Johnson Tiles Pty Ltd v Esso Australia Pty Ltd and Esso Australia Resources Pty Ltd (No 2)
[2001] VSC 292
•17 August 2001
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 5538 of 2001
| JOHNSON TILES PTY LTD and ORS | Plaintiff |
| v | |
| ESSO AUSTRALIA PTY LTD | First Defendant |
| and | |
| ESSO AUSTRALIA RESOURCES PTY LTD | Second Defendant |
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JUDGE: | Gillard J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 August 2001 | |
DATE OF JUDGMENT: | 17 August 2001 | |
CASE MAY BE CITED AS: | Johnson Tiles Pty Ltd and Ors v Esso Australia Pty Ltd and Esso Australia Resources Pty Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 292 | |
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Defence – application to amend – further facts – defence that there was no duty of care owed to avoid pure economic loss – relevance of facts to question.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J. Burnside QC with Mr D. Collins | Slater & Gordon, Maurice Blackburn Cashman, Phillips Fox, Lander & Rogers |
| For the Defendants | Mr J. Middleton QC, Mr M. Derham QC, Mr A.J. Kelly, and Mr G.P. Harris | Middletons Moore & Bevins |
| For the 1st to 16th Third Parties | Mr G. Nettle QC Mr J. Beach QC and Mr S. Anderson | Freehills |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 2
Background......................................................................................................................................... 2
Application to Amend....................................................................................................................... 2
Nature of the Proceeding.................................................................................................................. 3
The Pleadings..................................................................................................................................... 4
The Issues............................................................................................................................................ 6
Duty of Care – Economic Loss......................................................................................................... 8
HIS HONOUR:
Introduction
This is a group proceeding instituted in this Court by writ, on 26 April 2001, pursuant to Part 4A of the Supreme Court Act 1986 ("the Act").
Background
A similar representative proceeding was instituted in the Federal Court of Australia, some two years ago. On 17 May 2001, Merkel J transferred the proceeding to this Court pursuant to s.5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cwth).
I have ordered, subject to further order, that the cross-vested Federal Court proceeding be stayed.
In this proceeding, there are three plaintiffs, and each represents members of a particular group. The groups as defined as business users, domestic users and stood‑down workers.
The three plaintiffs bring proceedings, on behalf of themselves and members of each particular group, seeking damages for losses and expenses suffered and incurred as a result of an explosion, which occurred on 25 September 1998 at the Longford Plant operated by the defendants. As a result of the explosion, the gas supply from that plant, which supplies most of the gas consumers in this State, was interrupted and not restored for a period of some 14 days.
Application to Amend
Application has been made by the defendants to amend their defence.
The amendment is set out in a summons filed by the defendants on 27 July 2001.
In the Federal Court proceeding, the defendants last year made application to Merkel J to amend their defence to raise the same matters. In a reserved judgment, Merkel J refused the amendment.
The defendants now apply to amend their defence in the proceeding in this Court.
Mr Burnside QC, who appeared with Mr D. Collins of Counsel for the plaintiffs, objected to the amendment on the ground that the facts sought to be pleaded were irrelevant to the defendants' defence. Mr Nettle QC, who appeared with Mr Jonathon Beach QC and Mr Stewart Anderson of Counsel for the first to sixteenth third parties, sought leave to be heard on the application, which was granted, and, on behalf of his clients, objected to the amendment.
Nature of the Proceeding
It is important, at the outset, to briefly summarise the factual and legal issues of the plaintiffs' claim.
The proceeding is brought, as a group proceeding, pursuant to Part 4A of the Supreme Court Act 1986. The first plaintiff, Johnson Tiles Pty Ltd ("Johnson Tiles"), is a company which carries on a business, and it represents the group members known as business users, that is, persons, including corporations, who, on 25 September 1998, were gas users for the purpose of operating a business and who suffered damage as a result of the interruption and cessation of the supply of gas. Members of the group suffered damage to property and/or pecuniary loss as a result of the lack of supply of gas.
