Lion-Dairy & Drinks Pty Ltd (formerly National Foods Limited) v Huhtamaki Australia Pty Ltd & Anor [2013] VSC 555

PRACTICE AND PROCEDURE - Application for stay or summary judgment under r 23.01 Supreme Court (General Civil Procedure) Rules 2005 refused - Application for summary judgment under s 63 Civil Procedure Act 2010 refused - Inappropriate in the circumstances to summarily determine whether "salient" features give rise to duty of care in negligence - Application for amendment of third party statement of claim substantially granted.

1 The Plaintiff, Lion-Dairy & Drinks Pty Ltd ("Lion Dairy"), at all material times carried on business as a manufacturer of foods and dairy products, including, among other things, "Yoplait Go-Gurt" ("Go-Gurt") and "Yoplait Smackers" ("Smackers") (collectively called, the "Products"). It did so out of its Morwell plant, Gippsland, in the State of Victoria (the "Plant"). Lion Dairy formerly carried on its business under the name "National Foods".

2 The Defendant, Huhtamaki Australia Pty Ltd, previously known as Huhtamaki Australia Limited ("Huhtamaki Australia"), is and was at all material times a packaging company incorporated in Australia. It carried on business as, among other things, a producer and manufacturer of flexible packaging (including conventional wrappers, film and tube laminates) for the consumer goods market, including the baby food, confectionery and dairy products markets in Australia and elsewhere.

3 On 16 November 2012 Lion Dairy issued this proceeding in the Commercial Court against Huhtamaki Australia, claiming damages for losses alleged to have arisen from a product recall of Yoplait yoghurt food products.

4 On 7 December 2012 the Court made directions for the filing and service of a defence and any third party statement of claim.

5 Huhtamaki Australia filed its defence on 1 February 2013.

6 On 4 February 2013 Huhtamaki Australia filed a third party notice against Flint Ink NZ Limited ("Flint Ink NZ"), alleging in summary that:

(a) Huhtamaki Australia had engaged the third party, Flint Ink NZ, under a supply agreement. Under the agreement Flint Ink NZ would supply ink to Huhtamaki Australia for use in printing on packaging to be used to contain food products for retail; and

(b) Huhtamaki Australia relied at all times on the advice received from Flint Ink NZ as to what would be suitable inks to use and that, accordingly, Flint Ink NZ owed a duty of care to Huhtamaki Australia.

7 During the preparation of its defence, Flint Ink NZ became aware of substantial problems with the third party statement of claim. The problems were, principally:

(a) The contract pleaded in the third party statement of claim was not entered into by Huhtamaki Australia. The contracting party was a New Zealand company, Huhtamaki New Zealand Limited ("Huhtamaki NZ");

(b) Huhtamaki NZ was not a party to the proceeding; and

(c) The supply contract between Huhtamaki NZ and Flint Ink NZ contained an arbitration agreement, which Flint Ink NZ seeks to enforce.

8 On 12 April 2013 Huhtamaki Australia's solicitors provided a proposed amended third party statement of claim.

9 On 18 and 19 July 2013 Huhtamaki Australia's solicitors provided a second proposed amended third party statement of claim. This is the version of the proposed amended third party statement of claim which Huhtamaki Australia seeks leave to file and serve.

10 In summary, in its statement of claim in the principal proceeding, Lion Dairy alleges the following against Huhtamaki Australia:

(a) At all material times, Huhtamaki Australia knew, or alternatively ought to have known that:

(i) The Products produced by Lion Dairy, Go-Gurt and Smackers, were targeted at children of early-school age;

(ii) The Products and their packaging had to be safe for consumption by young children;

(iii) In order to consume the Products, a child, or alternatively his or her parent or carer, would have to tear the top off a Go-Gurt, or alternatively the Smackers tube, and suck on the open end of it; and

(iii) The flexible packaging supplied by it to Lion Dairy was for, among other things, the production of the Products;

(b) In or about June 2005, Lion Dairy and Huhtamaki Australia entered into an agreement (the "Agreement"). Under the Agreement, Huhtamaki Australia agreed to supply and Lion Dairy agreed to purchase flexible packaging, including film and tube laminates (the "Goods"), for use by Lion Dairy in packaging its products, including the Products.

