1 LE MIERE J: On 20 June 2012 I delivered reasons for judgment on the defendants' application for summary judgment or to strike out the plaintiff's claims: Alcoa of Australia Ltd v Apache Energy Ltd

Supreme Court of WA|2012-08-07|Before: Miere J

Plaintiff : Tottle Partners as agents for Landers & Rogers

1 LE MIERE J: On 20 June 2012 I delivered reasons for judgment on the defendants' application for summary judgment or to strike out the plaintiff's claims: Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209. I held that Alcoa's claim that the liquid damages provisions are unenforceable should be struck out. I also held that Alcoa's claim for damages for breach of statutory duty is unsustainable and those paragraphs of the statement of claim that relate solely to the claim for damages for breach of statutory duty should be struck out. I held that the defendants' claim for summary judgment and to strike out Alcoa's claim for damages for economic loss sustained as a result of the defendants' breach of its common law duty of care should be dismissed. The parties have subsequently conferred about the orders that should be made to give effect to those reasons for judgment. Alcoa has served on the defendants a proposed further amended statement of claim (FASOC). The defendants object to a number of paragraphs of the FASOC on the ground that they do not accord with the reasons in Alcoa applies for leave to file and serve a further amended statement of claim in the form of the FASOC. The defendants oppose leave in those terms and submit that a number of paragraphs of the amended statement of claim should be struck out.

2 The FASOC strikes out [27], [33], [47] [50] of the amended statement of claim. Those paragraphs relate to Alcoa's claim for damages for breach of statutory duties by the defendants. It is common ground that, in accordance with my reasons in [2012] WASC 209 those paragraphs of the amended statement of claim should be struck out. The FASOC also strikes out [58] and [59], part of [60] and [B] of the plaintiff's prayer for relief against Apache North West, Tap and Kufpec of the amended statement of claim. Those paragraphs relate to Alcoa's claim that the liquidated damages provisions in the Supply Contracts are void and unenforceable as a penalty. It is common ground that those paragraphs should be struck out.

3 The first and second defendants, Apache Energy and Apache North West, submit that (ii) and (iii) of the particulars to [2(e)], [3(e)] and [3(f)], [19] [21] and [51(c)] should also be struck out. Those paragraphs refer to the provisions of the Petroleum Pipelines Act 1969 (WA) (Pipelines Act) and licences issued to the second, third and fourth defendants, Apache North West, Tap and Kufpec, under the Pipelines Act. The defendants say that by reason of my findings in [2012] WASC 209 the pleading in those paragraphs cannot support Alcoa's claim for damages for breach of common law duty of care and should be struck out. Alcoa says that the pleading in those paragraphs is relevant to its claim for damages for breach of duty of care and should not be struck out.

4 The FASOC further seeks to amend the amended statement of claim by introducing new paragraphs 35(a), 35A, 35B, 50A, 50B, 50C and amendments to [55] and the particulars to [57] and [60]. These pleadings refer to the Pipelines Act. Alcoa says that the pleading is relevant to its claim for damages for breach of duty of care. The Apache parties say that the pleading is not sustainable because of my findings in [2012] WASC 209. The third and fourth defendants, Tap and Kufpec, adopt the submissions of the Apache parties.

5 The defendants submit that statutory obligations may be relevant to a cause of action in three ways. First, a failure to observe statutory obligations may be relied upon itself as providing a cause of action. Second, a failure to observe statutory obligations may be relied upon in an evidentiary sense as indicative of negligence at common law. Third, the statutory regime may be essential to the formulation of the duty of care upon which a party relies for a cause of action in tort. That three fold classification was stated by Gummow J in Crimmins v Stevedoring Committee [1999] HCA 59; 200 CLR 1 [161]. The defendants submit that the relevant pleading in the FASOC does not purport to fall within either of the first two ways in which statutory obligations may be relevant to a cause of action for damages. Rather, Alcoa's case is that the regime established by the Pipelines Act and the Petroleum Pipelines Regulations 1970 (WA) is essential to the formulation of the duty of care upon which Alcoa relies for its cause of action in tort.

