Caltex Oil (Australia) Pty Ltd v Dredge "Willemstad" [1976] HCA 65;

Caltex Oil (Australia) Pty Ltd v Dredge "Willemstad" [1976] HCA 65; - HCA 1976 case summary — Zoe

[11]

3. The damage occurred on the night of 25th-26th October 1971. On that night the dredge was being used to dredge a deep water channel in the bed of the bay. The western boundary of the area which was to be dredged at that time (area A) was about 100 feet to the east of the pipeline, part of which lay within another area (area D) which adjoined area A to the west. It was intended that after the dredging of area A had been completed the pipeline would be removed and replaced elsewhere and that the dredging of area D would commence thereafter. On the night in question the dredge repeatedly passed over the pipeline and its suction pipes caused damage extending over about 300 feet of the line. It is not in doubt that the dredge was off its proper course and that the negligent navigation of the dredge was a cause of the damage to the pipes. The dredge was able to navigate, not only by conventional means, but also by the use of equipment supplied by Decca Survey Australia Ltd. ("Decca"), by which the position of the dredge could be fixed with great accuracy by receiving and plotting radio signals transmitted from the shore. To enable Decca's system to be used, there was prepared a track plotter chart showing the area to be dredged, and on which the track of the vessel could be seen and if necessary recorded. An employee of Decca had drawn on the track plotter chart parallel lines showing the western boundary of area A, beyond which dredging ought not to be carried out, lest it endanger the pipeline, and showing also the pipeline itself. The lines were incorrectly drawn, in that they were placed at the wrong angle to the chart; the error was of about sixty degrees. This error meant that a navigator who sailed his dredge up to a position which, according to the markings on the chart, would have been 100 feet to the east of the pipeline, would, if he were on the northern side of the dredging area, have been much further away from the pipeline than that, but if he were on the southern side of the dredging area would in fact have crossed the pipeline. (at p536)

[18]

10. An action in rem is an action against the ship itself: see Aichhorn & Co. K.G. v. The Ship M.V. "Talabot" [1974] HCA 21; (1974) 132 CLR 449, at pp 455-456 . However, when the defendants to such an action have entered an appearance, judgment may be enforced against them personally, and to the full extent of the damages proved, even though those damages exceed the value of the ship: The Dictator (1892) P 304 ; The Gemma (1899) P 285 ; The Dupleix (1912) P 8 ; The Banco (1971) P 137, at p 151 . After appearances have been entered the action proceeds as if it were an action in personam although it does not cease to be an action in rem: The Broadmayne (1916) P 64, at p 77 ; The Banco (1971) P 137, at p 151 ; The Conoco Britannia (1972) 2 QB 543, at p 555 . Moreover, it appears that where an action has been commenced in rem a defendant may be added against whom the plaintiff has only a right in personam, and that an action may be commenced by means of a single writ against a number of defendants, against some of whom the plaintiff has an action in rem and against others an action in personam only: Roscoe, Admiralty Practice, 5th ed. (1931), pp. 263-264. Further, there is recent authority that the court has inherent jurisdiction to allow the intervention in an action in rem of a party who has no interest in the property arrested, when the effect of the arrest is to cause that party serious hardship, difficulty or danger: The Mardina Merchant (1975) 1 WLR 147; (1974) 3 All ER 749 . I can see no reason why these principles should not be applicable under the Admiralty Rules of New South Wales. I can therefore assume that it would have been possible for the learned trial judge to have ordered the joinder of Captain Henneman as a defendant if the plaintiffs in the action had sought to pursue a claim against him personally, although it would have been more doubtful whether it would have been proper to allow Captain Henneman to intervene if, not having been made a defendant, he had sought to do so. In fact, of course, the judge neither joined Captain Henneman as a defendant nor gave him leave to intervene. (at p539)

[19]