Huhtamaki Australia admits the Agreement and that it supplied flexible packaging to Lion Dairy pursuant to the Agreement;

(c) In the course of negotiations prior entering into the Agreement, Lion Dairy made two things known to Huhtamaki Australia, among others. First, it relied upon Huhtamaki Australia's skill. Second, the particular purpose for which the Goods were being acquired, namely as flexible packaging for production of food and dairy products for consumption by persons of varying ages;

(d) There were implied terms of the Agreement that:

(i) The Goods, including the film, were, alternatively would be, of merchantable quality and fit for their intended purpose;

(ii) The Goods, including the film, were, alternatively would be, free of defects making the Goods unsuitable for production of the Products; and

(iii) The Goods, including the film, were, alternatively would be, safe for use in the production of the Products;

(e) The Agreement was a contract for the sale of goods by description and contained the implied warranties set out in s 19 of the Goods Act 1958 (Vic);

(f) Further, or in the alternative, at all material times:

(i) It was reasonably foreseeable that Lion Dairy might suffer economic loss as a consequence of Huhtamaki Australia's want of reasonable care in the supply of the Goods, including the film used in the production of the Products;

(ii) Lion Dairy was vulnerable to the consequences of Huhtamaki Australia's want of reasonable care in the supply of the Goods, including the film used in the production of the Products; and

(iii) Lion Dairy and Huhtamaki Australia were in a sufficient relationship of proximity such that Huhtamaki Australia owed Lion Dairy a duty of care;

(g) Further or in the alternative, in the course of negotiations prior to entering into the Agreement and in order to induce Lion Dairy to enter into the Agreement, Huhtamaki Australia, its servants or agents, represented to Lion Dairy, in trade and commerce that:

(i) The Goods, including the film, were and would be fit and safe for use as flexible packaging in the production of Lion Dairy products, including the Products;

(ii) The Goods, including the film, were and would be in accordance with the specifications that had been provided (the "Specifications"); and

(iii) The Goods, including the film, were and would be manufactured and delivered by Huhtamaki Australia to Lion Dairy:

1. with the same or higher level of care and skill as would reasonably be expected of a person qualified and experienced in the manufacture and transport of the same or similar goods; and
2. in accordance with the Specifications,

(h) The Representations were false in that the original film had bond strength of only 100 to 200g/25mm and the film was not fit and safe for the intended purpose. This is illustrated by three incidents involving child consumers in the market place.

Huhtamaki Australia admits that in July 2008, Lion Dairy received three complaints from consumers of the Products that pieces of the yoghurt packaging had become detached from the yoghurt packaging during consumption;

(i) On 6 August 2008, Lion Dairy stopped production of the Products and quarantined all stock of the Products. On 8 August 2008, due to the de-lamination defect, Lion Dairy recalled the Products in the market with best before date of 27 September 2008 or earlier;

(j) On or about 27 August 2008, Lion Dairy, after certain assurances were given to it by Huhtamaki Australia, resumed production of the Products using the new film supplied by Huhtamaki Australia to it pursuant to the Agreement; and

(k) On 28 October 2008, after a de-lamination defect was detected in the Products produced with the use of the new film, Lion Dairy stopped the resumed production of the Products. Further, it quarantined all stock of the said Products at the Plant prior to distribution. Lion Dairy did not resume production of the Products until about mid-January 2009.

11 Accordingly, Lion Dairy sues Huhtamaki Australia for damages arising out of alleged: breach of contract (the Agreement); breach of the implied statutory warranties under s 19 of the Goods Act 1958 (Vic) (fitness for purpose and merchantable quality); breach of its alleged duty of care (negligence); and misleading and deceptive conduct (ss 51A, 52 and 53 Trade Practices Act 1974 (Cth) (the "TPA"), and ss 4, 9 and 12 Fair Trading Act 1999 (Vic).

Huhtamaki Australia denies the alleged breaches and misleading and deceptive conduct on the grounds set out in its defence.

