Brian v Burders Lane Enterprises Proprietary Limited

"Why the plaintiff's claim cannot succeed against the defendant 13. It is a fundamental principle of the corporations law that each company has its own distinct legal personality, one that is separate not only from its directors and employees, but other related companies. 14. There are instances where the corporate veil can be lifted and liability attach to directors personally, but they are all provided by express legislative intent. 15. There is also authority that where a company deliberately establishes subsidiary companies as a form of shield from liability, the Court can look beyond the subsidiary to the ultimate holding company and attach liability to it, but only in very rare circumstances where a holding company controlled the conditions in which the plaintiff worked. However, there needs to be clear evidence that the subsidiary company was established as a deliberate faade to protect the holding company. 16. Those authorities can be distinguished from this matter because: a. The cases involve a holding company's control over a subsidiary. b. The possibility of liability moving from one company to another operates when there are a series of companies in a group, which is not the case here. c. The liability moves from company to company, not from one company via a director to a new company, as is said to occur here. d. The possibility of liability moving from one company to another operates where both companies were operating at the time the liability arose which is not the case here - the manufacturer of the machine had ceased trading 18 months before the plaintiff's injury. e. The authorities referred t o involve direct relationships between the respective plaintiffs and the subsidiary, either as employees or via contract, which is not the case here. 17. It is also worth noting that while the cases James Hardie & Co Pty Limited v Hall and P ioneer Concrete Services Ltd v Yelnah Pty Limited discuss the possibility of piercing the corporate veil, neither case actually finds sufficient cause to do so. 18. The defendant is unable to identify any authorities which are directly on point with this matter and which would support the proposition that a party can pierce the corporate veil and attach liability to a director so that when a director moves from one company to another, the liabilities of the first company attach to him. Moreover, the corporate veil would need to be pierced twice in this instance - once to attach to the director while he was a director of Whitlands and the second time as a director of the defendant. 19. It is also critical to bear in mind that the creation of the defendant was not done to avoid liability to the plaintiff as the plaintiff' s injury occurred 18 months after Whitlands was deregistered and the defendant created. There can be no legitimate suggestion that the defendant was simply created to avoid liability to the plaintiff nor does the plaintiff plead that that was the case. 20. It is clear from the pleadings, and Mr Chipchase's affidavit, that the Plaintiff was aware of the legal entity that did manufacture the wood splitter, namely Whitlands. The defendant has suggested that the plaintiff take steps to re - register Whitlands and sue it via any relevant policy of insurance relying on s.6(4) of the Law Reform (Miscellaneous) Provisions Act 1946 . However, the plaintiff's solicitors have chose not to do so because there is no insurance policy that would respond to the plaintiff's claim. The defendant notes that it also has no insurance policy that responds to the claim. 21. The Plaintiff has shown no basis upon which the defendant could be found liable for the manufacture of the wood splitter, nor owe any duty of care to people such as the plaintiff." 19Mr Kettle's submissions are lengthier and I would like to succinctly summarise them if I could. He refers to s 5B of the Civil Liability Act 2002 in so far as he seeks to restate the law of negligence. In his submission, a cause of action can be discerned by applying the provisions of s 5B. He then refers me to CSR Limited v Wren (1998) 44 NSWLR 436, and then to McPherson's Limited v Eaton [2005] NSWCA 435 and J & V Pesl v Ray Smith Tractors & Anor [2007] NSWCA 74. 20Paragraphs 5 to 15 of Mr Kettle's submissions on behalf of the plaintiff are: 5. "The duty of care owed by Burders Lane Enterprises to the Plaintiff, arises from the particular circumstances relied upon and pleaded. 6. In CSR Limited v. Wren [1998] 44 NSW LR 436, CSR was found by the Court of Appeal to owe Mr Wren a duty of care, even though it did not fall within any recognised category in which a duty of care was owed. The question in all cases was and remains to determine whether in a particular set of circumstances a duty of care arises. The assumption of responsibility was not a necessary ingredient for the finding of a duty of care and reliance was a common feature found in the category of a case where a duty of care has been recognised, but it was not a necessary ingredient. 