The second plaintiff, Douglas Chalmers ("Mr Chalmers"), was a domestic user on the relevant date, and he represents all those members of the group who were domestic users and who suffered damage to property and/or pecuniary loss as a result of the stoppage.
The third plaintiff, Gregory Alan Dean ("Mr Dean"), was a worker at the relevant date, who was stood‑down from his employment, as a result of the stoppage, and suffered pecuniary loss as a result. He represents persons in the group known as stood‑down workers, who suffered pecuniary loss as a result of being stood‑down.
The two defendants, at all material times, operated, managed and controlled the Longford Plant in East Gippsland, which produced gas. The gas was supplied by the defendants to companies which distributed the gas to consumers throughout Victoria.
On 25 September 1998, a series of explosions and a fire occurred at the Longford Plant and, as a result, gas plant No. 1 was substantially damaged. The production and supply of gas from the plant ceased or was severely diminished, resulting in the stoppage of the supply of gas. As a result, the supply of gas to the plaintiffs and the various group members and some employers, ceased until 8 October 1998, when the supply became available in limited quantities.
Each of the plaintiffs and those whom they represent, suffered damage, both of a physical and property nature, and also loss, which was pure economic loss, as a result of the cessation of the supply.
It is alleged against the two defendants that they were negligent in the design, installation, operation and management of the plant at Longford, and that their negligence was a cause of the explosion and fire which resulted in the cessation of the supply of gas.
An important issue in the case concerns the alleged duty of care owed by the defendants or either of them to each of the plaintiffs and the persons each represents.
The Pleadings
Paragraph 9 of the amended statement of claim alleged that Johnson Tiles and Mr Chalmers and those whom they represent were dependent on the defendants for the supply of gas for their use. It is alleged that the employers of Mr Dean and the other persons whom he represents, also relied upon a supply of gas for their use.
Paragraph 10 alleged that the defendants knew and it was reasonably foreseen that the plaintiffs and the group members depended upon the defendants to provide them with a supply of gas.
Paragraph 16 alleged that the defendants "owed a duty of care when designing, installing, operating and maintaining the Longford Plant" to the three plaintiffs, and the persons and organisations whom they represented.
The defendants, in their defence, deny the allegations made in paragraph 9 and also paragraph 16.
Having denied in paragraph 9 that the plaintiffs, and in the case of the third plaintiff, his employer, and members of the groups, were dependent upon the supply and this should have been reasonably foreseeable, the defendants went on to plead a number of other factual allegations. In denying paragraph 16, which denies the duty of care, they also repeat the matters referred to in paragraph 9.
The matters set out in paragraphs 9.2 to 9.25.2 set out various matters which the defendants rely upon, in answer to the contention that they owed a duty of care to the plaintiffs and the group members.
Mr Middleton QC, on behalf of the defendants, stated that one of the main issues in the proceeding was whether or not the defendants owed a duty of care to avoid pure economic loss to the plaintiffs and the group members, who suffered pure economic loss not consequential upon any physical or property damage.
The factors that are pleaded and relied upon concern matters such as the fact that the defendants supplied the gas to others at the boundary to the Longford Plant, and that others were responsible for supplying the gas to the plaintiffs and the group members. It is asserted that the gas was supplied pursuant to a variety of statutory provisions and specific contracts between the suppliers and the consumers. It is said that they are relevant matters to the question of whether there was a duty of care to avoid economic loss. No attack has been made by the plaintiffs on the pleading that they are not relevant to the question of the duty of care, although in fairness to the plaintiffs, it is submitted by them that those facts do not exclude the duty of care.
The defendants now wish to plead further facts.
The Issues
This is not an application by a party to add a new cause of action or to plead a defence in law to a claim. The principles concerning such applications are well established.
The Rules permit amendment of a pleading at any time. Rule 36.03(b) provides –
"A party may amend any pleading served by him
(a)once before the close of pleadings; or
(b)at any time, by leave of the court or with the consent of all other parties."
In fact, pleadings have not closed, and it appears that this is the first amendment sought by the defendants. However, it was made quite clear that if the amendment had been permitted, application would have been made by the plaintiffs to have the pleading disallowed, pursuant to Rule 36.04. Accordingly, it is appropriate to treat the application as an application for leave to amend.
