Johnson Tiles Pty Ltd v Esso Australia Ltd

REASONS FOR JUDGMENT 1 By a notice of motion dated 15 February 1999 Esso Australia Limited and Esso Australia Resources Ltd ("Esso") moved the Court for an order that the Further Amended Statement of Claim ("the statement of claim") of the applicants dated 12 February 1999 be struck out. A copy of the statement of claim is annexed to these reasons for judgment. In the alternative, an order was sought striking out paras 6, 7, 8, 9, 13, 14, 18, 19, 20 and 21 of the statement of claim. Esso contended that the statement of claim, as presently pleaded, did not disclose a reasonable cause of action and would prejudice, embarrass or delay the fair trial of the proceeding. 2 The proceeding is brought by three applicants as representative parties under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The applicants are claiming damages for the economic loss allegedly suffered by the applicants and group members (being business users, domestic users and stood down workers as defined in the statement of claim) as a consequence of an explosion and fire that occurred at Esso's Longford plant on 25 September 1998. It is alleged that as a result of the explosion the supply of gas to the applicants and the group members or their employers (as the case may be) ceased until 8 October 1998 thereby causing the economic loss claimed in the proceeding. 3 On the present motion it is appropriate to approach the pleading challenge on the basis that it is desirable, given the complexity, magnitude and number of claims being made in the present case, that the pleadings clearly and precisely identify all of the issues which are to be determined by the Court. 4 The primary contention of Esso was that the material facts pleaded in the statement of claim assert what, in truth, is an obligation on the part of Esso to supply gas to the group members or, at the least, to take reasonable steps to ensure that the supply of gas to the applicants and to group members was secure, reliable, adequate and continuous. The contention was founded upon the allegation that the applicants and the group members claimed that their loss was caused by Esso's failure to provide to them or to their employers a secure, reliable, adequate and continuous supply of gas. Esso then contends that the quantitative rather than qualitative, omission alleged against it is premised on an obligation that is contractual in nature and cannot constitute or give rise to a like duty in negligence. 5 In John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd and Another (1996) BCL 262 at 274, Byrne J made certain observations on the fundamental difference between contractual and tortious obligations. His Honour said that the pleaders in that case: "…allege a duty of care to perform the contract. In every respect it is a duty which is contractual in description: its terms, its breaches and the consequent loss, as pleaded, are indistinguishable from contract-based obligations, breaches and loss. It is nonetheless given a tortious tag by the opening assertion that the defendant owed to the plaintiff a duty of care to perform those obligations. What the law of negligence in this context imposes is, not that the defendant owes a duty of care to perform a contract, but that it owes a duty to perform the contract with due care: Macpherson & Kelley v Prunty [1983] 1 VR 573. There is an essential difference between that duty of care and the contractual duty to perform the pre-bid work "to enable the project to be accurately priced" or "to ensure that the design in the preliminary engineering would not differ from the design engineering": para 26. To confuse the two is to confuse obligations which are essentially different. The contractual duties here are expressed as obligations to perform work to achieve a particular objective: the concurrent duties in tort, if they exist, must be to perform the same work with due skill, care and diligence." 6 If the cause of action against Esso was pleaded on the basis that Esso is under a duty to supply gas or to take reasonable steps to ensure the supply of gas then there would be force in Esso's contentions. As was pointed out by Byrne J, such a duty is contractual in description and cannot be converted into a tortious obligation by merely stating that there was a duty of care to perform a contractual obligation. 7 However, in my view the present pleading is not founded, directly or indirectly, on a duty to supply. The claim in negligence is that: (a) Esso held itself out as capable of producing and supplying and able to provide a secure, reliable, adequate and continuous supply of gas to gas users in Victoria; (b) the business users and the domestic users, as was well known by Esso, were dependent upon Esso as their sole supplier of gas for a secure, reliable, adequate and continuous supply of gas; (c) the stood down workers were likewise dependant upon Esso as the sole supplier of gas to their respective employers; (d) Esso knew or ought reasonably to have known and foreseen that, in the event of a cessation or interruption of a supply of gas to the domestic users, the business users or the employers of the stood down workers, all of the group members would suffer loss and damage; (e) by reason of the above matters Esso owed a duty of care to each of the group members in the design and operation of the Longford plant; (f) the interruption to and cessation of supply as a result of the explosion and fire that occurred at the Longford plant on 25 September 1998 were caused by Esso's negligence and breach of its duty of care in the design and operation of the Longford as particularised in the statement of claim; (g) as a consequence of the above matters each of the group members suffered financial loss and damage. 