12 At all material times Flint Ink NZ was incorporated in New Zealand and has carried on business which has included developing, manufacturing and marketing inks for use in food packaging.

13 Further, at all material times Huhtamaki NZ was incorporated in New Zealand and has carried on business which has included the manufacture, production and supply of flexible packaging for the consumer goods market.

14 The original third party claim by Huhtamaki Australia pleads negligence and breach of contract claims against Flint Ink NZ. Huhtamaki Australia seeks leave to file and serve an amended third party claim against Flint Ink NZ. The proposed amended third party claim abandons the breach of contract claim and proceeds only with the negligence claim.

15 In its proposed amended third party statement of claim directed to Flint Ink NZ as the third party, Huhtamaki Australia alleges that the Lion Dairy claims are apportionable claims and that Flint Ink NZ is a concurrent wrongdoer for the purposes of Part IV of the Wrongs Act 1958 (Vic) and Part VIA of the TPA.

16 It pleads further that if Huhtamaki Australia is liable to Lion Dairy as alleged, and if any or all of the claims made by Lion Dairy are not apportionable claims, then Huhtamaki Australia is entitled to indemnity or contribution from Flint Ink NZ by reason of the principal allegations summarised below:

1. On or about 1 November 2005, Huhtamaki NZ and Flint Ink NZ entered into an agreement under which Huhtamaki NZ would purchase exclusively from Flint Ink NZ, and Flint Ink NZ would supply, ink products for the use, among others, of printing on goods which would be used for retaining liquids and/or foods for human consumption (the "Flint Ink Supply Agreement").
2. Flint Ink NZ agreed to supply and Huhtamaki NZ agreed to buy exclusively from Flint Ink NZ, on the terms and subject to the conditions contained in the Flint Ink Supply Agreement, the ink products covered by the agreement (the Ink Products).

(b) Claim in Respect of Advice provided by Flint Ink NZ to Huhtamaki NZ

3. Huhtamaki Australia alleges that at all material times:

(i) Huhtamaki NZ relied on Flint Ink NZ to advise it as to what would be suitable inks to use;

(ii) Flint Ink NZ knew or ought to have known of Huhtamaki NZ's reliance on it;

(iii) Flint Ink NZ knew or ought to have known that if Huhtamaki NZ, in reliance on such advice, purchased unsuitable ink products, its customers would likely suffer loss;

(iv) Flint Ink NZ in fact advised Huhtamaki NZ as to what would be suitable ink products to use;

(v) In the circumstances, Flint Ink NZ owed Huhtamaki NZ and Huhtamaki Australia (as a customer of Huhtamaki NZ) a duty to exercise reasonable care in advising Huhtamaki NZ as to what ink products to use;

(vi) Between about 2004 and August 2008, Flint Ink NZ advised Huhtamaki NZ to use Melam ink, including with corona treated substrate, for the production of yoghurt packaging for Lion Dairy (the "Advice"); and

(vii) Relying on the Advice, Huhtamaki NZ: in or about late 2007 and early 2008, pursuant to the Flint Ink Supply Agreement, purchased Melam ink for use with a corona treated substrate in the production of packaging for Lion Dairy; between about December 2007 and July 2008, used the Melam ink in the production of such packaging for Lion Diary; between about May 2008 and August 2008 Huhtamaki NZ supplied to Huhtamaki Australia, which resupplied to Lion Dairy, the packaging material.

(c) Third Party Claim by Huhtamaki Australia in Respect of the Advice

4. Huhtamaki Australia refers to the claims of Lion Dairy against it that the packaging material was defective, not fit for purpose, not of merchantable quality, not in accordance with the Specifications, was not safe for use in the production of the Products, and was not manufactured with the same or higher level of care and skill as would reasonably be expected of a person qualified and experienced in the manufacture of the Goods (the "Alleged Failures").