7. In McPhersons Limited v. Eaton & Ors [2005] NSW CA 435 (16 December 2005), the Court of Appeal held that a non-manufacturing vendor of goods that is ignorant of a dangerous defect does not owe the same duty of care as that of a manufacturer as " something more " was required. There was a paucity of case law on the topic as to what " something more " was required. The Court held that a vendor of goods owed no duty of care to persons who might ultimately be affected by those goods, unless there is some additional factor, generally a factor associated with the creation of risk or knowledge of risk involved in the goods. The question of a whether [sic] a duty of care existed and the scope or content of any duty of care found to have existed were questions of law, although the determination of that issue is dependent partly largely on factual findings made by the Trial Judge. 8. In J & V Pesle v. Ray Smith Tractors & Anor [2007] NSW CA 74 (2 April 2007) the Court of Appeal again considered the essentials of an action for negligence brought by the purchaser of a slasher against the supplier for indemnity for damages paid on injuries suffered by an employee of the purchaser. The supplier acted as a distributor of the slashers. On review of the evidence for the purpose of considering as to whether the supplier owed the purchaser a duty of care, the state of actual knowledge on the part of the supplier was found to be the " something more " necessary to impose a duty of care on the supplier to the past purchasers of the slasher. The Trial Judge was found to be in error in finding that there was no duty of care. 9. The totality of the relationship between 080 Pty Limited, Burders Lane Enterprises and the Plaintiff support that, consistent with the provisions of the CLA and the common law, a duty of care was owed by Burders Lane Enterprises to the Plaintiff. While it is accepted that the mere co-existence of knowledge of a risk of harm and the power to avert or minimise that harm does not of itself give rise to a duty of care at common law, the totality of the relationship between the parties is relevant. The totality of the relationships has yet to be explored in these proceedings. 10. The provisions of S .5B(2) CLA have been said to be, in substance, a reiteration of the well-known analysis of Mason J in Wyong Shire Council v. Shirt . S.5B presupposes the existence of the law of negligence and operates against this background. 11. The Plaintiff has adduced expert evidence that the wood splitter itself was deficient, that potential safety issues had been identified prior to the Plaintiff's accident and not acted upon, and based on the known facts the Plaintiff alleges negligence asserting, in effect, that a reasonable person in Burders Lane Enterprises' position would have adopted the precautions referred to in paragraph 12 of the Statement of Claim to guard against the risk of injury to users of the woodsplitter. Burders Lane Enterprises had good reason in 2005 to believe that injury would be suffered by users of wood splitters which had been manufactured at its place of business, under the direction and subject to the design of its director and carrying its brand name. 12. Burders Lane Enterprises, it can be inferred, carried out the same activities as those carried out by 080 Pty Limited, including those incidental to the business of manufacturing wood splitters. Those activities are part of carrying on the business of manufacturing and supplying woodsplitters, even though the corporate entity under whose umbrella that business is pursued has changed. From Mr Chipchase's investigations and those of the Plaintiff, the nature, location and name of the business have, to all intents and purposes, not changed. 13. Even the Super Axe brand has been preserved. There is an obvious and seamless connection between Burders Lane Enterprises and users of the wood splitter, giving rise to a duty of care, the nature of which owed by Burders Lane Enterprises to users reflects that owed by 080 Pty Limited to users of its wood splitters. There is nothing in evidence to suggest that, but for the change in corporate entity, anything has changed between the designers, manufacturers and personnel who comprise the business of Whitlands Engineering and users of the woodsplitter. 14. Burders Land Enterprises, had the same knowledge and 'control' that 080 Pty Limited would have had in limiting the risks of harm suffered by users of the woodsplitter. Also, Burders Lane Enterprises had as at the date of injury the practical opportunity of dealing with the risk in question. 