The Ship 'Eternal Wind' v Fortuna Seafoods Pty Ltd

[2006] HCATrans 136

[2006] HCATrans 136

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B100 of 2005

B e t w e e n -

THE SHIP ‘ETERNAL WIND’

Applicant

and

FORTUNA SEAFOODS PTY LTD (AS TRUSTEE FOR THE ROWLEY FAMILY TRUST)

Respondent

Application for special leave to appeal

GUMMOW J
KIRBY J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 10 MARCH 2006, AT 9.35 AM

Copyright in the High Court of Australia

MR B.W. RAYMENT, QC:   May it please your Honours, I appear with my learned friend, MR A.W. DUFFY, for the applicant.  (instructed by Ebsworth & Ebsworth)

MR A.J. GREINKE:   If it please the Court, I appear for the respondent.  (instructed by Thomson Rich O’Connor)

GUMMOW J:   Yes, Mr Rayment.

MR RAYMENT:   Your Honours, in our submission, the adoption of the test propounded in the Queensland Court of Appeal in this matter with a class described at such a high level of generality, as they described it, would itself promote indeterminacy in this area of the law and the ease with which their Honours inferred that the applicant would have known of the existence of this class and membership of this class shows how significant this case could be in the law of economic loss.

GUMMOW J:   I think you have to look very specifically.  The message of Perre v Apand is the common law bar loves tests.  It is much better to look very specifically at the facts.

MR RAYMENT:   But the level of generality at which the court has put it, that is a related corporation with an integrated business operation, could catch almost any related company of a plaintiff in Australia.

GUMMOW J:   What is wrong with the formulation by the primary judge who had the wisdom to attend closely to what my colleague and I had said in Perre v Apand?

MR RAYMENT:   Your Honours, in our submission, his Honour has produced just a completely general class of related corporations with an integrated business operation which would be present everywhere one looks in our commercial community.  The only previous case involving relational loss in this Court directly was Caltex and it was important in that case that the defendant knew or ought to have known that the plaintiff, individually, and not as a member of an unascertained class, was likely to suffer loss.  That would be the very reverse of the kind of facts that arose here.

GUMMOW J:   There was a finding of fact here though, was there not?

MR RAYMENT:   There was a finding of fact of the primary judge, for example, in the last paragraph of his judgement at page 11, paragraph [30] which, in our submission, puts the matter totally generally.  There was found to be common shareholders, common directors, a trustee and beneficiary relationship in “what was essentially one business”.  The one business was one company was a single entity company carrying on a fishing operation on board the Melina T and the other one was a packaging operation which packaged for eight other vessels and the public generally.

GUMMOW J:   Yes, for good reason involved with regulatory laws of New South Wales, I think.

MR RAYMENT:   Yes, they set it up for reasons many years before to do with the law of New South Wales.

KIRBY J:   They are highly integrated companies, are they not?

MR RAYMENT:   They were just, we submit, two related enterprises in different areas of business where the catch of one was supplied to the other.

GUMMOW J:   Wait a minute.  The intrusion of Salomon v Salomon into this field of the law as a reason for denying remedy is at the root of your submissions, is it not?

MR RAYMENT:   It is really our primary submission that the statement of a class in such general terms ‑ ‑ ‑

GUMMOW J:   We are talking about economic loss.

MR RAYMENT:   Yes, but the statement of a class in such general terms, in our respectful submission, would really effectively introduce into this area of the law a new category of plaintiff, that is, related companies in some integrated business operation.

KIRBY J:   You may remember from Perre v Apand that I was possibly the most sympathetic to that view, that the integration of the companies makes it very artificial to divide them off just because they are separate companies, but if you could convince me that we have taken in this decision a course which is not consistent with the course being taken elsewhere in the world then that might be a special leave point.  The Court of Appeal did refer to a series of Canadian cases and there have been some English cases on this but is it your proposition that ‑ ‑ ‑

MR RAYMENT:   This plaintiff could never have recovered, we submit, in England ‑ ‑ ‑

GUMMOW J:   That does not surprise me.

MR RAYMENT:   ‑ ‑ ‑ in America and probably not in Canada, in our submission, on these facts.

GUMMOW J:   The plaintiff in Caltex would not have recovered in England either.  The days have passed when – that is something in terrorem, as far as I am concerned.

MR RAYMENT:   But the plaintiff in Caltex was at one end of the pipeline.  The dredging master in Caltex ‑ ‑ ‑

GUMMOW J:   I know that, but the fact is he could not have recovered in the United Kingdom, right?

MR RAYMENT:   Not necessarily.

KIRBY J:   I am not quite as nationalistic as Justice Gummow.