11. As a general rule an unconditional appearance amounts to a submission to the jurisdiction of the court and to a waiver of irregularity, e.g. in the manner of service. However, only a defendant can enter an appearance. That is the general rule in all proceedings and it applies also to proceedings under the Admiralty Rules of New South Wales: see rr. 18 and 19 and Form No. 4. In an action in rem the persons who may become defendants, if they choose to appear, are the owners and others interested in the ship. The interest must be in the property proceeded against. Examples of persons having the necessary interest are mortgagees, trustees in bankruptcy, underwriters who have accepted abandonment, charterers, persons who have possessory liens, or competing maritime liens, and generally persons who are plaintiffs in other actions in rem against the same property: Halsbury's Laws of England, 4th ed., vol. 1, par. 375. As to the last class of persons mentioned in Halsbury a narrower view appears to have been taken in Owners of Ship Norma v. The Ship Ardencraig (1907) SALR 48 , but we are not concerned with that question; the examples given suffice to indicate in a general way the nature of the interest required. In The Dowthorpe [1843] EngR 477; (1843) 2 W Rob 73, at p 77 [1843] EngR 477; (166 ER 682, at p 684) Dr. Lushington said that "an interest to establish a persona standi in judicio is not an absolute right to a given sum of money; but if a person may be injured by a decree in suit, he has a right to be heard as against the decree; although it may eventually turn out that he can derive no pecuniary benefit from the result of the suit itself". He was there dealing with the position of assignees of a bankrupt shipowner and the injury to which he referred was injury of a proprietary kind; clearly injury to feelings or reputation would not be enough. The possibility that a finding that the ship had been unskilfully navigated might affect the reputation of Captain Henneman does not mean that he might be injured by a decree in the action in the sense used by Dr. Lushington. A judgment against the dredge would not directly affect Captain Henneman in any proprietary or pecuniary sense. Since in fact he had no interest in the dredge he was not one of the persons to whom the writ was addressed and he had no right to appear in the action. His unauthorized appearance did not convert him into a defendant and in truth he never became a party to the proceedings. It may be added that in the circumstances that have been mentioned the other parties to the action could not have been misled into the belief that Captain Henneman had an interest in the ship and for that reason became a defendant. The proper course was to have dismissed Captain Henneman from the proceedings. In my opinion the appeals brought against Captain Henneman must fail and his cross-appeals, by which he seeks an order that he be dismissed as a party, ought to be allowed. (at p540)

[21]

13. No evidence was given by anyone who was on the bridge of the dredge on the night in question as to what happened on that occasion. There was thus no direct evidence that Decca's system was in use on that night. However, a number of facts proved in evidence did in my opinion give rise to the inference that the system was being used. There was evidence that the two misleading lines were not marked on the track plotter chart when it was handed over by Decca's staff to the surveyor employed by the charterers of the dredge, and that they were subsequently marked on the chart by Mr. Austin, an employee of Decca. That chart as originally received by the dredge was deficient, so far as those intending to use it were concerned, because it did not show the western boundary of the area to be dredged (although it must be added that Decca cannot be blamed for this, since Decca had not been asked to plot that boundary). The learned trial judge accordingly inferred that the deck officers of the dredge would have wanted that boundary fixed with precision before they would dredge near the pipeline. It seems to me a reasonable inference that the lines were marked on the chart by Mr. Austin, at the request of those concerned with the navigation of the dredge. In other words, it is a reasonable inference that it was intended by someone concerned with the navigation of the dredge to use the track plotter chart, and the Decca system, in the navigation of the dredge. On the morning of 26th October three independant witnesses saw the track plotter chart on the track plotter on the bridge of the dredge. That was the position in which it would have been placed if it had been in use. There were no markings on the chart showing the course taken by the dredge, but, as the learned judge rightly pointed out, that was in no way conclusive. The fact that the dredge was operating at night made it more probable that Decca's system would have been used, for in conditions of darkness it would have been more likely to be effective than conventional methods of navigation. The general manager of Decca said in evidence that the Decca system is almost invariably used in a dredging project when a trailer hopper suction dredge (as the "Willemstad" was) is being used. In my opinion when a chart is obtained for use in the navigation of a dredge, and the circumstances are propitious for its use, and the dredge is found to be off its proper course but in the very area where one would expect to find it if the chart had been used, and soon afterwards the chart is found on the bridge in the position where it would have been if it had been in use, it may be inferred, in the absence of any evidence to the contrary, that it was being used on the occasion in question. The learned trial judge also relied in support of his conclusion on certain documents produced from Decca's custody, but in my opinion it is unnecessary to consider their evidential value and weight. (at p541)

