again unsuccessfully, sought orders that BAL’s cross claim against BIL be struck out upon the ground that payment by James Hardie to BAL pursuant to the deed extinguished by satisfaction all BAL’s remaining claims for contribution.

169. Bruised and perhaps distracted by these failures, BIL did not thereafter amend its defence to BAL’s cross claim so as to assert pro tanto satisfaction. Is that failure fatal to its present submission?

170. Leotta v Public Transport Commission (NSW) ((1976) 9 ALR 437) is authority for the proposition that a failure to amend pleadings is not fatal to the assertion of a legal right if the facts necessary to found such a right emerge and are contested in the course of the trial. Leotta was explained by Jacobs J in Maloney v Commissioner for Railways ((1978) 18 ALR 147 at 151) as follows

All it means is that a defendant cannot lie by as the evidence supporting the case emerged and then at the end of the trial submit that the issues of fact raised by that case should not be submitted to the jury or even wait for appeal and then claim that the case which emerged should not have been left to the jury.

171. The statement of principle most apt to the question now before me is to be found in the judgment of Mason CJ and Gaudron J in Banque Commerciale S A in liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287 where their Honours said:

The function of pleadings is to state with sufficient clarity the case that must be met . In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some basis for the determination of their respective rights and liabilities.

Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.

172. This trial has been conducted by BIL from its very commencement in interlocutory skirmishes upon the basis that BAL should account in some fashion for the monies received from James Hardie. BAL has never put in issue the fact that the monies were paid. It has acquiesced in the factual contention, advanced by BIL as the basis of entitlement to interlocutory relief. Because of the way in which this trial has been conducted. I see no procedural unfairness in, or procedural bar to, the determination of the satisfaction issue raised between BAL and BIL.

173. After the close of evidence in this hearing BAL was alive to the issue. In submissions dated 4 June 2001, BAL wrote, before receiving the submissions of BIL:

IMPACT ON APPORTIONMENT/DAMAGES AS A RESULT OF SETTLEMENTS OF CROSS CLAIMS AGAINST JAMES HARDIE &COY PTY LTD

Strictly speaking, there is no evidence in the hearing of the terms of the settlement between BAL and James Hardie

However, the Court is aware from interlocutory applications that the cross claim brought by BAL against James Hardie &Coy Pty Ltd has been settled. The Court is also aware that such settlement was for a sum of $72,500 inclusive of costs. There is no evidence before the court to indicate the extent to which, if at all, there was any determination of a percentage liability of contribution by James Hardie towards the plaintiff’s damages. No one has sought to tender such evidence. In the circumstances, the Court could not conclude that there was any such inter partes determination by BAL and James Hardie particularly when it is known to the Court in relation to the separate settlement between Pacific Power and James Hardie that the sum of $68,250 was allocated towards Pacific Power’s own costs owed by it to the plaintiff-a sum approximating the inclusive sum received by BAL. In those circumstances, if the Court were to draw any conclusion from the BAL/Hardies settlement it would be that there was no contribution by James Hardie to BAL in respect of BAL’s liability to the plaintiff.

In relation to the settlement between PP and James Hardie the evidence from the judgment of this Court on the cross claim between those parties is that PP has received 15 per cent of the total liability to the plaintiff from James Hardie. That sum must be brought to account in the final reconciliation of damages.

174. On 13 June 2001 in the course of oral submissions the following exchange occurred:

His Honour You are in this position-is it in evidence before me the amount you got?

Mr Miller It was on the interlocutory application for satisfaction but not in the trial, no. We have clearly said in our submissions that we have received an inclusive of costs figure of $72,500 that in the deed between ourselves and the parties makes absolutely no attribution of any percentage of liability to Hardies

His Honour In which case if I follow the satisfaction argument without any further evidence I would find that your loss had been satisfied as to the extent of $72,500

Mr Miller Your Honour has already dealt with that in the interlocutory judgments and has not followed the satisfaction argument, the satisfaction argument would require your honour to be satisfied at two limbs that the parties intended there be satisfaction by reason of the payment of that amount and that on the material that your honour felt you could go to the judgments, the pleadings, whatever other material there was in fact full compensation.

His Honour No, the satisfaction so far as the extinction of your claim I have dealt with but I have not dealt with the satisfaction as to part of the claim. We come back to the proposition that a party cannot recoup its loss twice, it is fundamental. If you are not going to yourself split up the $72,500 I am going to assign it all to partial satisfaction.

Mr Miller Partial satisfaction?

