National Semiconductor Corporation v Nilsen Industrial Electronics Pty Ltd

[1992] HCATrans 137

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No Ml3 of 1992

B e t w e e n -

NATIONAL SEMICONDUCTOR

CORPORATION

Applicant

and

NILSEN INDUSTRIAL ELECTRONICS

PTY LIMITED

Respondent

Application for special leave

to appeal

MASON CJ
BRENNAN J

McHUGH J

National 1 8/5/92

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 8 MAY 1992, AT 11.42 AM

Copyright in the High Court of Australia

MR R.J. STANLEY, QC: If the Court pleases, I appear with my

learned friend, MR L. GLICK, on behalf of the

applicant. (instructed by Baker & McKenzie)

MR W.J. MARTIN, QC: If the Court pleases, I appear with my

learned friend, MR S.R. HORGAN, for the respondent.

(instructed by Best Hooper)

MASON CJ:  Mr Stanley?

MR STANLEY: If the Court pleases, this application involves

an issue which, in our submission, is of

fundamental and general importance in that it

involves the liability or the extent of the duty of
care that may be imposed upon a manufacturer of a

product as a result of which some negligence in its

manufacture causes purely economic loss to an

ultimate consumer. The question is whether a duty

of care can exist - does exist in the absence of

any contractual obligation or contractual duty

between the manufacturer and the consumer.

BRENNAN J:  When one has an important question like that, it

would be helpful to have facts, would it not?

MR STANLEY:  Your Honour, that is so, of course, but the

specific issue here relates to the position of the

applicant being a United States' Corporation being

brought into this jurisdiction on a basis ~here, in

our submission, the law requires that it be shown

that it is strongly arguable that one of the

grounds provided under Order 7 of the Supreme Court Rules has been met. Our submission is and has been

that the facts as they have been established, and the burden lies on the respondent to show that it

is strongly arguable that the grounds have been

satisfied - been met - and that, in turn, requires,

in our submission, that the respondent show that it

is strongly arguable that a cause of action exists.

BRENNAN J: But you are seeking special leave from this

Court with regard to that question of law that you

first mentioned and the question is whether we

should grant special leave in order to consider

that question when the facts of the case have not

been determined.

MR STANLEY:  Your Honour, if Your Honour were to take that

view it would mean that the applicant will, in

effect, be brought to this jurisdiction to argue

that issue and the whole point of the procedure

provided by Order 7 and the import of the decision

of Dewhurst v Cawrse will come to nought.

BRENNAN J: Well, do you want special leave to consider the

question of extra-juris service and jurisdiction?

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MR STANLEY:  If the Court thought that was appropriate, we

would not refuse the invitation.

BRENNAN J:  No, of course not, but it rather shifts the

ground, does it not?

MR STANLEY:  Your Honour, unless the law is that it is

sufficient for the respondent consumer to simply
show that in the course of manufacturer or

distribution of an article, in this case a complex

computer time clock, that negligence in its

manufacture will give rise to a cause of action

because a duty of care arises simply by reason of

the fact that there is the ultimate use by the

consumer, in our submission, unless more is shown,

the respondent must fail in its application. It is

not sufficient, in the absence of any actual

reliance, let alone any known reliance by the

manufacturer, unless there are some other special

facts which would enable the relationship of

proximity to exist.

McHUGH J: But that is the one question we cannot determine

in this case, is it not? This is a case simply

about practice and procedure and all the case would

stand for, if leave was granted, was that on the

particular facts of this case there was or was not

a strong arguable case. We would not determine the

substantive questions of law. That is not the

issue.

MR STANLEY:  Your Honour, it would be a substantive issue

whether or what more is required in the absence of

actual or known reliance or actual dependence or

assumption of responsibility - in those

circumstances, what more is required.

McHUGH J: Not necessarily, Mr Stanley. The Court could

come to the view, "Well, on this application, this

question was strongly arguable.", without

determining whether it was correct or not. This is

a matter of practice and procedure.

MR STANLEY:  If the Court took the view there was no more

than the fact that this was a complex component

part that was useless in itself and was known by

the manufacturer that it would be ultimately used

in some other device, that it would be manufactured

by some other manufacturer down the track, in our

submission, that in itself would not be enough and

could not be enough without more, without some form

of reliance, without some form of assumption of

responsibility, to impose a duty of care.

McHUGH J: That is not the question. The question is

whether those facts would create a strongly

arguable case.