[22]

14. Counsel for Decca submitted that there was other evidence from which it could be inferred that those in charge of the dredge were not relying on the chart at the time when the damage occurred. The centre point of the damage was 125 feet outside and to the south of the two dredging areas mentioned - in fact it was to the south of dredging area D. It would follow from the judge's finding that the damage commenced just inside dredging area D and extended to the south of that area for about 300 feet. If the damage did not extend so far, the damaged pipes would have been entirely outside the dredging area. An attempt was made to disturb the judge's finding as to the position and extent of the damage, but I consider that it would not materially assist Decca's argument if the damage had been entirely outside the dredging area. The submission for Decca was that the dredge had no occasion to be to the south of the dredging area at the place where the damage occurred and that the Decca system is so accurate - it is said to give a general positional accuracy of better than five feet - that the dredge would not have been in that position if those in charge of its navigation had been using that system. Although the erroneous markings on the track plotter chart would have misled the officers navigating the dredge into going too far to the west, in the direction of the pipeline, those markings would not have misled them as to the position of the dredge in relation to the southern boundary of the dredging areas. The learned trial judge considered that Decca's submission was answered by the fact that if the dredge was working outside the dredging area it was doing so for the purpose of dredging the slopes or batters of the sides of the channel. Counsel for Decca submitted that this inference could not properly be drawn. The batter areas were not marked on any of the charts. It was said that having regard to the situation and depth of the water where the damage occurred, and to the terms of the contract under which the dredge was being worked, it was unlikely that the slopes were being dredged. I am inclined to doubt whether it can be inferred that the dredge was working on the slopes of the channel. I also doubt whether the learned judge was right in finding, as he did, that there was no evidence that the dredge from time to time left the dredging area in order to dump spoil. However, on any view the navigation of the dredge was unskilful. That circumstance in itself seems to me to provide one possible explanation for the presence of the dredge outside the dredging area and even for its return to the wrong position after spoil was dumped. If that view were accepted it would not follow that those navigating the dredge were not using the Decca system. It is possible that their main concern was to avoid the pipeline and they may not have regarded it as particularly important to ensure that the dredge did not stray to the south of the boundary. Of course the position of the damage is one matter to be weighed in deciding what inference may be drawn from the evidence as a whole, but it does not in my opinion overcome the inference that the Decca system was being used. (at p543)

[29]

21. The rule was first laid down in Cattle v. Stockton Waterworks Co. (1875) LR 10 QB 453 , where it was held that a contractor doing work on the land of a third person had no right of action when that land was flooded by water which leaked from a defective water-pipe laid by the defendant, with the result that the plaintiff's contract with the landowner was rendered less profitable. Some remarks of Blackburn J. (1875) LR 10 QB, at p 457 suggest that he based his judgment on the ground that the damage suffered by the plaintiff was not the proximate and direct consequence of the act of the defendant. The question next arose in the House of Lords in Simpson and Co. v. Thomson (1877) 3 App Cas 279 . In that case a ship was damaged by a collision with another vessel owned by the same person. It was held that the underwriters, who had paid the owner in respect of the loss of the first-mentioned ship, could not claim damages from him because the loss had been caused by the negligence of his other vessel. The majority of the members of the House of Lords based their judgments on the rules relating to subrogation, but Lord Penzance took pains to negative the principle suggested by counsel in that case "that where damage is done by a wrongdoer to a chattel not only the owner of that chattel, but all those who by contract with the owner have bound themselves to obligations which are rendered more onerous, or have secured to themselves advantages which are rendered less beneficial by the damage done to the chattel, have a right of action against the wrongdoer although they have no immediate or reversionary property in the chattel, and no possessory right by reason of any contract attaching to the chattel itself, such as by lien or hypothecation" (1877) 3 App Cas, at p 289 . Lord Penzance considered that this suggested principle was not only unsupported by authority but was such as, if accepted, would be likely to give rise to rights of action which "might be both numerous and novel" (1877) 3 App Cas, at p 290 . The examples which his Lordship gave of the novel claims to which the suggested principle might give rise were by no means fanciful. He instanced a claim made by a third person in respect of the negligent destruction of goods which the owner had contracted to supply to him. That sort of situation in fact arose in Margarine Union G. m. b. H. v. Cambay Prince Steamship Co. Ltd. (1969) 1 QB 219 and French Knit Sales Pty. Ltd. v. N. Gold & Sons Pty. Ltd. (1972) 2 NSWLR 132 . He further raised the question whether a doctor, who had contracted to attend an individual for a fixed sum by the year, could have a right of action in respect of the additional cost of attendance and medicine cast upon him by the accident. A very similar question fell for decision in the Supreme Court of California in Fifield Manor v. Finston (1960) 354 P. 2d 1073 . In these three later cases a view consistent with that expressed by Lord Penzance was taken, and the claims for economic loss were rejected. (at p546)