8 Putting to one side for the moment certain pleading deficiencies, to which I will later refer, the allegation against Esso is not that it was under a duty of care to ensure that its supply of gas was secure, reliable, adequate and continuous. Rather, the case pleaded was that by reason of the matters which I have summarised in (a)-(d) above, Esso owed a duty of care to the applicants and each of the group members in the design and operation of the Longford plant. As I later explain, the duty of care alleged in that general manner is not properly pleaded. The deficiency arises as a result of a failure of the statement of claim to properly plead the applicants' claim in negligence for economic loss. 9 However the cause of action, albeit that it is pleaded deficiently, is based upon a tortious, rather than a contractual, duty of care. In particular: · the alleged dependence on the provision by Esso for a secure, reliable, adequate and continuous supply of gas addresses the issue of proximity rather than any alleged contractual obligation owed by Esso to the applicants and group members in relation to the supply of gas; · the pleading is premised on an alleged duty of care in the design and operation of the plant in order to avoid or protect against a cessation of supply; · the applicants do not allege to a right to or in respect of supply; · only a negligent cessation of supply is said to found the applicant's claim in negligence. 10 Accordingly, I do not accept that the pleading is premised on an allegation of a right to supply. In those circumstances the primary ground put forward by Esso for contending that no reasonable cause of action in negligence is pleaded must fail. 11 However, there is a fundamental difficulty with the pleading in negligence in its present form which may, in part, have contributed to Esso's view that the pleading is premised on an alleged right to supply. The difficulty initially relates to para 9 of the statement of claim which contains a bald allegation that Esso owed a duty of care to each of the applicants and each of the group members "in the design and operation of the Longford plant". As has been pointed out on a number of occasions, the existence of a duty of care is closely related to the damage in respect of which it is said the alleged wrongdoer had a duty to take some step to avoid. A duty of care arises in negligence at common law only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage. 12 In Sutherland Shire Council v Heyman (1984) 157 CLR 424 at 487 Brennan J said: "…a postulated duty of care must be stated in reference to the kind of damage that the plaintiff has suffered and in reference to the plaintiff or a class of which the plaintiff is a member…The question is always whether the defendant was under a duty to avoid or prevent that damage…" See also Bryan v Maloney (1995) 182 CLR 609 at 617-619. 13 In Pyrenees Shire Council v Day (1998) 192 CLR 330 at 338-339 Brennan CJ observed that in a claim for negligence the question for determination is whether the alleged wrongdoer was under a duty to the plaintiffs to take some step which it had unreasonably failed to take and which, if taken, would have avoided the damage claimed to have been suffered. In the context of a claim for economic loss Lord Bridge, in Caparo Industries Plc v Dickman and Others (1992) AC 605 at 627, said: "It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless." Lord Oliver (at 651) said: "It has to be borne in mind that the duty of care is inseparable from the damage which the plaintiff claims to have suffered from its breach. It is not a duty to take care in the abstract but a duty to avoid causing to the particular plaintiff damage of the particular kind which he has in fact sustained." 14 Paragraph 9 of the statement of claim fails to take into account the significance of the above observations and offends the basic requirement of pleading the duty of care in a manner which connects it with the loss against which the plaintiff is to be protected. I do not accept the submission of the applicants that the nexus sufficiently appears in para 22. In the circumstances of the present case I am satisfied that para 9 ought to be struck out. 15 Esso also contended that there were fundamental problems in the pleading of para 13. It was said that many of the particulars were material allegations and should be pleaded as such. It was next contended that a number of the particulars failed, expressly or inferentially, to relate to or have any relevant connection with the loss alleged to have been suffered. Thirdly, criticism was made of certain particulars on the ground that they were expressed in very general terms or, in substance, claimed as a particular of negligence a failure "to ensure" that steps were taken which would have avoided the cessation of supply. The particulars in para 13 that were said to offend the above principles were sub-paras (i), (j), (k), (n), (o), (p), (q), (r), (s), (t) and (u). 