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MR STANLEY:	In our submission, they would not and they

could not.

McHUGH J: But it decides nothing in terms of the

substantive law of Australia. It might determine

something in the matter of practice and procedure

which is surely a matter for the Supreme Court of

Victoria.

MR STANLEY: 

This Court has pointed to the difficulty of

determining the facts that would enable a court to
find a duty care in cases of pure economic loss

where what is relied upon is not simply a

misrepresentation, the sort of situation we are dealing with here, but there has been no answer

given to the question of what is required so far as

a manufacturer is concerned before a duty of care

will be imposed upon him, in respect of his

product, to the ultimate consumer who suffers pure

economic loss in circumstances where there was no

representation or no reliance.

McHUGH J: 

But you have only got to look at a case like

Ann's to see the trouble courts can get into when

they decide hypothetical questions. You just

cannot determine questions of proximity without

knowing what all the facts of the case are.

MR STANLEY: For the words "strongly arguable" to mean

something, in our submission, they must mean more

than just a prima facie or just perhaps arguable -

it must mean more than that and unless it can be

said that the facts that have been established in

this case - and they are required to be established

by the evidence, in our submission, for the

original service to stand; the facts must be

established on the evidence that is before the

court - for those facts to be sufficient to mount

an argument that is strong or an arguably good

case, in our submission, it would mean more than

simply saying that there may be other facts that

may appear in due course. The obligation, the

burden, is upon the respondent to establish the
facts upon which, firstly, the cause of action can

be based and then the grounds within Order 7 can be

satisfied. In our submission, that has not

occurred here.

The only factor that has been led in evidence is the fact that this is a complex product and, in

our submission, that in itself is not and cannot be
enough. If it is, the manufacturer of every

product that may be complex, that may, in turn, be

used in the manufacture of another product, would

owe a duty of care to the ultimate consumer for
economic loss that occurred. In our submission,

that could not be the law.

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McHUGH J: But there are other facts in this case though, as

well, is there not? It may well turn out to be

relevant that your client, if it be the case, was

aware of the defect and yet continued to sell the

product knowing it was likely to cause harm.

MR STANLEY:  Yes, that is so, Your Honour, but that, in our

submission, is really just another aspect of the

issue of negligence - the allegation of negligence

against it.

BRENNAN J:  Mr Stanley, your argument, if I was sitting in

the Supreme Court of Victoria, might sound very

attractive but I must say, when I think of the

difficulties that this Court had in dealing with

economic loss when it had the facts before it in a

case like "The Willemstad", the thought that we

would have to deal with the economic loss on no

more than a construction of an affidavit seems to

me to be fanciful. It is just not a case which

would justify this Court entertaining so important

a question.

MR STANLEY:  I hear what Your Honour says, and it would be

pointless for me proceeding further unless there is

a different view expressed by Your Honour's

brethren.

MASON CJ: There is another comment that should be made,

Mr Stanley. It is this: in many instances·it is thought that special leave will be granted by this

Court to correct what is perceived to be an error

made by courts below in reaching a decision. The

fact is that the appellate jurisdiction of this

Court is primarily hinged on the notion that the
Court will be elucidating the general principles of

law, and that is the primary ground that attracts

the grant of special leave in this Court and is the

justification for a second appeal. It is the only

justification for a second appeal apart from what

might be described as very clear cases of

procedural irregularity.

It necessarily follows that there are going to

be cases where people might have some doubt about

the correctness of a decision of a court below but

that does not attract the appellate jurisdiction of

this Court in the absence of a question of general

principle or some procedural irregularity. This is

such a case.

MASON CJ:  I will ask Justice Brennan to deliver the first

judgment.

BRENNAN J: In my view, special leave should be refused in

this case for the reasons that have just fallen

National	8/5/92 from the Chief Justice. For those reasons I would
refuse the grant of special leave.
McHUGH J:	I agree.
MASON CJ:	I must say, I can hardly disagree with what

Justice Brennan has said.	The application is
therefore refused.

MR MARTIN:  If the Court pleases, I apply for costs and also

do so on a solicitor/client basis on the basis that

this was an interlocutory application as to a

matter for procedure.

MASON CJ:  Yes. You do not oppose costs in any event, do

you, Mr Stanley?

MR STANLEY:  No, I do not, Your Honour.

MASON CJ:  The application is refused with costs. I need

hardly add, not on a solicitor and client basis.

AT 11.55 AM THE MATTER WAS ADJOURNED SINE DIE

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