The general rule which applies to all applications for amendment is set out in Rule 36.01(1) of the Rules, which relevantly provides:
"(1)For the purpose of determining the real question in controversy between the parties to any proceeding or correcting any defect or error in any proceeding … the Court may at any stage order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding."
This paragraph of the Rules is both the rationale for the power and the criterion for its exercise.
The rule concerning the power to amend a pleading in this State has been in similar form since the Judicature Act Rules were first passed in the Colony of Victoria in the latter part of the 19th century. The general rule is that relevant amendments should be permitted, unless the amendment will cause prejudice to the other party which cannot be overcome in some way.
Soon after the Judicature Act Rules were passed in England, the Courts adopted a practice which has been followed in this State, and applied ever since. In the case of Cropper v Smith (1884) 26 Ch D 700 at 710, Lord Justice Bowen said –
"Now I think it is a well-established principle that the object of courts is to decide the rights of the parties and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights … I know of no kind of error or mistake, which if not fraudulent or intending to overreach, the court ought not to correct if it can be done without injustice to the other party. Courts do no exist for the sake of discipline, but for the sake of deciding matters in controversy and I do not regard such amendment as a matter of favour or grace … It seems to me that as soon as it appears that the way in which the party has framed his cause will not lead to a decision of the real matter in controversy, and is much a matter of right on his part to have it corrected if it can be done without injustice, as anything else in the case is a matter of right."
I also refer to what Isaacs J said in O'Keefe v Williams (1910) 11 CLR 171 at 204 and the recent High Court decision of Queensland v J.L. Holdings Pty Ltd (1997) 189 CLR 146 at 155.
The proposed amendment is not, in fact, seeking to set up a complete defence to the proceeding. It is not a question of considering whether the defence is open in law. The defendants have put in issue, the question of whether there is a duty of care owed to those consumers who suffered economic loss only. The plaintiffs have pleaded that there is such a duty of care and by denying the assertion, the defendants are putting in issue the question and, in my opinion, are entitled, under the general denial, to adduce any facts which are relevant to the question.
In accordance with the modern practice of pleading, a defendant is obliged to plead any matter that may take the opposite party by surprise. See Rule 13.07(1)(b).
In my opinion, it is appropriate that the defendants do plead all facts which they say are relevant to the issue of whether there was a duty of care owed to avoid pure economic loss.
What the defendants seek to do is to plead additional facts, which they say are relevant to the issue. Whether the facts are relevant to a fact in issue will depend upon what the relevant facts are.
The present proceeding has been on foot now for some three months, and the pleadings have not closed. As a general rule, the defendants should be given every opportunity to plead their case and accordingly, the Court, at this stage, should liberally approach any application for amendment.
Duty of Care – Economic Loss
In Australia, the law has permitted recovery by a plaintiff seeking pure economic loss from a negligent tortfeasor. The right to recover for economic loss not consequent upon personal or property injury is traced back to Hedley Byrne v Heller (1964) AC 465. But the cause of action was confined to negligent misstatement causing loss. Today, the right to recover may extend to the provision of services – see Williams v Natural Life Health Foods Ltd (1998) 1 WLR 830 at 834-35 per Lord Steyn.
In England, other than claims based on Hedley Byrne, as extended by Henderson v Merrett Syndicates Ltd (1995) 2 AC 145, i.e. provision of services, the general rule is that it is not possible to recover damages for pure economic loss – see Caparo Industries Plc v Dickman (1990) 2 AC 605 and Murphy v Brentwood (1991) 1 AC 398. There are some exceptions – see e.g. Ross v Caunters (1980) Ch 297 and White v Jones (1995) 2 AC 207. But in Australia, the High Court has recognised a right to recover pure economic loss from a negligent tortfeasor in cases outside negligent misrepresentation – see Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529.
In determining whether or not there is a duty of care in England, the Courts consider three questions, namely, whether there was a reasonable foreseeability of injury or damage, the relationship of sufficient proximity and whether the imposition of a duty of care was fair, just and reasonable in the circumstances. See Caparo Industries Plc v Dickman, supra.