16 Esso's submissions concerning para 13 are closely related to the deficiency, to which I have referred, in para 9. Paragraph 13 states that the interruption to supply was caused by the respondent's negligence and breach of the duties referred to in para 9. In my view it is embarrassing to have both claims expressed in that general and overlapping form. Further, as para 9 has been struck out, to the extent that para 13 relies on para 9, it must also be struck out. In those circumstances it is unnecessary to determine whether the particulars are material allegations of fact or are appropriate for particulars. However, in my view more careful consideration should be given to that matter in a repleaded statement of claim as there is some substance in the allegation that, in a case such as the present, it may not be appropriate for all of the substantive allegations concerning breach of duty to be pleaded as mere particulars. 17 I would add that I am also in agreement with Esso's other submissions concerning the particulars set out above and am satisfied that they suffer the vices complained of by Esso. Accordingly, even if I did not strike out para 13 as a result of the substantive problems to which I have referred, I would nevertheless have struck the paragraph out on the ground that Esso's complaints concerning the particulars are well founded. Accordingly, I also strike out para 13 of the amended statement of claim. 18 Criticism was also made by Esso of the misleading and deceptive conduct claims. As has been pointed out on a number of occasions, the central allegation in any claim based upon s 52 of the Trade Practices Act 1974 (Cth) must carefully and precisely identify the conduct of the respondent which is alleged to have been misleading and deceptive in contravention of s 52. In my view the pleading in its present form fails to do so. An initial problem is that in para 14 the conduct which is the central allegation is pleaded by way of particulars. Plainly, the conduct complained of is a material fact and must be pleaded as such. Further, the particulars themselves are not confined, as they ought to be, to the conduct of Esso said to be misleading or deceptive. Thus, para 14 is defective and must be struck out. As that paragraph is to be struck out and repleaded it seems to me that the subsequent paragraphs which are entirely reliant upon it ought also to be struck out. Those paragraphs are paras 15, 16, 17 and 18. 19 The allegations in paras 19, 20 and 21 are, in substance, a different way of pleading what was sought to be pleaded in para 14. I need not investigate that matter further as para 21 suffers from the same vice as para 14 in that the so called contravening conduct is pleaded as a particular rather than as a material allegation. The paragraph also suffers the further deficiency that it extends beyond conduct and impermissibly relies upon the fact that events occurred, which were contrary to that which was assumed (or represented) to occur, as a particular of misleading conduct. It is well established that that is not a proper way for a claim for misleading and deceptive conduct to be pleaded. The situation is analogous to that considered in Bill Acceptance Corporation Ltd v GWA Ltd (1983) 78 FLR 171 where Lockhart J observed that conduct must be misleading or deceptive at the time it was engaged in; the mere fact that a representation as to future conduct did not come to pass did not make the representation, as such, misleading or deceptive. 20 A further problem was identified in the course of argument in relation to a suggested claim of damage to property. If such a claim is being pursued it raises issues, in relation to liability on both causes of action, which differ from those raised by the pure economic loss claims and must be specifically and separately pleaded. 21 It was not contended by Esso that if it was successful on its challenge to the pleadings that this was a case where leave to replead the statement of claim should be refused. The statement of claim has already been the subject of a number of amendments. Rather than strike out the specific paragraphs and further amend the present statement of claim it is appropriate that it be struck out with leave to replead. In those circumstances the appropriate orders are that the Further Amended Statement of Claim dated 12 February 1999 be struck out but that leave be given to the applicants to deliver a further amended statement of claim within fourteen days. As Esso has been substantially successful on its motion it is appropriate that the applicants pay to Esso its costs of and incidental to the motion. ANNEXURE