National Semiconductor Corporation v Nilsen Industrial Electronics Pty Ltd

This matter came before the High Court of Australia on an application for special leave to appeal. The applicant, National Semiconductor Corporation, a United States corporation, sought to challenge its being brought within the jurisdiction of the Supreme Court of Victoria. The respondent, Nilsen Industrial Electronics Pty Ltd, was the ultimate consumer of a product manufactured by the applicant. The core of the dispute concerned whether a manufacturer owes a duty of care to an ultimate consumer for purely economic loss arising from negligent manufacture, in the absence of any contractual relationship between them.

The legal issues before the High Court revolved around the proper interpretation and application of Order 7 of the Supreme Court Rules concerning service out of the jurisdiction. Specifically, the applicant argued that the respondent bore the burden of demonstrating that it was strongly arguable that the grounds for service out of the jurisdiction had been met. This, in turn, required the respondent to show that it was strongly arguable that a cause of action existed, which raised the substantive question of whether a duty of care could arise in the circumstances.

The applicant contended that a duty of care in negligence for economic loss could not arise simply by reason of the ultimate use of a product by a consumer, without more. It was submitted that the respondent needed to establish more than just the fact of manufacture and distribution, and that in the absence of actual or known reliance, or other special facts establishing a relationship, the respondent's claim should fail. The Court, however, noted that the application appeared to be primarily concerned with practice and procedure, and that granting leave might not resolve the substantive legal questions, but rather determine whether a strong arguable case existed on the particular facts.