[44]

29. It may be right to say, as Lord Devlin said, that the distinction between recovery for economic loss and recovery for material loss is illogical, but that does not mean that the decisions that have drawn that distinction were erroneous, because the law aims at practical justice rather than logical consistency. However, I am in respectful agreement with Lord Denning M.R. in S.C.M. (United Kingdom) Ltd. v. W.J.Whittall & Son Ltd. (1971) 1 QB, at p 344 that the distinction is not lacking in common sense. If a person committing an act of negligence were liable for all economic loss foreseeably resulting therefrom, an act of careless inadvertence might expose the person guilty of it to claims unlimited in number and crippling in amount. For example, if, through the momentary inattention of an officer, a ship collided with a bridge, and as a result a large suburban area, which included shops and factories, was deprived of its main means of access to a city, great loss might be suffered by tens of thousands of persons, but to require the wrongdoer to compensate all those who had suffered pecuniary loss would impose upon him a burden out of all proportion to his wrong. Similarly, the driver of a vehicle which collided with a pylon carrying electric power lines in an industrial area might dislocate the work of dozens of factories. It is true that under modern conditions some claims arising from physical injury or material damage can be very large in amount - for example if a passenger train were derailed. Nevertheless, the extent of claims for loss that is purely economic is likely to be very much wider than that of claims arising out of physical injury and material damage. Further, a law which imposed a general duty to take care to avoid causing foreseeable pecuniary loss to others would, as Widgery J. suggested, interfere greatly with the ordinary affairs of life. There are sound reasons of policy why economic loss should not be treated in exactly the same way as material loss. (at p552)

[65]

8. There has long existed a line of authority in English law said to establish the proposition that damages may not be recovered in negligence for purely economic loss. The decision of their Lordships in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1963] UKHL 4; (1964) AC 465 , itself changing existing law as to negligent misstatements and allowing recovery for purely economic loss in that field, has at the same time given rise to speculation whether this is now, or indeed ever was, the law. Lord Devlin, at least, considered that the fundamental question settled by their Lordships' decision was that purely economic loss will be recoverable if there is sufficient proximity between the parties to give rise to a special duty relationship. In numerous recent cases the English and, to a lesser extent, the Canadian and Australian courts have considered the recoverability of purely economic loss in areas beyond the field of negligent misstatement, as have the courts of the United States. In the English cases the attempt to extend liability for negligence in these areas so as to include economic loss where the plaintiff has suffered no physical injury or damage to property to which the economic loss is consequential has usually failed. In Canada it has occasionally succeeded, notably in Seaway Hotels Ltd. v. Consumer Gas Co. (1959) 21 DLR (2d) 264 , a decision antedating Hedley Byrne [1963] UKHL 4; (1964) AC 465 , and, in rather special circumstances involving products liability, in Rivtow Marine Ltd. v. Washington Iron Works (1973) 40 DLR (3d) 530 . The point has not before arisen directly for decision in this Court nor are there any authorities which are binding on this Court; in the New South Wales Supreme Court, in French Knit Sales Pty. Ltd. v. N. Gold & Sons Pty. Ltd. (1972) 2 NSWLR 132 Asprey J.A., with whose reasons Hardie A.J.A. agreed in substance, adopted the same view as have English authorities. However, Mason J.A. (as he then was) concluded that it was inappropriate to determine upon demurrer the "interesting and difficult questions of law" which were raised. (at p559)