MR RAYMENT:   Cattle states a general rule without having stated an absolute rule.  There was a line of sight from the dredging master to the Banksmeadow terminal of Caltex and to the AOR oil refinery.  As a matter of fact, the High Court was told in the course of the argument in Caltex that there had been a relationship of wholly‑owned subsidiary and holding company between the two parties to that case, Caltex and AOR, and that played no part whatsoever in the result of the case.

Your Honours, this really would be, in superior courts in Australia, the second main relational loss case, in economic loss, since Caltex, Perre v Apand being a quite different kind of case, in our submission, which turned primarily upon the presence within 20 kilometres of the Sparnon’s land of the various Perre farms and the factory that was involved in that case.  There was true propinquity, in Justice Jacob’s sense, in Caltex in that case entirely absent ‑ ‑ ‑

GUMMOW J:   Do you mean physical propinquity?

MR RAYMENT:   Physical propinquity.

GUMMOW J:   Here there is economic propinquity in the way this family has organised its business affairs.

MR RAYMENT:   It is not just limited to families though, this kind of approach, your Honours.  This is any related company that would be therefore ‑ ‑ ‑

GUMMOW J:   No, that is not what the case decides.  It comes back to what I said to you first off:  common law barristers love erecting principles out of cases that are fact based, then you seek to use that in terrorem.

CRENNAN J:   Adding to that, is not one view that what the Court of Appeal does is it is a principled application of Perre v Apand?

MR RAYMENT:   Except that Perre v Apand was not a relational loss case.  In our respectful submission, it is to misunderstand Perre to bring its list of principles to bear on the facts of this case, especially when you arrive at a so-called ascertained class cast at such a high level of generality as this one, relational ‑ ‑ ‑

KIRBY J:   Mr Rayment, Justice Gummow, as I observed, is very nationalistic and he thinks we solve things here and, of course, that is ultimately our duty.

GUMMOW J:   No, I think we decide cases and hopefully others see the light.

KIRBY J:   I would like to know what do you say is the reason why this case would be lost in the United Kingdom and in the United States?

MR RAYMENT:   It would in each case, we submit, fall within the general rule of non‑recovery.

GUMMOW J:   That would have been true of Perre v Apand, in some jurisdictions.  We went through all this.

MR RAYMENT:   I do not know that it has arisen in the context of physical propinquity such as was found in both Caltex and Perre, we submit.

GUMMOW J:   I think we also considered some judgements of Chief Justice McLachlin in this area?

MR RAYMENT:   Yes.

KIRBY J:   Is there anything in Woolcock that is relevant to this?

MR RAYMENT:   There is, with respect to vulnerability.  If one takes the approach of the collective judgment in Woolcock and also that of Justice Callinan, we submit vulnerability should have been found to be absent in the present case.  There was no reason to think that one company could not have stipulated for protection from the other on the facts of this case and the Court dealt with the matter by looking at the absence of evidence in Woolcock.  In the present case, if you examine the judgments below, it also has proceeded with there being, as it were, no evidence called at all about the matter and presumptions being applied to the very opposite result as was mentioned in Woolcock.

One other matter that we wanted to mention about the President’s judgment, and it to some extent affects that of Justice Dutney as well, is that her Honour appears to have thought that there was relevant propinquity in this case.  The vessel sank 48 miles off the coast from Noosa and the processing plant was some 30 to 45 kilometres south of Noosa, on the coast.  That is hardly the kind of propinquity that Justice Jacobs was referring to or that could possibly be thought to be relevant in Perre.

KIRBY J:   The propinquity here was the family connection.

MR RAYMENT:   Her Honour puts it on several bases, one of which is the one I have mentioned, and especially mentions Justice Jacobs’ judgment, talks of the “physical propinquity” at paragraph [26] of the judgment.

KIRBY J:   It is a matter of drawing lines, is it not?  The principle is one of policy that the law does not like pure economic loss and therefore it draws lines.  It seems a very fact intensive case and unless you could convince me that the court below applied a wrong principle or is out of step with the general movement of the common law in other countries, it really would not be a matter that would attract our attention.  It is very much a matter of fact and ‑ ‑ ‑

MR RAYMENT:   Your Honours, the facts, we submit, are very likely to be quite common in this country.

GUMMOW J:   We will see.

MR RAYMENT:   Their Honours have essentially established a new head of economic loss claims, that is, related companies with any kind of integrated business operation.  That is a very general description.  It is nothing like – my clients were the owners of an international vessel with an international crew and they were found to have known because a business card was being used in Brisbane for two companies.

GUMMOW J:   What is the country of nationality of the ship?

MR RAYMENT:   It is a Panamanian registration and the crew was Filipino.

GUMMOW J:   Yes, a flag of convenience ship.

MR RAYMENT:   They were fixed with knowledge of what was on a business card circulating in very limited circumstances in Australia of some business relationship because no evidence was called in the case.  That, in our respectful submission, shows how easy it would be to apply this

principle.  There is no reason, we respectfully submit, why a related company should be any better off, in terms of recovering economic loss, than a non‑related company.