In Australia, the Courts have, in the past, applied a two‑step test in cases where the victim and wrongdoer do not fall within one of the recognised categories, such as employer‑employee, teacher-pupil and road user/road user, to name a few. The two steps involve considering and determining the following questions –
"(a)Would a reasonable person in the shoes of the alleged wrongdoer having knowledge of all relevant circumstances have reasonably foreseen that his actions or omissions could possibly injure the victim?
(b)If yes, was there a relationship of proximity between the victim and the wrongdoer?"
In Cook v Cook (1986) 162 CLR 376, the majority of the High Court summarised the law in determining whether there was a duty of care, when they said at p.381 –
"For our part, we accept that a relevant duty of care will arise under the common law of negligence only in a case where the requirement of a relationship of proximity between the plaintiff and defendant is satisfied. See generally Jaensch v Coffey; Sutherland Shire Council v Heyman; Stevens v Brodribb Sawmilling Co Pty Ltd. As an overriding control of the test of reasonable foreseeability, that requirement of proximity relationship can be traced back to the judgments of Lord Esher and A.L. Smith LJ in Le Lievre v Gould; see Donoghue v Stevenson. It continues the general determinent of the categories of case in which the common law of negligence recognises the existence of a duty to take reasonable care to avoid a reasonably foreseeable and real risk of injury to another."
The references referred to by the Court and the facts of the case of Cook v Cook, lead to the conclusion that the Court was stating a general rule to apply to a variety of relationships, irrespective of the nature of the loss.
Later, in Bryan v Maloney (1995) 182 CLR 609, Mason CJ, Deane and Gaudron JJ said, in a case where the loss was purely economic, at p.617 –
"The cases in this Court establish that a duty of care arises under the common law of negligence of this country only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage."
Their Honours went on to point out that in several areas of the law of negligence involving physical injury or property damage, reasonable foreseeability usually suffices to establish the duty of care.
Their Honours went on to say, at p.618 –
"In contrast, the field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. In that area, the question of whether the requisite relationship of proximity exists in a particular category of case is more likely to be unresolved by previous binding authority with the consequence that the 'notion of proximity … is of vital importance'. As Stephen J indicated in Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad', it is the articulation, in the different categories of case, 'of circumstances which denote sufficient proximity' with respect to mere economic loss, including 'policy considerations', which will gradually provide 'a body of precedent productive of the necessary certainty'. Inevitably, the policy considerations which are legitimately taken into account in determining whether sufficient proximity exists in a novel category will be influenced by the Court's assessment of community standards and demands."
(Emphases added).
Whether the principles stated above still represent the law in Australia, where the victim seeks to prove a duty of care to avoid economic loss, is open to doubt. I refer to the recent High Court decision of Perre v Apand Pty Ltd (1999) 198 CLR 180.
But assuming that the relationship of proximity is an essential part of the proof of the victim, then in this present case, what is involved in the concept that is central to the issues? What is the relationship of proximity?
It could hardly be described as a concept which can be determined by the application of a formula. A number of judges over the years have discussed the concept, and one thing that emerges from what has been said, is that there are potentially a great number of factors which could be relevant to a particular situation. The concept of proximity is uncertain, but it is also flexible. Unfortunately, there is no unifying single principle which can be applied in each case.
In most cases involving personal injury or property damage, the reasonable foreseeability test will, in most cases, identify and satisfy the requirement of proximity. However, in areas such as pure economic loss, there is much room for debate in determining the proximity relationship.
In Jaensch v Coffey (1984) 155 CLR 549, Deane J, at pp.584-5, said –
"It involves and embraces physical proximity (in the sense of space and time) between the personal property of the plaintiff and the personal property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client, and causal proximity in the sense of the closeness or directness of the relationship between the particular act or cause of action and the injuries sustained. The identity and relative importance of the considerations relevant to an issue of proximity will obviously vary in different classes of case and the question of whether the relationship is so close that the common law would recognise a duty of care in a new area or class of case is as Lord Atkin foresaw, likely to be difficult of resolution in that it may involve value judgments on matters of policy and degree."