1. Huhtamaki Australia alleges that the Alleged Failures, if established, are due to:

(i) The Melam ink recommended by Flint Ink NZ and used by Huhtamaki NZ not being suitable for use with a corona treated substrate; and

1. It is further alleged by Huhtamaki Australia that any loss suffered by Lion Dairy as a result of the Alleged Failures was caused or contributed to by Flint Ink NZ's negligence.
2. Further or alternatively, it is further alleged by Huhtamaki Australia that if the packaging material was not safe or fit for purpose as alleged by Lion Dairy, then:

(i) It was not safe and/or fit for purpose because the Melam ink was not suitable for use with a corona treated substrate; and

(ii) The supply of such product by Flint Ink NZ to Huhtamaki NZ was in breach of the warranty in the Flint Ink Supply Agreement.

1. Huhtamaki Australia then alleges that, as a result of the negligence and breaches referred to above, Huhtamaki Australia has suffered loss and damage, being its exposure to Lion Dairy's claim and the costs of defending it.

17 The third party, Flint Ink NZ, opposes the application of Huhtamaki Australia to amend its third party statement of claim.

18 Flint Ink NZ also makes application for a stay of the third party proceeding as an abuse of process.

19 By its summons, Flint Ink NZ seeks to have the third party proceeding against it summarily determined in reliance on the following legislation and subordinate legislation:

(a) Section 7 of the International Arbitration Act 1974 (Cth);

(b) Section 8 of the Commercial Arbitration Act 2011 (Vic);

(c) Rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic); and

(d) Section 63 of the Civil Procedure Act 2010 (Vic).

The Arbitration Agreement (Flint Ink Supply Agreement - Huhtamaki NZ/Flint Ink NZ)

20 The Flint Ink Supply Agreement between Huhtamaki NZ and Flint Ink NZ contained an arbitration clause (the "Arbitration Agreement") in the following form:

13.3 Governing law and Arbitration. This Agreement shall be governed by and construed in accordance with the laws of New Zealand.

Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or validity thereof shall be finally settled by arbitration in accordance with the Arbitration Act 1996.

21 It was submitted by Huhtamaki Australia that the Arbitration Agreement has no application to the matters pleaded in the proposed amended third party notice for two principal reasons:

(a) the Arbitration Agreement is not expressed to apply to tort claims; and

(b) pursuant to the applicable international arbitration conventions, the Arbitration Agreement may only support a stay of civil litigation instituted in a Court where the party initiating the proceeding is also a party to the relevant arbitration agreement. In this case, the party initiating the third party proceeding is Huhtamaki Australia, whereas the parties to the Arbitration Agreement found in the Flint Ink Supply Agreement are Huhtamaki NZ and Flint Ink NZ.

22 There is no evidence of the corporate relationship between Huhtamaki Australia and Huhtamaki NZ.

23 Huhtamaki Australia further submits that, at this stage at least, there is no evidence that Huhtamaki NZ has suffered any loss or damage as a result of the supply to it by Flint Ink NZ of the Ink Products, and no basis to found any arbitration process between Huhtamaki NZ and Flint Ink NZ.

24 The New Zealand Act referred to in the Arbitration Agreement, being the Arbitration Act 1996 (NZ), has no direct application in Australia.

25 However, the International Arbitration Act 1974 (Cth) (the "IAA") has potential application. Section 2D of the IAA sets out the IAA's objects:

(a) to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes; and

(b) to facilitate the use of arbitration agreements made in relation to international trade and commerce; and

(c) to facilitate the recognition and enforcement of arbitral awards made in relation to international trade and commerce; and

(d) to give effect to Australia's obligations under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting; and

(e) to give effect to the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985 and amended by the United Nations Commission on International Trade Law on 7 July 2006; and

(f) to give effect to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States signed by Australia on 24 March 1975.

26 Section 3 of the IAA defines "arbitration agreement" to mean:

arbitration agreement means an agreement in writing of the kind referred to in sub-article 1 of Article II of the Convention.

27 Section 3 of the IAA also defines "Convention" to mean:

Convention means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration at its twenty-fourth meeting, a copy of the English text of which is set out in Schedule 1.

28 The Convention is to be found in Schedule 1 to the IAA, and is called the United Nations Conference on International Commercial Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Convention is also known as the New York Convention.