His Honour Yes, but I will find that whatever loss-pro tanto satisfaction, whatever it is $72,500 you have received. It is not appropriate to play games, saying we are going to sit on it and you prove it. So I can do two things, I can call upon you to admit that portion of that which was exhausted in costs or am I going to use it all against you.

Mr Miller Your Honour can call upon me to do that, I will take instructions on that. . .

Mr Miller But, your Honour, I would urge your Honour to have regard to the reasoning of Giles J in Baxter v Obacello where his Honour said that if one is dealing with a satisfaction defence in the extent of determining whether there has been full recovery, which is the context in which your honour is talking, it is an exercise as the House of Lords said in Jamison, as the Court of Appeal said in Baxter, of looking to the material to see whether the parties intended it to amount to such, that is between myself-

His Honour You are confusing the two issues, we are not talking now of satisfaction in extinction of the claim, we are talking about pro tanto satisfaction. You have got some money to reduce your debt.

Mr Miller No,your Honour, we have-

His Honour What, the $72,000 was just a gift, was it?

Mr Miller Your Honour, we have resolved the proceedings between ourselves and Hardies.

His Honour You lost money because of your verdict, did you not, that is your loss?

Mr Miller Yes your Honour

His Honour Now you want BIL to contribute to that loss

Mr Miller Yes Your Honour, and Pacific Power.

His Honour You say that Hardies paid you money and you do not want to bring that into credit.

Mr Miller Hardies compromised proceedings with us your Honour.

His Honour In respect of your loss.

Mr Miller In part.

His Honour What part; how much?

Mr Miller An illiquid sum, your Honour. Your Honour, I cannot say what part because the agreement between my client and Hardies does not specify a part.

His Honour That is regrettable because if you are not prepared to assign that moiety of the money as went in partial satisfaction of your loss, the loss in respect of which you claim against BIL I am going to use it all. There is no authority perhaps, it may be rough justice, but that is what I am going to do.

Mr Miller I would be indebted if the authority could be pointed out to me your Honour, because it is not raised in either of the submissions of Mr Burbidge or Mr Toomey.

175. Thereafter Mr Miller for BAL made no application to reopen his case so as to call evidence as to that sum in which James Hardies’ payment satisfied BAL’s claim for contribution after the deduction of costs. Later that day Mr Burbidge QC, counsel for BIL, cited Armory v Delamire ((1722) 93 ER 664) as authority for the proposition that where a party which is the sole repository of some information chooses not to adduce evidence on that subject the Court may assess the question raised against the interest of the party concerned.

176. Armory v Delamire was applied by Handley JA in Houghton v Immer Pty Ltd (1997) 44 NSWLR 46 at 59. The court was there concerned with assessing the compensation to be ordered against a defendant with majority holding in a body corporate who wrongfully oppressed the holder of a minority interest. His Honour at 59 said:

In my judgment the court should assess the compensation in a robust manner, relying on the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party whose actions have made an accurate determination so problematic.

177. It is true that the rule was applied against parties in Armory and Houghton who were both wrongdoers in respect of the plaintiff’s rights. BAL is a wrongdoer qua the plaintiff Mr Royal but not in respect of the concurrent tortfeasor BIL. However the failure of BAL to respond to my invitation to declare its hand places me in a difficult situation. Any attribution by me as to that proportion of the $72,500 received by BAL from James Hardie pursuant to a cross claim, which was received as costs, will be pure speculation. I reject the submission of BAL that I should find that the amount allowed by James Hardie for Elcom costs, $68,500, should be presumed in relation to BAL’s costs.

178. A similar problem confronted the court in Bryanston Finance v De Vries ((1975) 2 All ER 609) where a plaintiff having settled by entry of judgment against one joint tort feasor, Lord Carbery, in the sum of 1000, continued in his action for damages against Mr De Vries, the other joint tort feasor. In the course of the trial counsel for the plaintiff did not inform the trial judge whether the judgment against the settling tort feasor had been satisfied so as to extinguish the cause of action and in consequence obtained a further judgment in the sum of 500. In setting aside the second judgment Lord Denning MR in the Court of Appeal said :

The plaintiffs and Lord Carbery have resolutely refused to give Mr de Vries any information about the settlement and what was done under it. At the hearing, Mr de Vries asserted that the plaintiff had recovered the 1000 against Lord Carbery, to which the judge said “whether they have got a penny I do not know”. Before this appeal came on for hearing, Mr de Vries wrote to Lord Carbery asking him whether he had complied with the consent order or had given alternative consideration to the plaintiffs. Lord Carbery replied on the 7th August 1974 that he was not in a position to give any details. If the plaintiffs have received the 1000 damages and 1250 costs, in meal or malt, it would be quite unjust that Mr de Vries should have to pay another 500 and costs in respect of the self same damage. Of course, if the plaintiffs levied execution and got nothing from Lord Carbery, if they never received any of the 1000 damages or 1250 or the equivalent, they might be justified in trying to recover 500 from Mr de Vries. But it was a matter “peculiarly and solely within their knowledge”. So it was for them to prove they got nothing out of the settlement: see General Accident Fire & Life Assurance Corporation v Robertson. And they never proved it - or attempted to prove it.