There is no rationale that was identified in any earlier decision in this Court or that one can think of that would make a related company better off from the point of view of making this claim than a non‑related company and whether there was an integrated business relationship or not, similarly, would produce no difference, in our submission, in that regard.  If one asks the question, “Why should a duty be imposed?” the answer is, “It shouldn’t”.

GUMMOW J:   Part of the reason in the United States for their resistance to this sort of claim is the persistence of jury trials and the fear is, as I understand it, that once you let this sort of case anywhere near a jury there will be a takeoff, so they have tried to shut them out at the strikeout level, but that does not apply here.

MR RAYMENT:   It does not apply here.  It is not the rule in Britain, of course.  There is a more general ‑ ‑ ‑

GUMMOW J:   It is not stated as such in the United States cases because you cannot say unattractive things about the jury system, but from my understanding of things that is what is going on underneath the surface.

MR RAYMENT:   It may lie behind what Justice Cardozo said, perhaps.

GUMMOW J:   Yes.

MR RAYMENT:   As your Honour said, it was not mentioned.  This is not a transferred loss case, we point out.  You had something akin to a transferred loss case in Woolcock.

GUMMOW J:   Have there been any English cases since Perre v Apand on this question?

MR RAYMENT:   Not that we are aware of, your Honour.

GUMMOW J:   Perhaps they will receive our enlightenment. 

MR RAYMENT:   Your Honours, those are the reasons why we seek special leave in this case.

GUMMOW J:   Yes.  What do you say for the respondent?

MR GREINKE:   Your Honours, if I can go to the ‑ ‑ ‑

GUMMOW J:   What do you say about Mr Rayment’s point that once you allow this case to stand there will be a whole new class of action simply dependent upon economically integrated businesses recovering?

MR GREINKE:   Your Honours, that is not what the Court of Appeal found.  I say that that puts the finding of the Court of Appeal too high.  I say that what had happened in this case was an application of principle to particular facts in this case and it was the particular facts in which the Court of Appeal disagreed.  Perhaps I can bets illustrate that if I could take your Honours to his Honour Justice Dutney’s reasons which your Honours will find at page 49 of the application book.

At paragraph [105] his Honour really brings out perhaps most clearly the fact that this turns on the particular way in which the corporations here were integrated and the feature that he picks up on in particular is the catching and sale of the fish are linked in terms of the commercial operation.  He says:

Without both there is no commercial activity.

GUMMOW J:   Yes, I noticed that.  In this structure, there was not an intercompany sale.

MR GREINKE:   That is correct, your Honour.  He goes on.  If your Honours read towards the end of that same paragraph, he outlines the fact that on this reasoning this makes this case different from merely related companies and also the agent argument that his Honour Justice Jerrard refers to and in his view:

It creates a separate ascertainable category of finite membership.

Your Honours, that is really where the case turns between his Honour Justice Jerrard and the other two members of the court.  All three agree that an ascertainable class is a feature that may well assist in finding a duty of care.  The difference, really, between the members of the Court of Appeal is whether the particular facts of this case lead to an ascertainable class or not. 

The way in which the applicant frames what it says is the test that emerges from the case is really to apply his Honour Justice Jerrard’s reasoning as to what the particular facts in this case represented.  That was not what the other two members of the court found.  In particular, if I could refer your Honours to his Honour Justice Jerrard’s reasoning.  At page 44 of the application book his Honour’s conclusions in terms of the way that he approaches the case is that while he agrees with what the learned trial judge did in terms of the principles and the basis on which liability is imposed, his disagreement, both with the trial judge and the other two members of the Court of Appeal, is in how those apply to the facts of this particular case.  Your Honour, the same reasoning is apparent in the President’s reasons ‑ ‑ ‑

GUMMOW J:   Which paragraph of her Honour?

MR GREINKE:   This is at page 22 of the application book, paragraph [7] in this case, and in particular notes that:

The answer to that question –

about liability –

requires some more detailed attention to the pertinent facts of this case.

GUMMOW J:   I notice that Mr Rayment’s client did not go into evidence.

MR GREINKE:   That is correct.  That is relevant in the view of the Court of Appeal in making it easier for the trial judge to make an inference about the finding that there was means of knowledge of this particular type of class.  In any event, the applicant themselves ‑ ‑ ‑

KIRBY J:   A Panamanian corporation would not have intimate knowledge about the structures of the Australian industry, I would think.

MR GREINKE:   No, your Honour, but in any event the applicant itself in its argument contends that that factor is not relevant in any event.

KIRBY J:   Yes.  I think that is a better point.

MR GREINKE:   Yes.  In any event, that does not assist the applicant in terms of the grounds for appeal.