29 Clause 1 of Article 11 of the Convention provides:

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

30 The "Model Law" is the United Nations Commission on International Trade Law ("UNCITRAL") Model Law on International Commercial Arbitration, referred to in s 2D(e) of the IAA. It was adopted by UNCITRAL on 21 June 1985 and amended by UNICTRAL on 7 July 2006. The Model Law is set out in Schedule 2 to the IAA.

31 Option 1 of Article 7 of the Model Law defines and provides the form of an arbitration agreement under the Model Law. Option 1 defines an arbitration agreement as:

Arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

32 The Model Law has force of law in Australia by virtue of ss 16(1) and (2) of the IAA, which state:

Model Law to have force of law

(1) Subject to this Part, the Model Law has the force of law in Australia.

(2) In the Model Law:

"arbitration agreement" has the meaning given in Option 1 of Article 7 of the Model Law.

"State" means Australia (including the external Territories) and any foreign country.

"this State" means Australia (including the external Territories).

33 Section 7(1) of the Commercial Arbitration Act 2011 (Vic) (the "CAA") defines an arbitration agreement as an agreement by "the parties" to submit to arbitration. It is based on Article 7 of the Model Law. Section 7(1) of the CAA provides:

Definition and form of arbitration agreement (cf Model Law Art 7)

1. Definition and form of arbitration agreement (cf Model Law Art 7)

(1) An arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Section 7 of the IAA

34 Returning to the IAA, s 7(1)(a) of the IAA provides:

(1) Where:

(a) the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;

...

this section applies to the agreement.

35 Both New Zealand and Australia are "Convention countries" for the purposes of s 7(1)(a) of the IAA.

36 Under the Arbitration Agreement, being clause 13.3 of the Flint Ink Supply Agreement between Huhtamaki NZ and Flint Ink NZ, the parties in effect agreed that the arbitration procedure is to be in accordance with the Arbitration Act 1996 (NZ).

37 Section 7(1)(a) of the IAA renders s 7 applicable to the Arbitration Agreement because the parties have expressly agreed that the procedures of the arbitration are to be in accordance with the laws of a Convention country. In this case, the procedure in relation to arbitration under the Arbitration Agreement is governed by the Laws of New Zealand, which may relevantly include any procedures provided for in the Arbitration Act 1996 (NZ) and other New Zealand legislation and case law governing this type of arbitration.

38 Section 7(1)(d) of the IAA also renders s 7 applicable to the Arbitration Agreement. Section 7(1)(d) provides:

(1) Where:

...

(d) a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;

this section applies to the agreement.

39 Both Huhtamaki NZ and Flint Ink NZ were domiciled in New Zealand, for the purposes of s 7(1)(d) of the IAA, at the time of entry into the Flint Ink Supply Agreement.

40 By these routes, s 7(2) of the IAA becomes applicable. This sub-section provides for the making of a mandatory stay order by a Court, in the following circumstances:

(2) Subject to this Part, where:

(a) proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a Court; and

(b) the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.

41 The concept of a "matter" for the purposes of s 7(2)(b) of the IAA was the subject of consideration in Casaceli v Natuzzi SpA ("Casaceli").[1] There, the issue in dispute was whether the proceeding be stayed in whole or part and the parties be referred to arbitration in accordance with the IAA. The parties were in agreement as to: (i) there was an arbitration agreement as defined in the IAA; (ii) the agreement fell within the scope of one or more of the provisions of s 7(1)(a)-(d) of the IAA and thus s 7(2) applied; and (iii) the proceeding had been instituted in a Court by a party to the arbitration agreement to which s 7 applied, against another party to that agreement as referred to in s 7(2)(a) of the IAA. Accordingly, the remaining issue, which was in dispute in the case, was whether the proceeding involved a matter that, under the arbitration agreement, was capable of settlement by arbitration, as required by s 7(2)(b) of the IAA.