[76]

18. Accordingly, any doctrine of the law of negligence which would confine recoverable economic loss to that which is strictly consequential upon physical injury to the plaintiff's person or property must lead to a refusal of relief to Caltex. Although no decision binding upon this Court so confines the limits of recoverable economic loss there is much persuasive authority supporting such a conclusion. Its origin is to be found in the judgment of the Court of Queen's Bench, delivered by Blackburn J., in Cattle v. Stockton Waterworks Co. (1875) LR 10 QB 453 and from there it may be traced through the speech of Lord Penzance in Simpson v. Thomson (1877) 3 App Cas 279, at pp 289-290 , into a series of shipping cases in the first quarter of this century. These cases were concerned either with the case of charterers, otherwise than by demise, who suffered economic loss, typically due to injury to or compulsory acquisition of the chartered vessel, or, in one case, with a tug's economic loss flowing from the sinking, by another's negligence, of its tow. Up to this stage no judicial disquiet as to the exclusion of any rights to recover for purely economic loss is evident in the cases, its exclusion being justified principally by reference to uncontrolled extent to which liability would be extended were recovery of purely economic loss permitted and to the fear of a great influx of cases and of resultant detriment to judicial administration. The expression of this fear is no novelty and may be compared with that expressed much earlier by Lord Abinger in the somewhat different context provided by the issues in Winterbottom v. Wright [1842] EngR 713; (1842) 10 M & W 109 (152 ER 402) . As to the concern lest there be an undue extension of liability it is well to recall that these cases were decided before reasonable foreseeability had become accepted as a means of limiting the area of liability in negligence generally. It was also a time before Donoghue v. Stevenson [1931] UKHL 3; (1932) AC 562 and long before, at least in England, a right of recovery for the economic loss caused by negligent misstatement had been recognized. (at p563)

[90]

32. In addition to the arbitrary nature of such a rule it also possesses the unattractive quality of being quite unresponsive to the grossness of the wrongdoer's want of care in its exclusion of non-consequential economic loss. Again, the outcome of applying such a rule may well depend upon the precise terms of a contract between the injured person and a third party; those terms, otherwise wholly irrelevant to the tortfeasor's wrongful act, will, if they determine whether the injured person possesses a sufficient interest of the requisite kind in property which has been damaged, either confer upon him or deny to him an entitlement to damages. The injured party will suffer the same loss in either event but his right to compensation will depend upon the particular contractual situation into which the effect of the tortious act has wrongfully intruded itself. One simple example will suffice; more elaborate instances are furnished in Professor Atiyah's article in Law Quarterly Review, vol. 83 (1967) at pp. 266-267. A defendant's vessel by negligent navigation damages another ship whose charterer in consequence suffers economic loss; if by the terms of the charter the charterer has possession of the damaged vessel under a charter by demise he can recover damages for his economic loss but not so if he is but a charterer under a time charter in common form; cf. Courtenay v. Knutson (1961) 26 DLR (2d) 768 and Chargeurs Reunis Compagnie Francaise de Navigation a Vapeur v. English & American Shipping Co. (1921) 9 LI LR 464 . It is not unimportant to note that in the circumstances of the present case even the exclusory rule would operate to confer a complete right of recovery upon Caltex for its claimed economic loss had the processing agreement contained a clause granting it some possessory right in the pipelines during the currency of the agreement. These considerations make the suggested rule seem a high price to pay for protection against the fear of possibly excessive extension of the right to recover compensation for proved loss. (at p569)

[94]

