Alfabs Engineering Group Pty Ltd v Robert Regan - [2002] NSWSC 316 - NSWSC 2002 case summary — Zoe

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Alfabs Engineering Group Pty Ltd v Robert Regan

[2002] NSWSC 316

Supreme Court of NSW|2002-04-16|Before: Palmer J

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Court

Supreme Court of NSW

Decision date

2002-04-16

Before

Palmer J

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Judgment (14 paragraphs)

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CITATION : Alfabs Engineering Group Pty Ltd v Robert Regan [2002] NSWSC 316 CURRENT JURISDICTION: Common Law Division Administrative Law List FILE NUMBER(S) : SC 30021/02 HEARING DATE(S) : 15 and 16 April, 2002 JUDGMENT DATE : 16 April 2002

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PARTIES : Alfabs Engineering Group Pty Ltd [Plaintiff] Robert Regan [Defendant] JUDGMENT OF : Palmer J

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COUNSEL : T. Lee (Sol) [Plaintiff] M.J. Leeming [Defendant] SOLICITORS : Terence Lockyer Lee & Associates [Plaintiff] I.V. Knight, Crown Solicitor [Defendant] CATCHWORDS : ADMINISTRATIVE LAW - NATURAL JUSTICE - APPREHENDED OR ACTUAL BIAS - Plaintiff alleges that Defendant, Chief Inspector of Mines, was motivated by actual bias in deciding to prohibit use of Plaintiff's explosion suppression system in coal mines - Plaintiff submits even if no actual bias reasonable apprehension of bias is sufficient to invalidate decision - conflict of authority in UK. HELD: No actual bias- the principle that a reasonable apprehension of bias may invalidate a decision applies only to decisions of judicial or quasi-judicial tribunals, not to purely administrative decisions. - COAL MINES REGULATION ACT - NATURAL JUSTICE - Whether on true construction of the Act persons not bound by s.63 Notice but who are directly affected thereby have a right to be heard before the Notice is issued. HELD: Plaintiff was directly affected by Notice although not a person bound by it - because Plaintiff had no right of appeal under s.65 it was entitled to natural justice before the Notice was issued. - NATURAL JUSTICE - RIGHT TO BE HEARD - EXTENT OF RIGHT - Defendant decides to prohibit use of Plaintiff's system in mines until further information provided as to its effectiveness - Plaintiff asked if any further information available but not warned that Defendant was contemplating a prohibition order - decision urgent in the sense that if a mine explosion occurred and Plaintiff's suppression system not effective many lives would certainly be lost. HELD: Extent of requirement to afford natural justice varies according to the circumstances of the particular case - where decision urgent in the sense that many lives were at stake decision maker was not required to afford same extensive right to be heard as where no such urgency - the requirements of natural justice were satisfied. - DENIAL OF NATURAL JUSTICE - DECISION INVALID - DISCRETION. Held: If Defendant's decision had been made without affording natural justice Court still has a discretion whether to set aside the decision - public safety issues and capacity of Plaintiff to bring prohibition order to an end were material factors in exercise of discretion - decision would not have been set aside. LEGISLATION CITED : Coal Mines Regulation Act (NSW), 1982 - s.61, s.63 - Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 - R v St Edmundsbury BC ex parte Investors Ltd [1985] 1 WLR 1168 CASES CITED : - R v Secretary of State for Transport ex parte Pegasus Holdings (London) Ltd [1988] 1 WLR 990 - R v Sussex Justices ex parte McCarthy [1924] 1 KB 256 - Stead v State Government Insurance Commission (1986) 161 CLR 141 DECISION : Plaintiff's Summons dismissed with costs.