42 In relation to the word "matter" as used in s 7(2)(b) of the IAA, Jagot J accepted that it has "wide import"[2] and adopted the observations made by Deane and Gaudron JJ in Tanning Research Laboratories Inc v O'Brien ("Tanning Research").[3] Their Honours continued in Tanning Research:

In the context of s. 7(2), the expression "matter ... capable of settlement by arbitration" may, but does not necessarily, mean the whole matter in controversy in the court proceedings. So too, it may, but does not necessarily encompass all the claims within the scope of the controversy in the court proceedings. Even so, the expression "matter ... capable of settlement by arbitration" indicates something more than a mere issue which might fall for decision in the court proceedings or might fall for decision in arbitral proceedings if they were instituted. See Flakt [Flakt Australia Ltd v Wilkins & Davies Construction Co Ltd [1979] 2 NSWLR 243, 250]. It requires that there be some subject matter, some right or liability in controversy which, if not coextensive with the subject matter in controversy in the court proceedings, is at least susceptible of settlement as a discrete controversy. The words "capable of settlement by arbitration" indicate that the controversy must be one falling within the scope of the arbitration agreement and, perhaps, one relating to rights which are not required to be determined exclusively by the exercise of judicial power. See Mustill and Boyd, The Law and Practice of Commercial Arbitration in England, 2nd ed (1989), pp 149-150, where it is noted that "English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not" but that the powers of an arbitrator "are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state".[4]

43 In Casaceli, Jagot J[5] also made reference to Recyclers of Australia Pty Ltd v Hettinga Equipment Inc ("Recyclers of Australia")[6] noting that Merkel J said in that case:

While Deane and Gaudron JJ may have differed in some respects from the majority on the question of the scope of a "matter", Tanning Research is authority for the view that, for the purposes of s 7(2), the "matter" to be determined in a proceeding is to be ascertained by reference to the subject matter of the dispute in the proceeding and the substantive, although not necessarily the ultimate, questions for determination in the proceeding. The scope of the matter is to be ascertained from the pleadings and from the underlying subject matter upon which the pleadings, including the defence, are based: Tanning Research at 343-344 and 351-354 cf Fencott v Muller (1983) 152 CLR 570 at 608, Hooper v Kirella [1999] FCA 1584; (1999) 167 ALR 358 at 368-371.

The manner in which a claim or a defence is pleaded is of importance to, but is not determinative of, the characterisation of the "matter" for the purpose of s 7(2). Once the "matter" is properly characterised the question to be determined is whether that matter is capable of settlement under the arbitration clause.

The proceeding in Tanning Research, being the appeal to the Court, was stayed because the outcome of the proceeding was dependent, at least in part, on the determination of the matter to be referred to arbitration. Given the requirement in s 7(2) that only so much of the proceeding as involves the matter need be stayed, it is clear that a proceeding that includes matters severable from or independent of the matter required to be referred to arbitration need not be stayed in respect of those matters.[7]

44 In the present case I am satisfied that the relevant "matter" for the purposes of s 7(2)(b) of the IAA, as pleaded in the present third party statement of claim and the proposed third party statement of claim, essentially comprises two claims. First, a claim for indemnification or contribution pursuant to s 23B Wrongs Act 1958 (Vic) in respect of any amount ordered to be paid by Huhtamaki Australia to Lion Dairy. Second, and in the alternative, a claim for damages, pursuant to the causes of action pleaded in the third party statement of claim, which are referred to above. Neither Huhtamaki Australia nor Lion Dairy are parties to the Arbitration Agreement or to any relevant arbitration agreement.

45 To my mind, this matter is not capable of settlement by arbitration. An arbitral body may be regarded as capable of determining a matter in accordance with the national law agreed upon by the parties to the arbitration agreement. However, the subject matter of the third party claim cannot be referred to arbitration, because there was no arbitration agreement which was applicable to the parties to the third party claims.

46 Further, the application of the mandatory stay provision in s 7(2) of the IAA is also expressly subject to s 7(2)(a) which makes the provision conditional upon there being "proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement [that] are pending in a court". The Defendant in the present proceeding is Huhtamaki Australia. It has instituted proceedings by way of the third party proceedings against Flint Ink NZ. However, Huhtamaki Australia is not a party to the Arbitration Agreement.