36. In these circumstances it is not surprising that, as Edmund Davies L. J. has pointed out, there has, over the years, been some judicial disavowal of this suggested exclusory rule. His Lordship refers, among other authorities, to what was said on this topic by Lord Roche in Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) (1947) AC 265 . That case is important not only for the doubts cast by Lord Roche upon the correctness of the earlier case of La Societe Anonyme de Remorquage a Helice v. Bennetts (1911) 1 KB 243 , a case which has been much relied upon as supporting the suggested rule, and for the instance he gives of a goods owner entitled to recover for certain economic loss when the carrier's truck on which his goods are carried is damaged by negligence without any damage to those goods. Lord Roche's speech (1947) AC, at pp 279-280 may, I think, also be regarded as authority for the proposition that, in the circumstances to which he refers, economic loss, being expense incurred by the owner of undamaged cargo as a result of a collision whether by land or by sea, is recoverable in an action in negligence against the colliding vessel or vehicle; he described the cargo-owner and the shipowner as being engaged in a common adventure with and by means of the ship or lorry. Lord Porter supports the like proposition, at least where cargo is being carried by sea; the ship and cargo-owner are then, he said, engaged in a joint venture (1947) AC, at pp 296-297 . The significance of this proposition for present purposes is not, I think, diminished by their Lordships' references to the concept of common adventure or joint venture. Lord Roche certainly did not, nor, I think, did Lord Porter, intend by the use of these phrases a reference to the technical doctrine of general average contribution. These references were, as I would read the speeches, intended to be no more than descriptive of the situation which arose from goods being carried by sea or land, thereby giving rise to a relationship between the cargo-owner and the tortfeasor sufficiently proximate to have permitted of the recovery by the former of his economic loss. The goods owner and the ship or vehicle owner are, in such a case, engaged in a common adventure in the sense that their respective property is open to the same risks of injury and one who encounters the ship or vehicle on the sea or on the highway owes to each party a like duty of care to avoid the infliction of injury or economic loss. In Hedley Byrne [1963] UKHL 4; (1964) AC 465 the three members of the court who referred to Greystoke Castle (1947) AC 265 regarded it as authoritative on the question of recovery for purely economic loss. Lord Hodson (1964) AC, at p 509 cited Lord Roche's example of the lorry and the goods owner as supporting his own view that "It is difficult to see why liability as such should depend on the nature of the damage". Lord Pearce cited Greystoke Castle (1947) AC 265 as authority for the proposition that "economic loss alone, without some physical or material damage to support it, can afford a cause of action" (1964) AC, at p 536 . Lord Devlin said, that that case "makes it impossible to argue that there is any general rule showing that such loss" (financial loss without physical injury to the plaintiff's property) "is of its nature irrecoverable" (1964) AC, at p 518 . His Lordship had earlier described the supposed distinction between injury to person or property and economic loss as that kind of nonsense which arises out of a refusal to make sense (1964) AC, at p 517 . (at p572)

[100]

42. The need, in cases of purely economic loss, for some further control of liability apart from that offered by the concept of reasonable foreseeability arises in part because, in cases of physical injury to person or property, the concept has been given a very far-reaching operation, far more extensive than may be thought to have been conveyed by Lord Atkin's reference to that which one "can reasonably foresee would be likely to injure" a person in the relationship of neighbour (Donoghue v. Stevenson [1931] UKHL 3; (1932) AC 562, at p 580 ). This is perhaps well enough so long as what is in question is only liability for injury to person or property, the duty of care being fixed by reference to the plaintiff whose person or property is injured, those indirectly affected by the repercussions of the negligent act having suffered no such injury. But if economic loss is to be compensated its inherent capacity to manifest itself at several removes from the direct detriment inflicted by the defendant's carelessness makes reasonable foreseeability an inadequate control mechanism. The very wide reach of the concept of reasonable foreseeability is illustrated by The Wagon Mound (No. 2) [1966] UKPC 1; (1967) AC 617 . What was there described as "a possibility, but one which could become an actuality only in very exceptional circumstances" and also as a risk which, while "real" and not one to "brush aside as far fetched", was yet "remote", was nevertheless held to be reasonably foreseeable. A further illustration is provided by the sequence of events which, in the facts of Chapman v. Hearse [1961] HCA 46; (1961) 106 CLR 112 , culminated in the death of Dr. Cherry and were held to be reasonably foreseeable. In Caterson v. Commissioner for Railways (N.S.W.) [1973] HCA 12; (1973) 128 CLR 99, at p 102 Barwick C.J. restated, as a concise delineation of liability in tort, a formulation involving reasonable foreseeability which had earlier been propounded by Lord Reid, making in the process one slight modification to it; damage which is reasonably foreseeable as "not unlikely to happen even in the most unusual case" was, he said, damage for which a defendant is liable unless the risk be so slight that a reasonable man would be justified in neglecting it. This formulation itself demonstrates, as do The Wagon Mound (No. 2) [1966] UKPC 1; (1967) AC 617 and Chapman v. Hearse [1961] HCA 46; (1961) 106 CLR 112 , the inadequacy of reasonable foreseeability as the sole measure of liability for economic loss. To take an instance used in argument, if by negligent navigation a bridge is destroyed can it be the policy of the law that every member of the public who is a regular user of the bridge and who in consequence incurs increased transport costs because now obliged to travel by a more circuitous route, is to be entitled to recover his resultant economic loss, a loss which will perhaps continue until, at some distant future date, the bridge is restored? I would think not; yet it is by no means clear to me that an application of the criterion of reasonable foreseeability might not produce that very result. (at p574)