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1 An explosion in an underground coal mine is the nightmare of all miners and their families. Safety in mines is rightly given the highest priority in the Department of Mineral Resources, the Department which administers the industry in New South Wales. The Defendant, Mr Regan, is the Chief Inspector of Mines in the Department. 2 The Plaintiff ("Alfabs") has, since September 2001, manufactured and supplied to underground coal mines in New South Wales polyethylene bags of a special type which are filled with stone dust and used as barriers to prevent or suppress the effect of explosions. On 1 March 2002 Mr Regan issued to the managers of all underground coal mines in New South Wales Notices pursuant to ss.61 and 63 of the Coal Mines Regulation Act (NSW), 1982 ("the Act"). The practical effect of those Notices was to prohibit coal mine operators from using Alfabs bags as explosion suppression barriers until such time as Mr Regan was satisfied, by the provision of further information, that the bags were effective. 3 Alfabs commenced proceedings in the Administrative Law Division of the Court on 5 March 2002 seeking orders that the Notices be set aside. The proceedings have been heard urgently on a final basis because of the public safety issues which are involved. 4 Alfabs alleges that Mr Regan's decision to issue the Notices should be set aside for a number of reasons. First, it says that Mr Regan denied it natural justice, or procedural fairness, in not giving it the opportunity to provide further information to him about the effectiveness of the bags before he decided to issue the Notices. 5 Second, it says that Mr Regan's decision was either apparently or actually biased in favour of a competitor of Alfabs, namely SkillPro Services Pty Ltd ("SkillPro") and had the effect of shutting Alfabs out of the market for suppression bags, to SkillPro's advantage. 6 Third, Alfabs says that Mr Regan had no evidence or other material which could justify his decision to prohibit use of the bags until further information as their effectiveness was provided to him. 7 Fourth - and this may be in truth a variation upon the third reason - Alfabs says that Mr Regan's decision was so unreasonable that no reasonable person in his position could have made it. In this regard, it relies upon the often cited authority of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. 8 Mr Regan denies all of the allegations made against him. Facts