179. Lawton LJ put the position in more sporting terms:

At the very end of the trial Mr de Vries made the allegation that the plaintiffs had received the damages. The judge replied: “Maybe: I do not know that”. Experienced counsel then appearing for the plaintiffs made no denial. This may be justifiable under the rules of pleading, just as under the rules of cricket a batsman who knows he has been caught at the wicket need not leave his crease until the umpire gives him out, but nearly all batsmen start walking. In my judgment, the plaintiff’s omission to give the judge any information whether the agreed damages had been paid made this aspect of the trial unsatisfactory.

180. The present problem to my mind is best resolved by recourse to the onus of proof. It is patent from the pleadings between BAL and James Hardie, the deed and the admissions of counsel, that the sum of $72500 was paid by James Hardie to BAL and received by BAL in extinction of the claim made by BAL against James Hardie for contribution to its liability upon the plaintiff’s judgment. It is for BAL to prove the extent to which any part of this sum was applied not in satisfaction of the claim but in payment of its costs. As no evidence is offered I am compelled to find that the claims in tort and for contribution by BAL have been satisfied to the extent of $72,500.

CALCULATIONS OF LIABILITY

181. The plaintiff’s judgment is in the sum of $145,000. I have apportioned liability as follows:

Eraring Energy	10 per cent	$14,500
BAL	15 per cent	$21,750
BIL	75 per cent	$108,750

The rights of Eraring Energy and BAL to contribution extend also to the costs payable by them to the plaintiff (James Hardie & Coy v Wyong Shire Council [2000] NSWCA 107 unreported). Because the plaintiff’s costs have not yet been taxed the total sum which is to be apportioned is unknown and I cannot give judgment for any party in a sum certain.

182. It is apparent however, that when the prima facie contributions which Eraring Energy and BAL are entitled to receive from BIL are ascertained, a deduction must be made from each in respect of the satisfaction received from James Hardie and judgment entered for the balance, if any.

183. It would appear probable that after the deduction of $72,500 from BAL’s entitlement there are no monies payable by BIL to BAL pursuant to the Statute. The claim of BAL against BIL in tort, however, must also include the costs incurred by BAL in resisting the plaintiff’s claim subject to the deduction of 17 per cent for contributory negligence. These costs were a foreseeable loss. Again no evidence of the amount of these costs is before me. It may be that the total of BAL’s claim for indemnity against the plaintiff’s judgment and costs, together with the claim for its own costs in the plaintiff’s action after deduction of 17 per cent for contributory negligence, exceeds the amount of satisfaction and BAL is entitled to judgment against BIL on this claim.

ORDERS

184. Babcock International Limited is to pay to Eraring Energy that sum by which Eraring Energy’s payments towards the plaintiff’s judgment and his costs exceed 10 per cent of the total thereof, less $21,500.

Babcock International Limited is to pay to Babcock Australia Ltd that sum, if any, by which Babcock Australia Ltd’s payments towards the plaintiff’s judgment and costs exceed 15 per cent of the total thereof, plus 83 per cent of Babcock Australia Ltd’s costs incurred in the plaintiff’s action, less $72,500.

185. I stand this matter over to a date to be fixed upon which the parties may agree on consequential judgment sums or lead further evidence relating to the calculation of these amounts. I will on that day hear the parties on costs.

Mr G Inatey SC with Mr D Miller instructed by Moray and Agnew appeared for Babcock Australia Ltd (the first cross-claimant and first cross-defendant to the second cross-claim)

Mr B M Toomey QC with Mr J A Gracie and Ms T Moisidis instructed by Goldrick Farrell Mullan appeared for Eraring Energy (the second cross-claimant and first cross-defendant to the first cross-claim)

Mr R J Burbidge QC with Mr S Kettle instructed by Mallesons Stephen Jacques appeared for Babcock International Ltd (the second cross-defendant to the first and second cross-claims)