[101]

43. The need is for some control mechanism based upon notions of proximity between tortious act and resultant detriment to take the place of the nexus provided by the suggested exclusory rule which I have rejected. Its precise nature and the extent to which it should restrict recovery for purely economic loss must depend upon policy considerations just as does the conclusion that for cases of economic loss such an additional control mechanism is necessary. Both in actions for negligent misstatement and in products liability actions based upon negligence, the particular fact situations encountered are likely themselves to provide material out of which formulations limiting the extent of liability may be fashioned; Hedley Byrne [1963] UKHL 4; (1964) AC 465 and Rivtow Marine (1973) 40 DLR (3d) 530 respectively provide examples of this process in these two areas. But in the general realm of negligent conduct it may be that no more specific proposition can be formulated than a need for insistence upon sufficient proximity between tortious act and compensable detriment. The articulation, through the cases, of circumstances which denote sufficient proximity will provide a body of precedent productive of the necessary certainty; the gradual accumulation of decided cases and the impact of evolving policy considerations will reflect "the courts' assessment of the demands of society for protection from the carelessness of others" - per Lord Pearce in Hedley Byrne (1964) AC, at p 536 reiterated by Lord Diplock in Dorset Yacht Co. v. Home Office [1970] UKHL 2; (1970) AC 1004, at p 1058 . It was Lord Pearce in Hedley Byrne who explained the divergence between the law of negligence in word and that of negligence in act in terms of the quite special characteristics of words as the instrument of negligence (1964) AC, at p 534 . Economic loss possesses many of the characteristics which Lord Pearce attributed to negligence by word and the need which his Lordship recognized for proximity as a precondition of liability for negligence by word applies equally to all cases of recovery for purely economic loss. (at p575)

[113]