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9 The facts which give rise to the dispute may be stated rather briefly, as there is not very much disagreement about them between the parties. 10 The underground mining of coal inevitably produces readily inflammable material in the form of methane gas and coal dust. Methane is more easily ignited than coal dust, but methane gas in a mine is usually of limited quantity whereas coal dust is present in large quantities throughout the whole mine. Accordingly, even though a methane gas explosion is a very serious occurrence which can kill and maim many miners, an even more serious and devastating explosion occurs if the methane gas explosion produces in turn a coal dust explosion. This can happen when the blast force of the methane explosion blows the coal dust on the floor of the mine into the air and the coal dust is then ignited by the extremely hot flame front produced by the methane explosion. 11 A coal dust explosion usually runs throughout the whole of the mine and it has been found many times that when a coal dust explosion occurs all the workers in the mine are killed. 12 The prevention of explosions in underground coal mines has been the subject of research, investigation and regulation in coal mining countries for many years. It has been found that one way to prevent a coal dust explosion is to render the coal dust in the mine incombustible by combining it with an inert material such as stone dust. Because it is difficult to maintain the correct level of stone dust distribution in certain areas of a mine, a way has been devised of producing a saturation of stone dust in a mine whenever an explosion occurs. The method is rather simple in concept but, of course, it is complex in execution. 13 Plastic bags are filled with stone dust and suspended in rows from the ceiling of the mine at various strategic points. If an explosion occurs the force of the blast will burst the bags and will disperse the stone dust in the air to mingle with and render incombustible the coal dust before the flame front from the explosion reaches it, thereby preventing or suppressing a coal dust explosion. 14 As I say, the idea is simple but carrying it into effect is not so simple. There must be sufficient stone dust to produce the required effect. This means that the plastic bags containing the stone dust must be able to support a weight of 6 kilograms. The bags must be sufficiently strong that they will not break or spill although suspended by hooks for a long time. Nevertheless, they must be able to rupture easily whenever an explosion occurs and they must be able to release their contents in an efficient way. 15 Research on producing the right combination of materials in constructing these stone dust bag barriers was carried out for a number of years in South Africa by an organisation identified in the evidence only by the acronym CSIR. Extensive tests were conducted on a trial and error basis, the most important tests being conducted by setting off real explosions in mines and seeing how various combinations of materials reacted. These 'real life tests' were conducted in mines in South Africa, the United States and Germany and they were, no doubt, expensive. 16 By the beginning of 1997 research on the stone dust bag barrier had been completed and CSIR, through various agents or associated entities, began to manufacture and distribute its bags to the mining industry throughout the world. In late 2000, Alfabs began to distribute the bags to mines in NSW. It purchased from SkillPro the bags and the plastic hooks and collars that were to be used to attach them to coal mine ceiling. The precise relationship between SkillPro and CSIR is not revealed by the evidence. The bags supplied by SkillPro were at first sold under the brand name "DUBACO" and later under the name "ACIRL". 17 Some time in 2000 Alfabs decided that, rather than purchasing the bags from SkillPro, it would itself manufacture and supply bags for use as stone dust barriers. It produced some polyethylene bags, no doubt modelled closely on the ACIRL bags, and commissioned a report from Valley Geotechnical (NSW) Pty Ltd ("Valley"). The report compared the properties of the ACIRL bags with those of the proposed Alfabs bags and commented upon the expected performance of the Alfabs bags. 18 The conclusion reached by Valley was that "the proposed [Alfabs] bags should perform similarly to the current product in use (ACIRL). It is recommended that for certainty the polyethylene bags to be used by Alfabs should have only a single seam across the base and no side seam" . 19 Valley did not test the Alfabs bags or the ACIRL bags using 'real life' explosions, as had been done by CSIR with the ACIRL bags. Valley noted that "without any guidelines available to determine performance and functional data it was decided to test the bags by pressurising to burst and note the mode of failure" . Accordingly, the bags were slowly inflated until they burst. It is common ground between the parties' experts that these testing conditions were quite remote from the 'real life' tests which would have been afforded by controlled explosions in coal mines. 20 Valley's recommendation as to the placement of seams referred to the fact that the ACIRL bags had a single seam at the bottom whereas the Alfabs bags had a seam at the bottom and along one side. Valley considered that it might assist the dispersal of stone dust upon rupture of the Alfabs bag if it, like the ACIRL bag, had only one seam at the bottom. 21 Alfabs adopted Valley's recommendation and procured the manufacture of a bag with only one seam at the bottom. This new version was not submitted to Valley for testing. Alfabs began to sell its bags to coal mines in NSW in late September 2001. 22 Unlike the position in Queensland, in New South Wales a person manufacturing or supplying equipment for use in coal mines does not have to obtain prior approval from the Department of Mineral Resources or any other body. However, under s.61 of the Act the Chief Inspector of Mines is empowered to send Notices to coal mine managers informing them of matters relevant to mine safety. Under s.63 if the Chief Inspector is of the opinion that anything connected with the control or management of a mine is dangerous to the safety of those employed at the mine or is liable shortly to become dangerous, the Inspector may issue to mine owners or managers a Notice stating that opinion and imposing such prohibitions as appear to the Inspector to be necessary for the safety or health of persons employed at the mine. 23 SkillPro soon learned that Alfabs was selling its own bags to the mining industry. On 17 January 2002 Mr Humphreys, a director of SkillPro, wrote to Mr White, the Mining Sales Manager of Alfabs, protesting that Alfabs had copied the ACIRL bags. Mr Humphreys emphasised that the copied bags had not been extensively tested by 'real life' explosions as had the ACIRL bags, so that the Alfabs bags were not only inferior but might be dangerous. Mr Humphreys advised Mr White that SkillPro would be informing the Department of Mineral Resources and all collieries that the research and test results used by SkillPro in relation to its own bags were not applicable to any other bags. In other words, Alfabs was put upon notice that SkillPro would be making representations about the safety of the Alfabs bags, not only to mine operators but also to the Department of Mineral Resources. 24 On the same day, Mr Humphreys wrote to Mr Regan drawing his attention to the fact that Alfabs bags were being manufactured and distributed without having been tested by 'real life' explosions in the same way as had the ACIRL bags. The letter stated: "… we are extremely concerned that a manufacturer may see fit to supply a critical safety product without any proof that the product is fit for its intended use." 25 On 30 January 2002, Mr Clive Ellis, a Scientific Officer employed by the Department of Mineral Resources, prepared a minute concerning the Alfabs bags. The minute went in the first instance to Mr Fawcett, Manager, Mine Safety Unit, Mr Ellis' superior, and then to Mr Regan. The minute stated that the bagged explosion barrier system developed by CSIR in South Africa and sold by SkillPro as ACIRL had been imitated by Alfabs. It drew attention to the fact that the ACIRL bags had been tested in an extensive programme of experimental explosions in South Africa and Germany, but that the Alfabs bags had only been tested by Valley, which was apparently accredited only for the testing of aggregates and soils. 26 Mr Ellis made the following comments about the Valley report: "Valley … rely … on an infrared scan of the polyethylene material in the SkillPro and Alfabs bags. The accompanying report from Newcastle University states: 'This is a reasonably comprehensive test and only fine details such as tactility and crystallinity etc would not be revealed by this'.