(Emphasis added).
In Sutherland Shire Council v Heyman (1985) 157 CLR 424, Deane J, at p.498, emphasised the assumption of responsibility as being a relevant factor.
His Honour did not exclude the questions of idiosyncratic notions of justice or morality. He emphasised that it was a question of law to be resolved by the processes of legal reasoning, induction and deduction. He also emphasised, in Jaensch, at p.585, that the question could not be –
"Divorced from notions of what is fair and reasonable … or from the considerations of public policy which underlie and enlighten the existence and content of the requirement."
Lord Oliver summed up the substantial uncertainty in Alcock v Chief Constable of South Yorkshire (1992) 1 AC at 415, where he concluded that the Court "has no reference to defined criteria, and the decision necessarily reflects to some extent the Court concepts of what policy – or perhaps common sense – requires."
His Lordship, in the earlier case of Caparo Plc v Dickman, supra, explained the rationale for the concept, when he said, at p.633, that the concept was used "to keep the law of negligence within the bounds of common sense and practicality".
Later, on the same page, he stated –
"'Proximity' is, no doubt, a convenient expression so long as it is realised that it is not more than a label which embraces not a definable concept but merely a description of circumstances from which, pragmatically, the courts conclude that a duty of care exists."
More recently, the High Court has considered the issue of a duty of care in a case involving pure economic loss. See Perre v Apand Pty Ltd, supra.
In that case, the loss suffered by each plaintiff was pure economic loss. As was emphasised in that case, there are many factors that may be taken into account in determining whether or not there is a duty of care, and a matter which adds to the difficulty of determining the question is the lack of precision in the concept of financial or economic loss.
Each of the seven justices of the High Court, in that case, delivered separate reasons for judgment, and a consideration of each of the judgments supports the observation that the legal principles to apply in a case involving pure economic loss are now more uncertain than before. This makes the task of legal practitioners and Judges of advising and deciding, difficult. McHugh J recognised the importance of certainty of the law in practice – see pp.211 and 215. It is unfortunate that the members of the Court did not bear that maxim in mind when delivering their reasons. All one can say is that the law concerning duty of care to avoid pure economic loss is in a state of change, and is uncertain.
Trial Judges are assisted by a step‑by‑step approach, even though some steps may involve value judgments and room for much argument.
In the Perre case, the Chief Justice agreed with the reasons of Gummow J. His Honour did, however, make a number of general observations. He did not agree with the three‑stage English test. He emphasised that knowledge by the tortfeasor actual or constructive, of the vulnerability of the victim is the significant factor.
Gaudron J, after noting there was no governing principle and discussing the various approaches of the past, observed that, although the notion of proximity had been accepted by the High Court in the past, its usefulness was questionable. See pp.197‑8.
Her Honour referred to the law concerning negligent misrepresentations, and observed that there was another category that could be articulated.
She summarised this category at p.201, when she said –
"Where a person is in a position to control the exercise or enjoyment of another of a legal right, that position of control and, by corollary, the other's dependence on the person with control are, in my view, special factors or, which is the same thing, give rise to a special relationship of 'proximity' or 'neighbourhood' such that the law will impose liability upon the person with control if his or her negligent act or omission results in the loss or impairment of that right and is, thereby, productive of economic loss."
McHugh J was of the opinion that proximity was no longer a test, and he opined the view that the High Court had held that it no longer applied. I would respectfully query whether this is correct.
He opined the view that there was a need for a new framework for determining the existence of a duty of care. His Honour disagreed with Gaurdron J's approach, based upon the control of the exercise or enjoyment of another of a legal right.
His Honour was of the view that the most satisfactory approach was the incremental approach. If the case did not fall within an established category, then it was necessary to examine analogous cases to determine whether a duty of care does or does not exist.