KIRBY J:   What do you say about Mr Rayment’s submission that we have now gone off on a tangent of our own and that we are out of step?  After all, this is an international industry and it would concern me if we were taking a different course on this issue as compared to other major shipping countries.

MR GREINKE:   In terms of the result here, the result would be different in England but only because England has a bright line rule against recovery of economic loss.

KIRBY J:   It is a rather unjust bright line, I must say, in my opinion, as I expressed in Woolcock.

MR GREINKE:   Yes, your Honour.  What the applicant really asks this Court to do is to revisit Perre and Caltex but in its view with a view to reversing both of those outcomes and that would bring us into line with the English situation.

GUMMOW J:   Presumably if they changed next week, we would change again.

MR GREINKE:   If that is our approach, that we wish to be in line with the English approach, that would be the case but, in my submission, Australian law has moved on since then and ‑ ‑ ‑

KIRBY J:   The issue is not just one confined in law to the shipping industry; it is one that, as Woolcock showed, has many ramifications in many professions and activities.  I remember that the cases that I cited in my dissenting opinion Woolcock showed that Malaysia, Singapore and other countries have rejected the bright line that the English adopt and that is what encouraged me to take the step that I thought was proper in Woolcock, so that going back to the bright line is not really an option.

MR GREINKE:   Yes.  The other feature of this case which is relevant to that issue is that both his Honour at trial and also the Court of Appeal recognised that in this particular type of case it would not upset the international agreements in terms of shipping – it is a different type of case – and if it was wishing to interfere with the rights of parties to say a time charter or other type of arrangement ‑ ‑ ‑

KIRBY J:   The bottom line in your case is that effectively this was a family enterprise and they had organised themselves in this way but that they are closely integrated and that really though in law they are separate, if you look at it in reality, which is what the law of negligence does or should do, they are so intimately interconnected that it is really in some senses even stronger than Perre.

MR GREINKE:   That is correct.  His Honour at trial referred to the view of a dissenting counsel – I think it was in Candlewood – to the effect that in tort, why should a party only be liable for half a loss simply because by fortune it happens to be spread across two technically separate entities by way of contract or Corporations Law.

KIRBY J:   That runs into Salomon and that is a very important principle and it is not to come up tangentially in a case like this.

MR GREINKE:   Yes, certainly this is not a lifting the corporate veil case.  The people suing here are not the shareholders.  The people suing here is

the other entity that carried out the business enterprise.  Your Honours, I have also outlined the reasons why ‑ ‑ ‑

GUMMOW J:   Yes, we do not need to hear you any more, thank you.

MR GREINKE:   Thank you, your Honour.

GUMMOW J:   Yes, Mr Rayment.

MR RAYMENT:   Your Honours, we are, I think, at issue.  We submit that this case does not really depend upon any particular facts at all.  If you look closely at the judgement of Justice Dutney, it does not depend ‑ ‑ ‑

KIRBY J:   That cannot be right, Mr Rayment.  Every negligence case depends on the facts.

MR RAYMENT:   No, it does not depend on any particular facts in this matter.  All that there was, really, was a ‑ ‑ ‑

KIRBY J:   The facts of the relationship of the companies are very important facts.

MR RAYMENT:   What was relied upon was the fact that one company lent money to the other and that produced mutual liabilities between them.  They used two bank accounts for the convenience of both and then adjusted it all in their accounts.  That is commonplace in ‑ ‑ ‑

CRENNAN J:   What about the point that it was essentially two companies conducting one business?

MR RAYMENT:   That is merely dependent upon that proposition.  What happened here was that you had a fishing boat.  You had one business conducting a processing plant for this vessel and for others that the group controlled and for six third parties as well as fish being brought in for the processing plant from general sources.  All of those facts are commonplace facts.  The circumstances in the case were simply that there was a packing fee charge of $1 a kilo by the present respondent and it handled the sales operation as well, passing on the entirety of the proceeds, so there was no difference between that, essentially, and a regular case, in our submission, of related corporations with mutual dealings.  Those are our submissions, if the Court pleases.

GUMMOW J:   Yes, thank you, Mr Rayment.

We are not convinced, given the particular facts of this case, that the application enjoys a sufficient prospect of success to warrant the grant of special leave.  The Queensland Court of Appeal applied the principles stated by this Court in Caltex Oil (Australia) Pty Limited v The Dredge “Willemstad” (1976) 136 CLR 529 and in Perre v Apand (1999) 198 CLR 180. The relationship between the relevant companies is very close and integrated. In effect, they were vertically integrated, and it appears that this is now quite a common practice in the relevant industry.

In these circumstances, we are not inclined to consider that the Court of Appeal erred.  Special leave is refused with costs.

AT 10.02 AM THE MATTER WAS CONCLUDED