15. Taking into account the circumstances known to the parties at the present time, Burders Lane Enterprises' Application to dismiss proceedings for suing the wrong party should be dismissed. The requirements imposed by S.5B [Duty of care] CLA are met as are the requirements imposed by S.5B(2) CLA and the common law test of the duty of care consistent with Wyong Shire Council v. Shirt . " 21In answer to the submissions of Mr Anderson for the applicant, Mr Kettle points out that he does not seek to pierce the corporate veil, but rather to assert that a different duty of care, a separate and independent duty of care, was owed by the defendant, as well as the duty of care that had been owed to the plaintiff by 080, whilst it existed, as the manufacturer of defective goods. 22Further, in his submissions Mr Kettle points out that the categories of negligence are never closed and that the High Court has accepted that the occasions for the imposition of a duty of care do not constitute a closed list: Mutual Life and Citizens Assurance Company Limited v Evatt (1968) 122 CLR 556, and also pointed out what fell from Barwick CJ at 569, that the elements of a relationship out of which a duty would arise cannot be confined to fixed and labelled categories. 23He then points out that "new duty situations are continually being recognised". In response, Mr Anderson for the applicant argues a "floodgates" position, that should the cause of action alleged by the plaintiff exist then there would be a minefield laid for all those who practice in insolvency. There is much force in that submission . However, I do not need, in my view, to so lve the pleading point, because in my view the matter is best dealt with under the limitation defence. 24I have been referred to two relatively recent decisions of the Court of Appeal. They are: Baker - Morrison v State of New South Wales [2009] NSWCA 35, and Bostik Australia Proprietary Limited v Liddiard [2009] NSWCA 167, which sent me back to my decision in Wright v Country Waste Systems Proprietary Limited (2007) 6 DCLR (NSW) 136; [2007] NSWDC 287. I am heartened by the view that the position eventually adopted by the Court of Appeal expressed, much more succinctly and learnedly than in my own decision, the same principle to be applied in interpretation of the new limitation provisions. The question here is: when was the cause of action complete? 25That the plaintiff had an injury that was sufficiently serious to justify the bringing of the cause of action would have been clear at the time that the accident happened; there cannot be any dispute otherwise. There can be no dispute that the fact that the injury had occurred was known to the plaintiff on the same day that the accident did occur. 26The question then is: when did the plaintiff know that the injury was caused by the "fault" of the "defendant"? The current applicant submits that that is a reference to the "actual defendant", rather than the "proposed defendant"; but, in light of the case argued by the plaintiff/respondent, I am prepared to accept that that extends to the defendant upon whom the plaintiff seeks to impose liability. 27The question then becomes: " when did the plaintiff have knowledge of the relevant "fault"? In par 4 of his affidavit, the plaintiff tells me that on 26 September 2005 he decided to Google "Super Axe" to learn more about the machine. It was then as the search results page came onto the screen that he saw the Victorian WorkSafe's alert, warning of the dangers of the relevant woodsplitter . After doing that, he decided to check if the modifications recommended in the alert had been made to the woodsplitter which he was using at the time of his injury. 28It should be recorded that it appears to be common ground between the parties that the woodsplitter which the plaintiff was using at the time carried a plate indicating its manufacture in August 1998 . So, the plaintiff should have known by the time he did his Google search that the woodsplitter which caused his injury was manufactured prior to the WorkSafe Victoria alert. 29Eventually, he contacted the defendant and spoke to "Tony", who has been identified to me by Mr Burder as being Tony Wylks, the Office Manager. On 22 October 2005 the plaintiff received from Tony a brochure with a letter dated 19 October 2005. The brochure clearly states that Burders Lane Enterprises Pty Ltd was trading as Whitlands Engineering, the letterhead provided an ABN , and attached to the letter was a glossy brochure which became exhibit C-C before me. Again, that makes it clear that the brochure refers to products manufactured by "Whitlands Engineering", not by Whitlands Engineering Pty Ltd. 30On 6 December 2005 the plaintiff contacted the WorkCover Authority of New South Wales and spoke to an inspector concerning the WorkSafe Victoria alert. He asked the inspector if there was any relevant information available on either Burders Lane Enterprises Pty Ltd, trading as Whitlands Engineering, or concerning the Super Axe, the trade name of the woodsplitter manufactured initially by 080 and more recently by the present defendant. 