At p.218, His Honour said –
"In determining whether the defendant owed a duty of care to the plaintiff, the ultimate issue is always whether the defendant in pursuing a course of conduct that caused injury to the plaintiff, or failing to pursue a course of conduct which would have prevented injury to the plaintiff, should have had the interest or interests of the plaintiff in contemplation before he or she pursued or failed to pursue that course of conduct. That issue applies whether the damage suffered is injury to person or tangible property or pure economic loss. If the defendant should have had those interests in mind, the law will impose a duty of care."
If I may say so, with the greatest of respect, His Honour appears to me to have substituted one test, with its uncertainties, with another test, with a similar degree of uncertainty.
At p.231, His Honour stated that there were five questions to be considered in determining whether there was a duty of care.
Gummow J, with whom the Chief Justice agreed, after discussing the principles concerning recovery of pure economic loss in the field of negligence through the cases in many jurisdictions, concluded, at p.254, by saying –
"I prefer the approach taken by Stephen J in Caltex Oil. His Honour isolated a number of 'salient features' which combine to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss. In Hill v Van Earp and Pyrenees Shire Council v Day, I favoured a similar approach, with allowance for the operation of appropriate 'control mechanisms'. In those two cases, the result was to sustain the existence of a duty of care."
What the control mechanisms are, in any particular case, will depend upon the circumstances. The cases have established a number of relevant matters.
It appears that Gummow J was applying the traditional two‑step approach, which was exemplified by Stephen J in Caltex Oil.
Kirby J prefers the English approach, which involves a three‑step exercise, namely, foreseeability, proximity and policy.
The English approach was first discussed in Peabody Trust v Sir Lindsay Parkinson Ltd (1985) AC 210 at 241, where Lord Keith of Kinkel said –
"So in determining whether or not a duty of care of a particular scope was incumbent upon the defendant it is material to take into consideration whether it is just and reasonable that it should be so."
His Honour referred to what Lord Morris of Borth-y-Gest said in Dorset Yacht Co v Home Office (1970) AC 104 at 138, where his Lordship did raise the question of whether it was fair and reasonable that a duty of care should exist.
As Counsel in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, I referred to what Lord Keith said in the Peabody Trust case. It is clear that members of the High Court were aware of the English approach, and yet no High Court Judge in the past has embraced the English approach. Kirby J now does.
Hayne J adopted the traditional approach of applying the two‑test exercise, but emphasised the importance of control mechanisms, which he identified in the case, at p.303, as being indeterminent liability and a concern not to establish a rule that will render "ordinary" business conduct tortious.
Callinan J also adopted the two‑step approach, which was applied in the Caltex case, and emphasised the importance of particular factors to the question of duty of care.
In my opinion, the majority of the High Court still favour the two‑step exercise, but what is relevant to the proximity aspect will depend upon the circumstances of each case. Clearly, questions of policy can arise and apply.
Mr Middleton QC emphasised that the law was not certain in this area, and what factors were to be taken into account would depend very much upon each case.
In my opinion, it is difficult for a Court to say, from a pleading, that certain facts pleaded, by way of defence, are irrelevant to the question of whether there was a duty of care owed by the particular defendant to the particular plaintiff to avoid economic loss. The cases show a myriad of factors.
In Agar v Hyde (2000) 201 CLR 552, Gaudron, McHugh, Gummow and Hayne JJ, at p.578, highlighted the difficulties of a Court coming to a conclusion on a pleading that there was no cause of action. In my view, their observations are equally applicable to the question of whether certain factual matters are relevant to a particular defence. Their Honours, at p.578, said –
"The result is that frequently the conventional form of pleading in an action of negligence will not reveal the alleged duty with sufficient clarity for a court considering an application for summary determination of the proceeding to be sure that all the possible nuances of the plaintiff's case are revealed by the pleading. Further, and no less importantly, any finding about a duty of care will often depend upon the evidence which is given at trial. Questions of reliance or knowledge of risk are two obvious examples of the kinds of question in which evidence given at trial may take on considerable importance in determining whether a defendant owed the plaintiff a duty of care."
(Emphases added).
In my respectful opinion, the same observations can be made in respect of determining whether or not certain facts which a defendant seeks to plead in his defence, are relevant or irrelevant to the question of duty of care.