6 The defendants submit that in order for a failure to observe statutory obligations to constitute a basis upon which a common law duty may be erected, the statute sought to be invoked must be directed towards some identifiable class or individual, or their property, as distinct from the public at large.

7 The defendants submit that in [2012] WASC 209 I found that s 36A and s 38 of the Pipelines Act and reg 10 of the Petroleum Pipelines Regulations are provisions for the general good and not for the protection or benefit of any particular class of persons of which Alcoa is a member.

8 The defendants submit that I held in [2012] WASC 209 that the relevant statutory provisions and regulation sought to be invoked by Alcoa are not directed at or to it and confer no protection or benefit on it. Therefore, the defendants submit neither the statutory provisions nor the regulation can form any part of the formulation of the common law duty postulated by Alcoa in FASOC.

9 Alcoa submits that the statutory provisions, regulations and licence conditions relating to the operation and maintenance of the pipelines alleged in the challenged paragraphs of the FASOC are relevant to establishing whether the defendants owed a common law duty of care to the plaintiff. The salient features in establishing such a duty include assumption of responsibility, the degree and nature of control able to be exercised by the defendant to avoid harm and consistency with the terms, scope and purpose of any statute relevant to the existence of a duty. Alcoa says that the issues of control, assumption of responsibility and vulnerability are to be analysed and determined in light of the facts established at trial and those facts include the statutory framework and licence conditions, which Apache Energy assumed responsibility to comply with by operating the pipelines, and which the other defendants assumed responsibility to comply with by becoming licensees. Therefore, Alcoa submits the statutory provisions and regulations and licence conditions are relevant to, and relied upon, for the purpose of establishing those salient features. Alcoa submits that my finding in [2012] WASC 209 that the statutory provisions and regulation were not for the benefit of consumers for the purpose of a claim for breach of statutory duty does not mean that the legislation is irrelevant to a claim based upon a common law duty of care. Alcoa submits that the court may consider the relevance of any material legislation in different ways and for different purposes in determining whether a duty of care exists.

10 Central to the defendant's argument is the submission that in order for it to constitute a basis upon which a common law duty may be erected, the statute sought to be invoked 'must be directed towards some identifiable class or individual, or their property, as distinct from the public at large'. The quotation is taken from the judgment of Crennan and Keifel JJ in Stuart v KirklandVeenstra [2009] HCA 15; (2009) 237 CLR 215 [131]. Their Honours cited Crimmins v Stevedoring Industry Finance Committee (McHugh J); Brodie v Singleton Shire Council [2001] HCA 29; (2001) 206 CLR 512 [326] (Hayne J) and Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54; (2002) 211 CLR 540 [32] (Gleeson CJ) [79] (McHugh J) in support of that proposition. I note that Crennan and Keifel JJ, and the authorities their Honours referred to, were concerned with the exercise of a statutory power by a public authority. Alcoa's case is not formulated upon the exercise of a statutory power, whether by a public authority or otherwise.

Paragraphs of amended statement of claim challenged

11 The defendants say that (ii) and (iii) of the particulars to [2(e)] should be struck out. Paragraph 2(e) pleads that Apache Energy was in control of the day to day operation, management and maintenance of the Sales Gas Pipelines through which the Sales Gas is transported from the Varanus Island Hub Facilities to the Australian mainland for delivery to customers of the Varanus Island Joint Ventures. The defendants do not object to that pleading but to (ii) and (iii) of the particulars in support of it. The impugned particulars refer to the issue of pipeline licences to Apache North West, Tap and Kufpec and the nomination by them of Apache Energy to operate, manage and maintain the pipelines. The particulars are proper particulars insofar as they go to establish that Apache Energy was in control of the operation, management and maintenance of the relevant pipelines.