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It seems that Valley Geotechnical and Alfabs are totally unaware that 'crystallinity' is the crucial property of the plastic in the SkillPro bags. I have serious doubt that barriers consisting of these bags would be of any use in suppressing a coal dust explosion. The bags may well end up on the floor with the stonedust still inside them." 27 Mr Ellis noted that there was a potentially serious safety issue involved in the matter and recommended that mine managers be required to cease using Alfabs bags until it was demonstrated that the bags were effective. He further recommended that Alfabs "be advised of this action and invited to provide whatever relevant information they have" . Mr Ellis attached a draft letter to Alfabs, to be sent by Mr Regan as Chief Inspector of Coal Mines, which stated that it was Mr Regan's understanding that there may be no experimental basis to demonstrate that the Alfabs bags would be effective in suppressing a coal dust explosion. The draft letter advised that Mr Regan was issuing a Notice under s.63 of the Act requiring coal mines not to use the Alfabs bags until he was satisfied that their effectiveness had been demonstrated. Mr Regan says, and I accept, that he noted Mr Ellis' minute when he received it. He says that he did not then make up his mind as to whether to issue a s.63 Notice but determined that more information should be sought from Alfabs, if it was available. 28 On 31 January Mr Ellis sent an e-mail to Mr Regan referring to his minute and the draft letter which he had sent the previous day. Mr Ellis suggested that the issue of a s.63 Notice might be appropriate and that the Notice should prohibit the use of all stone dust bags other than those of ACIRL because, Mr Ellis said, they were the only bags which were known to operate correctly. The e-mail continued: "Should contact be made first with Alfabs? Would this be seen as fair process? Not to do so may seem to presume that they have no defence, and deny them the opportunity to justify themselves. Yet there is a great urgency." 29 On about 18 February Mr Regan rang Mr White of Alfabs. Mr Regan said that it had been brought to his attention that the Alfabs bags had not been correctly tested. Mr White said that testing had been carried out on them and Mr Regan responded: "Well, I had better get something from Alfabs very quickly" . Mr White said that he would ring Alfabs' General Manager, Mr Torrance, and ask him to get in touch with Mr Regan. 30 On 21 February Mr Regan went to the Alfabs office and spoke to Mr Torrance. Mr Torrance gave him another two copies of the Valley report. It is clear that the Department had already received a copy of that report because Mr Ellis had commented upon it in his minute of 30 January 2002. Mr Regan said: "The report [i.e. the Valley report] is the same as the one I already have. My people have done some testing which shows that the bags are not identical. I have been told about the bags and it is my duty to do something about it. Is that report all you have?"