The defendants have already pleaded that, certain contractual relationships between the defendants and those who ultimately supply the gas to the consumer, and the contents of those contracts, together with certain statutory provisions in this State relating to the supply of gas, are all relevant matters to the question of duty of care. This seems to be accepted by Counsel for the plaintiffs, and also the first to sixteenth third parties. The amendment seeks to add further facts to this question.
Can it be said that the additional facts, which the defendants wish to plead, are irrelevant to the exercise of determining whether or not there was a duty of care owed by the defendants to all plaintiffs and group members, to avoid economic loss, in the light of all that has been said on the subject since the Caltex case was decided in 1976? The quest for a formula to apply to all cases has failed and, in my respectful opinion, is unachievable.
The defendants seek to add new sub-paragraphs to paragraph 9.18 of their defence.
Paragraph 9.18 asserts that if any of the plaintiffs or group members were vulnerable to an interruption to the supply of gas, then their vulnerability did not come about by reason of the conduct of the defendants, but was due to the conduct of Gascor Pty Ltd. Gascor purchased gas from the Longford plant and supplied it to consumers.
It is asserted that it was in control of the system and, hence, all risks associated with supply were the responsibility of Gascor.
The amendment seeks to add further facts, and can be briefly summarised. The amendment pleads that Gascor knew or ought to have known that the gas system security measures were insufficient to ensure the supply of gas, and that Gascor did not have in place any emergency plan to avoid damage in a situation where there was an unexpected interruption to the supply of gas. It is asserted that Gascor knew or ought to have known that the supply could be interrupted, and that it knew or ought to have known that it had the ability to avoid the consequences of the interruption of supply. It was said, based upon that knowledge, that certain steps should have been taken by Gascor to avoid this risk of loss and damage to consumers. Various procedures are pleaded, such as having storage facilities, entering into agreements with other gas industry participants, and having in place an emergency plan. Assuming those facts are proven, are they relevant to the question of duty or not duty?
It was submitted by Counsel for the plaintiffs and also for the first to sixteenth third parties, that the proposed amendment raises facts which were irrelevant to the issue of the duty of care.
Given the state of the law, and, in particular, the uncertainty as to what factors are relevant to determining whether there is a duty of care to avoid economic loss, I am not prepared, on a pleading summons, to hold that what the defendants wish to plead are irrelevant to the issue of duty of care. The authorities establish that factors of policy will intrude, and as Hayne J said, one of the control mechanisms is the concern "not to establish a rule that will render 'ordinary' business conduct tortious." See Perre v Apand Pty Ltd, supra, at p.303. A factor which has been held relevant in the past is the contractual relationships between the alleged tortfeasor and a third party.
Mr Nettle QC submitted that to permit the amendment would lengthen the trial, because the third parties have a direct interest in any findings of fact in relation to the proposed amendment, because of the third party proceeding. The fact that the trial would be lengthened, in my view, is no answer to allowing an amendment, which raises facts which the defendants wish to rely upon and are arguably relevant.
But, in my view, the factual matters raised by the proposed amendment do not cover a wide field and, indeed, some of the assertions could either be easily proved or refuted. I do not accept that the proposed amendment raises any factual matters which will unduly prolong the trial.
In my opinion, the proposed amendment pleads facts that are arguably relevant.
As a trial Judge, I will be in a far better position to rule, as to the relevance of the additional pleaded facts, after all the facts are before the Court, and there has been time to reflect on all matters. I am not prepared to shut out the defendants, at this stage, from adducing those facts, and whether or not they will ultimately be relevant to the issue, will be a matter for consideration and argument at the trial.
I also point out that under the plea denying the duty of care, it is open to the defendants to prove any facts which are relevant to the question.
Subject to submissions by Counsel, I propose to make the following orders –
(i)That the defendants have leave to amend their defence in accordance with the amendment set out in their summons filed 27 July 2001;
(ii)that the defendants bear their own costs of the amendment;
(iii)that there be no order for costs of the defendants' application.
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