12 The defendants object to [3(e)] of the amended statement of claim which pleads that Apache North West is and was a licensee under pipeline licence number 12 (PL12). Paragraph 3(f) pleads that Apache North West was responsible under the terms of PL12 for the operation, management and maintenance of the relevant pipelines. The defendants object to the words 'under the terms of PL12' in [3(f)] and to the particulars of that paragraph which state that the licensees are responsible for the operation, management and maintenance of the pipelines pursuant to the terms of PL12 and/or pursuant to s 36A of the Pipelines Act and reg 11 of the Regulations. The particulars further state that pursuant to cl 11(15) of PL12, any breach of the terms of PL12 by the nominated operator shall be deemed to be a breach of the license by the licensees. The fact that Apache North West was a licensee under PL12 and responsible under the terms of PL12 for the operation, management and maintenance of the pipelines is arguably relevant to Apache North West's control, or capacity to control, the pipelines. Unnecessary material may be struck out if it will cause delay or embarrassment. However, material is not struck out merely because it is unnecessary. Also, an unnecessary allegation will not be struck out if it is material in the sense that evidence could be led at trial to support it. That Apache North West was a licensee under PL12, was responsible under the terms of the licence and under the statutory provisions and regulations for the operation, management and maintenance of the pipelines are all matters that arguably may be led at trial as relevant to Apache North West's control of the pipeline and its relationship with Apache Energy. Those particulars will not prejudice, embarrass or delay the fair trial of the action and should not be struck out.

13 The defendants object to [19] to [21] of the amended statement of claim. Paragraph 19 pleads that reg 10 required the Sales Gas Pipelines to be operated in a proper and workmanlike manner and in accordance with good pipeline operating practice. The regulation is arguably relevant to the appropriate standard of care. Paragraph 19 will not prejudice, embarrass or delay the fair trial of the action and should not be struck out.

14 Paragraph 20 of the amended statement of claim pleads that Apache Energy held itself out to the relevant statutory authorities and to customers, including Alcoa, as the entity in control of the day to day operation, management and maintenance of the pipelines. That plea is arguably relevant to Apache Energy's control or assumption of responsibility for the operation, management and maintenance of the relevant pipelines. It does not prejudice, embarrass or delay the fair trial of the action and should not be struck out.

15 Paragraph 21 pleads that by reason of the matters referred to in [19] and [20] Apache Energy assumed responsibility to operate and maintain the pipelines in a proper and workmanlike manner and in accordance with good pipeline operating and maintenance practice. The assumption of responsibility is arguably relevant to the existence of a duty of care even in the absence of a plea of reliance. In any event, the plea does not prejudice, embarrass or delay the fair trial of the action and should not be struck out.

16 The defendants submit that [51(c)] of the amended statement of claim should be struck out. That paragraph pleads that the licensees knew or ought reasonably to have known the matters described in [19] to [20]. The objection is consequential upon and depends upon the objection to [19] and [20]. I have declined to strike out [19] and [20] and will not strike out [51(c)].

17 Alcoa seeks leave to introduce new paragraphs. The proposed [35(a)] is that Apache North West had voluntarily become a licensee under PL12 and responsible under the terms of the license for the operation, management and maintenance of the pipelines. Proposed [35A] is that under the terms of the Pipelines Act and the Regulations the licensees of PL12 were required to operate the relevant pipeline in a proper and workman like manner and in accordance with good pipeline operating practice (Pipelines Act s 36A and reg 10) and to maintain the pipeline in good condition and repair (Pipelines Act s 38). Proposed [35B] is that by reason of the matters referred to in [35] and [35A] Apache North West assumed responsibility to operate and maintain the pipelines in a proper and workmanlike manner and in accordance with good pipeline operating and maintenance practice. The assumption of responsibility is relevant to the existence of a duty of care. Whether the duty of care will be established will depend upon an analysis and evaluation of all of the facts as established at trial. The issues of control, assumption of responsibility and vulnerability should be analysed and determined in light of the facts established at trial. The relevance to the matters pleaded in proposed [35(a)], [35A] and [35B] is sufficiently arguable to justify the pleading. Leave should be given to amend in accordance with those paragraphs.