31The New South Wales inspector told the plaintiff to apply to the Freedom of Information Officer with WorkSafe Victoria. The plaintiff completed an application form but did not send it. Instead, he consulted a solicitor in Nowra, who happened to be a personal friend. The plaintiff used as his address Meroo Meadow, which, of course, is close to Nowra. Commencing at par 17, the plaintiff said this: "17. On 18 January 2007, I phoned Mr David Burder. 18. I asked Mr Burder to explain how the adjustable knee control and safety lockout function on the woodsplitter worked. He explained to me that the leg action had to push the mechanism forward than to the right, which prevents an inadvertent bump in the operation. 19. I asked Mr Burder if he had contacted all the owners of machines manufactured and sold prior to the " Safety lockout" becoming standard, to offer to fit it to their machines. 20. M r Burder replied, as I recall, " We made an effort to contact some, but had no real interest, so we really didn't chase it up " . 21. I then told Mr Burder of my accident to which he replied, as I recall, 'That's no good mate, but look, we sold over 2000 of these units, and you would have to agree there is no better way to cut wood is there? " I then terminated the call." The plaintiff goes on in his affidavit to tell me that on 25 January 2007 his solicitors at Nowra advised him to seek an opinion from lawyers in Wollongong or Sydney, and suggested to him his current solicitors. 32I am told, again, without objection from the Bar table, that the identity of the manufacturer of the woodsplitter is contained in the label on the woodsplitter, which contained its date of manufacture; that is, the full name of 080, as it was in August 1998, is contained on it, together with the date of manufacture. 33The plaintiff must have known, or certainly could have had constructive knowledge by 18 January 2007, when he had his telephone conversation with Mr David Burder; firstly, that the company, then trading as Whitlands Engineering, had taken over that business from 080 at some time after the manufacture of the woodsplitter; and, that there had been a modification introduced after the manufacture of the woodsplitter he was using at the time of the injury, which obviated the risk of what happened to the plaintiff occurring. 34In other words, it appears to me that the plaintiff had all requisite actual knowledge, or, at least, constructive knowledge, at the time he had the telephone conversation with Mr Burder on 18 January 2007. He then knew, and had known for some considerable time prior thereto, of the WorkSafe Victoria alert, and of the date of manufacture of the splitter that he was using at the time of his injury, and that the business conducted by the present defendant had taken over from 080. In answer to that, the plaintiff submits that these proceedings could not be commenced until when they were commenced because of a number of complications due to trying to trace down the insurer of either 080 or of the current defendant. 35The question of insurance is irrelevant. It is not a relevant consideration under the Limitation Act 1969 . And furthermore, if it were then one wonders why these proceedings have been commenced, because it is common ground that the current defendant, a $1 company, is not insured. 36It is clear from a letter of the administrator of 080 that it was placed into liquidation after GIO refused to admit a claim under policy number 0260411937. I do not know what the claim was, but it clearly caused Whitlands Engineering Pty Ltd, that is, 080, to go into liquidation, for the business to be transferred from 080 to the present defendant, and the present defendant to continue running that business. In effect, the machine now in question, the Super Axe, is the "child" of Mr Burder. However, the plaintiff does not seek to bring proceedings against him, but against one of two of his "babysitters", those being 080 and the present defendant. 37Again, I only raise those considerations because the delay in commencing the proceedings was trying to sort out who may have been an insurer of a relevant company. That, as I have said, is an irrelevant consideration. In my view, the plaintiff had actual constructive knowledge of everything that he is required to have knowledge of under s 50D of the Limitation Act 1969 on 18 January 2007; that is, when the limitation period commenced to run. It expired on 18 January 2010, and these proceedings were not commenced until 26 May 2010, outside the three year period, and this Court has no power to extend the limitation period. 38Any further reasons for judgment required? KETTLE: No, your Honour. 39HIS HONOUR: For those reasons, this statement of claim is dismissed. 40I order the plaintiff to pay the defendant's costs of the proceedings. Liberty to apply if the defendant seeks indemnity costs.

Amendments 21 November 2012 - Amended title - surname of plaintiff only DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 November 2012