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35 It is convenient to deal first with Alfabs' allegation that Mr Regan's decision to issue the Notices was motivated by actual bias in favour of SkillPro. I am quite satisfied that this allegation is completely unsubstantiated and must be rejected. 36 There is no evidence whatsoever of any antecedent relationship between Mr Regan and anyone at SkillPro which might call into question Mr Regan's impartiality. There is no evidence of any communication between Mr Regan or anyone at SkillPro prior to 1 March 2002 which is in the least untoward. It is suggested that Mr Clive Ellis was friendly with Mr Humphreys of SkillPro, but there is no evidence of any improper pressure being brought to bear on Mr Regan by Mr Ellis, nor is there is any suggestion that Mr Ellis misled Mr Regan into making his decision in order to favour SkillPro. 37 Despite a searching cross examination of Mr Regan by Mr Lee, who appears for Alfabs, I am entirely satisfied that Mr Regan made the decision which he did impartially, honestly believing that it was in the interests of the mining industry to issue the Notices. 38 Mr Lee submits that a reasonable person, knowing the facts of the case, would nevertheless have a reasonable apprehension of bias on the part of Mr Regan. I cannot accept this submission. I cannot see how any reasonable person, knowing the true facts of the matter, could for a moment have a reasonable apprehension that Mr Regan was biased. 39 In any event, in my opinion a purely administrative decision is in a very different category from a decision of a judicial or quasi-judicial tribunal. The decision of a judicial or quasi-judicial tribunal is, as a general rule, made in the course of a public proceeding in order to ensure that justice is not only done but is "manifestly and undoubtedly seen to be done" : R v Sussex Justices ex parte McCarthy [1924] 1 KB 256, at 259 per Lord Hewart CJ. A decision by an administrator in the position of Mr Regan is not subject to the same requirements of transparency because such an administrator is usually not administering, or purporting to administer, justice in the same sense as a judicial or quasi-judicial tribunal. Often administrators must make policy decisions where there is no guidance from established legal principle and notions of "justice" must be entirely subjective. Where such a decision requires that natural justice be afforded to an affected party, there is only one test as to the validity of the decision and that is whether or not natural justice has been afforded as a matter of fact. 40 In this regard, I note that there is a conflict of authority in the United Kingdom as to whether the test of apprehended bias can be applied to a purely administrative decision. In R v St Edmundsbury BC ex parte Investors Ltd [1985] 1 WLR 1168, at 1194-1195, Stocker J held that it cannot. In the limited time available to me for research, I have not been able to find any Australian authority upon the point. I am persuaded that the decision of Stocker J to the effect that the test of apprehended bias is not applicable to purely administrative decisions is correct and should be followed. Whether Alfabs entitled to natural justice