18 Proposed [50A] to [50C] plead in relation to Apache North West, Tap and Kufpec the matters pleaded in [35A], [35(a)] and [35B] in relation to Apache North West. The pleading should be allowed for the same reasons.

19 Alcoa further applies to amend [55] and [60] and the particulars to [57]. Those pleadings all relate to the liquidated damages claim. They are reasonably arguable and do not prejudice, embarrass or delay the fair trial of the action. They will be allowed.

20 Finally, the defendants object to the second, third and fourth defendants, Apache North West, Tap and Kufpec, being described in the statement of claim as the Licensees. Within reason, the plaintiff may use any word as an abbreviation or description of the second, third and fourth defendants. I will not compel Alcoa to describe the second, third and fourth defendants as 'Sellers' rather than 'Licensees'.

21 Paragraphs 27, 33, 47 50, 58, 59, part of 60 and B of the plaintiff's prayer for relief against Apache North West, Tap and Kufpec of the amended statement of claim should be struck out. The plaintiff should have leave to amend the statement of claim in terms of the FASOC.

22 The plaintiff submits that the appropriate way to approach determining the question of the costs of the defendants' applications is upon an analysis of the outcome of the specific issues. The defendants were wholly unsuccessful in the issues relating to the plaintiff's claim for duty of care but were successful in striking out the plaintiff's claim for breach of statutory duties. The plaintiff agreed immediately prior to the hearing of the applications not to maintain its claim that the liquidated damages provisions are void and unenforceable as a penalty. The plaintiff estimates that approximately 75% of the time taken in respect of the defendant's applications was spent on issues relating to the plaintiff's duty of care claim. This estimate is based on the length of the parties' written submissions and the time devoted to the various issues during the hearing. Setting off the time taken in respect of issues (approximately 25%), the plaintiff submits the appropriate costs order is that the defendants should pay 50% of the plaintiff's costs of the applications.

23 The defendants submit that save for those costs solely incurred in their claim for summary judgment and to strike out the plaintiff's negligence claim, the defendants' costs of and incidental to the applications should be paid by the plaintiff. The defendants further submit that the plaintiff's costs incurred solely in its resistance of the claim for summary judgment and to strike out its negligence claim should be the plaintiff's costs in the cause.

24 The general rule is that the successful party to an action recovers his or her costs. Ordinarily this is a just outcome because the party who turns out to have unjustifiably either brought another party before the court, or given another party cause to have recourse to the court to obtain his rights, should be required to recompense that other party in costs. Often, the same rationale will apply to the costs of interlocutory proceedings. The general rule as to costs is qualified by the practice of awarding costs in relation to issues. Rules of the Supreme Court 1971 (WA) O 66 r 1(3) provides that where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the court may order such party to pay the costs of such issue or issues. The same approach will often be appropriate in relation to the costs of interlocutory proceedings.

25 There were two principal issues involved in these applications. The plaintiff succeeded in the issue relating to its claim for damages for breach of a common law duty of care. The defendants were successful on the issue relating to the plaintiff's claim for damages for breach of statutory duties. In this case it is convenient to make an order that sets off the costs of the issues on which the defendants were successful against the costs of the issue on which the plaintiff was successful. An attempt at mathematical precision is unrealistic. Some of the submissions made at the hearing related to both issues, particularly those submissions which outlined the parties, their relationships, the circumstances leading to the explosion and fire of Varanus Island and the statutory framework. Nevertheless, I consider that the duty of care issue occupied more time at the hearing and in the preparation for the applications than the breach of statutory duty and liquidated damages issues. Having regard to the issues on which each of the parties were successful, the appropriate costs order is that the defendants should pay 40% of the plaintiff's costs of the applications.

Pipelines Regulations 1970

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Judgment (27 paragraphs)

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