49. The circumstances of the present case may usefully be compared with those instanced by Lord Roche in Greystoke Castle as properly giving rise to a right of recovery for purely economic loss. In a passage (1947) AC, at p 280 which has won the approval, although in some instances subject to a qualifying explanation, both of those who would confine economic loss within narrow bounds and of those who would extend the limits of recovery, Lord Roche spoke of a carrier's lorry engaged on a journey to deliver the plaintiff's goods and which was disabled by the careless conduct of the defendant, another user of the highway. If for Lord Roche's lorry there be substituted A.O.R.'s pipelines across Botany Bay, the consequence of the defendant's conduct is in each case to abort the transport of the goods and as a direct consequence to involve the plaintiff in economic loss. The precise nature of that loss differs only because the lorry has but a finite capacity per trip whereas the pipelines possess an infinite capacity so long as the flow through them continues; accordingly different practical consequences follow the disablement of these respective modes of transport but the problem for the goods owner is the same, how now to move his goods. In the case of the lorry it must be unloaded and the goods loaded onto another lorry and carried to their destination; according to Lord Roche the goods owner may recover from the defendant the cost of unloading and reloading and, if the risk of interruption of the carriage rested with the goods owner, also the cost of on-carriage on the new lorry. Assume that in Lord Roche's example the lorry which the defendant disabled was, to his knowledge, the only available one suitable for carriage of the plaintiff's goods; the factual analogy then becomes close and is unaffected by the fact that the product in the pipelines was lost. In the present case it was necessary to stop the continuity of flow through the pipelines, leaving undelivered Caltex's product still at the refinery, as would have been the goods had they been unloaded from the lorry and left on the roadside for want of any other suitable lorry. Lord Roche's example did not take the case thus far but, had the defendant known that the lorry was one uniquely suitable for the carriage of the goods by motor transport, the cost of having to resort to some other mode of transport would surely have been recoverable despite the absence of any injury to the plaintiff's property. So too should be Caltex's economic loss in the present case. In each case the economic loss is reasonably foreseeable and the incurring of cost in moving by other means the stranded goods is directly attributable to the tortious act of disabling the existing mode of transport. A close degree of proximity exists which is no doubt enhanced if the defendant knows that the lorry, like the pipelines in the present case is and can be employed for no purpose other than the carriage of goods to the plaintiff's premises. That the goods in Lord Roche's example were already en route and were not, as in the case of Caltex's undelivered oil, vainly awaiting carriage on second and subsequent trips by the now disabled lorry does not, I think, serve as a distinguishing factor; it is but a consequence of the infinite and continuous carrying capacity of a pipeline as compared with the finite and periodic capacity of a lorry. (at p580)

[201]

31. The defendants owed no duty of care to Caltex arising simply from a risk that A.O.R. might by the physical injury to its property be unable to supply refined petroleum products to Caltex under a contract for the supply thereof. However that is not the end of the matter. There was a duty of care owed by the defendants to Caltex. The duty of care was that owed to a person whose property was in such physical propinquity to the place where the acts or omissions of the dredge and Decca had their physical effect that a physical effect on the property of that person was foreseeable as the result of such acts or omissions. The physical effect of Decca's act or omission was at the place where the dredge went as a result of navigational error, caused by that act or omission. The physical effect of the dredge's act or omission was at the place where it went in its dredging operation. The property of Caltex in physical propinquity to the place where the acts or omissions of the defendants had their physical effect was its crude oil at the refinery and the products thereof so far as the crude oil had been refined. Though there was no evidence of precisely how much crude oil of Caltex was at the refinery at the time of the incident or of how much refined product was awaiting delivery, there was evidence that some was there. The physical effect on this property of Caltex was the immobilization through the pipeline of the crude oil and the products thereof. The risk of such a physical effect was foreseeable as the result of the act of breaking the pipeline. The damage suffered was the immobilization through the pipeline of the processed crude oil. A quantification of the damage was the cost of arranging alternative means of obtaining delivery of the products processed from the crude oil provided that so to do was reasonable. Damages, if they were payable at all, were admitted to be $95,000. This was a formal admission (Exhibit N) which relieved Caltex of proof of any matter going only to damages. Therefore no question arose, or now arises, whether the acts or omissions of the defendants had the physical effect of immobilizing all the crude oil and its refined products for which alternative means of delivery were arranged. That is to say, no question arose, or now arises, whether all the crude oil, for the processed products of which alternative means of delivery were arranged, was at the time of the incident already in physical propinquity to the place of the incident. Nor does any question arise whether the incurring of the cost of arranging alternative means of obtaining delivery of the processed products was reasonable. The duty of care having been found, and the injurious physical effect being of a foreseeable kind, the defendants were respectively liable to pay the agreed damages if a breach of the duty of care was proved against either of them respectively. For the dredge it has not been argued on this appeal that the finding of negligence was wrong. However, it has been so argued on behalf of Decca. I am of the opinion that the trial judge's conclusion on this point has not been shown to have been wrong. I agree with the reasons expressed by Stephen J. in this regard. (at p605)

At a glance

Court

Decision date

Before

Source

Judgment (219 paragraphs)

Caltex Oil (Australia) Pty Ltd v Dredge "Willemstad" [1976] HCA 65; (1976) 136 CLR 529 (9 December 1976)

Parties

Cases Cited (12)