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45 The content of the requirement to afford natural justice will vary according to the exigencies of the particular case. Where the matter to be decided involves issues of public safety and there is a real risk of death or injury on a large scale unless a perceived danger can be removed or ameliorated, natural justice will not require that an affected party be afforded the right to be heard and to present a case in the same detailed and leisurely way as might be expected if the decision involved, for example, an ordinary town planning question: see e.g. R v Secretary of State for Transport ex parte Pegasus Holdings (London) Ltd [1988] 1 WLR 990, at 1000. 46 In the present case, Mr Regan made his decision in the knowledge that coal dust explosions in mines are catastrophic and that if Alfabs' stone dust bag barrier were not effective, many lives could be lost in an explosion. There was no urgency in the decision in the sense that anyone had a fear that a mine explosion was, in fact, about to occur in early 2002. But there was a sense of urgency in that the whole industry knows that a coal dust explosion can occur at any moment, without warning, and that if effective barriers are not in place the death toll will be great. 47 Accordingly, in my opinion, while Mr Regan would not have been justified in making his decision without any warning at all to Alfabs, he was not required to give Alfabs as much time as it desired to provide him with information in addition to the Valley report. 48 One must consider Alfabs' position and that of Mr Regan in the context of what both knew as at February and March 2002. Alfabs knew that on 17 January 2002 SkillPro had complained to Mr Regan that the Alfabs bags had not been subjected to controlled explosion testing as had the ACIRL bags. From the conversations which Mr White and Mr Torrance had with Mr Regan on 18 and 21 February, Alfabs knew that Mr Regan already had the Valley report, that he was of the view that the Alfabs bag had not been correctly tested, that the Alfabs bags were not identical to the SkillPro bags, and that it was his duty to do something about it. 49 On 21 February Mr Regan asked Mr Torrance whether the Valley report was all the information that Alfabs had. Mr Torrance must have appreciated that Mr Regan was not satisfied by the Valley report and that he would not be satisfied by any report which did not involve controlled explosion testing. That is why Mr Torrance asked of Mr Regan: "Do you know of any other places where we can simulate an explosion" . Mr Regan offered some suggestions, but Mr Torrance did not respond with any assurance that Alfabs would immediately carry out such testing and would provide Mr Regan with any further information at all. 50 In that circumstance, in my opinion, Mr Regan was justified in forming the view, by 1 March 2002, that no further information would be volunteered by Alfabs even though it had been told that the Valley report was not regarded as satisfactory. 51 In my opinion, in view of the urgency of the decision in the sense which I have explained, natural justice did not require that Mr Regan give any further notice or request for information to Alfabs before making his decision to issue the s.61 and s.63 Notices on 1 March 2002. 52 In this regard, it is of critical importance to recall that the s.63 Notice does not prohibit the use of Alfabs bags once and for all. It is, in effect, a temporary prohibition, which is to continue only for such time as Alfabs fails to provide to Mr Regan satisfactory further information. The prohibition may be brought to an end by Alfabs supplying a satisfactory report as quickly as possible. "Wednesbury unreasonableness"

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53 In his careful and thorough submissions Mr Lee contended that there was insufficient evidence upon which a reasonable person in Mr Regan's position as at 1 March 2002 could have come to the conclusion that the Alfabs bags might not be effective and should not be used until further testing demonstrated that they were. 54 I am unable to accept this submission. One must bear in mind that all that Mr Regan had available to him by 1 March 2002 as to the efficacy of the Alfabs bags was the Valley report and the criticisms of that report as by SkillPro and by Mr Ellis in his minute of 30 January 2002. While the criticisms of SkillPro were in general terms, namely, that the Alfabs bags had not been subjected to controlled explosion testing, Mr Ellis' criticisms were more detailed. Mr Ellis pointed to the fact that the Valley report had omitted testing for crystallinity, which Mr Ellis regarded as a serious omission. 55 In my view, on the information which Mr Regan had available to him as at 1 March 2002, it could not be said that the decision which he reached was so unreasonable that no reasonable person in his position could have made it. Mr Regan was told that there were differences between the Alfabs bag and the ACIRL bag, and that the Alfabs bag had not been tested in a 'real life' situation. When many lives were at stake if the Alfabs bag was not effective, common sense would dictate that it should be subjected to the most rigorous testing available, namely, controlled explosion testing. The Valley report might express conclusions on the basis of laboratory tests, but a person in Mr Regan's situation would be justified in acting according to the old adage: "The proof of the pudding is in the eating" . 56 It is not to the point to urge now that the views of Dr Davies, Alfabs' expert, as to the effectiveness of the Alfabs bag should be accepted in preference to the view of Dr Hodgkin, Mr Regan's expert. Neither of those expert opinions was available to Mr Regan on 1 March 2002. In any event, Dr Davies agrees with Dr Hodgkin to the extent that he regards laboratory testing as necessarily inferior to controlled explosion testing. 57 I am of the view that there was sufficient material before Mr Regan on 1 March 2002 upon which a reasonable person in his position could have decided to issue the s.61 and s.63 Notices. Discretion