47 In recognition of this issue, and in seeking to address the point, Flint Ink NZ relies on s 7(4) of the IAA, which provides:

(4) For the purposes of subsections (2) and (3), a reference to a party includes a reference to a person claiming through or under a party.

48 Huhtamaki Australia, however, contends that the third party proceeding (and the proposed amended third party proceeding) have not been instituted by a party to the Arbitration Agreement. There was and is no agreement between Huhtamaki Australia and Flint Ink NZ. Accordingly, it was submitted that the Court has no power in this case to grant a stay pursuant to s 7(2) of the IAA.

49 This issue will be determined by reference to the case law on the subject.

Person Claiming "Through or Under a Party" _(_s 7(4) of the IAA)

50 The primary argument advanced by Flint Ink NZ was that Huhtamaki Australia is claiming through Huhtamaki NZ within the meaning of s 7(4) of the IAA.

51 Section 7(4) was considered by Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd ("BHPB v Cosco").[8] In this action the applicant, BHPB Freight Pty Ltd ("BHPB"), alleged that it was induced by the misleading and deceptive conduct of the first respondent, Cosco Oceania Chartering Pty Ltd ("Cosco"), to enter into a charterparty of a cargo vessel, the "Global Hawk". BHPB sought damages and other relief. Cosco asserted that the proceeding was brought in breach of a 12 month contractual time bar for claims arising out of the charterparty. It applied to have the action stayed so that a London arbitrator could decide whether the claim against it had been brought out of time. The stay application was based on s 7 of the IAA and, in the alternative, on the Court's inherent jurisdiction. At the conclusion of argument the Court ordered that Cosco's application be dismissed.

52 The basis of the stay application was clause 42 of the charterparty, which relevantly provided:

(b) Any dispute arising out of this Charter Party or any Bill of Lading issued hereunder shall be referred to arbitration in accordance with the Arbitration Act 1996 and any statutory modification or re-enactment in force. English law shall apply...

(c) The arbitrators, umpire and mediator shall be commercial persons engaged in the shipping industry. Any claim must be made in writing and the claimant's arbitrator nominated within 12 months of the final discharge of the cargo under this Charter Party, failing which any such claim shall be deemed to be waived and absolutely barred.

53 It was common ground that Cosco was not a party to the charterparty or to the arbitration agreement set out in clause 42. As a matter of contract law, Cosco was not a person who was bound by the charterparty generally, or clause 42 in particular. Cosco said, however, that it is deemed to be a party, relying on s 7(4) of the IAA. The Court in BHPB v Cosco therefore considered whether the facts justified Cosco's claim that it enjoyed the benefit of s 7(4).

54 Finkelstein J, having analysed the case law,[9] held that the cases show that there are two somewhat overlapping criteria that must be met to trigger the operation of s 7(4), which his Honour described in the following terms: "The first is that there is a relationship of sufficient proximity between the party to the arbitration agreement and the person claiming to prosecute or defend an action through or under that party. The second is that the claim or defence is derived from the party to the arbitration agreement".[10]

55 This approach was derived essentially from Tanning Research, where Brennan and Dawson JJ (with whom Toohey J agreed) said that because s 7(2) of the IAA speaks of both parties to an arbitration agreement, "a person who claims through or under a party may be either a person seeking to enforce or a person seeking to resist the enforcement of an alleged contractual right. The subject of the claim may be either a cause of action or a ground of defence".[11]

Next, the prepositions "through" and "under" convey the notion of a derivative cause of action or ground of defence, that is to say, a cause of action or ground of defence derived from the party. In other words, an essential element of the cause of action or defence must be or must have been vested in or exercisable by the party before the person claiming through or under the party can rely on the cause of action or ground of defence.[12]

57 The Court went on to say that the phrase "through or under a party" in s 7(4) applies, for example, to a trustee of a bankrupt's estate, an assignee of a debt arising out of a contract containing an arbitration clause, and a subsidiary of a parent company which is party to an arbitration agreement (and vice versa) when claims are brought against both arising out of the same facts.[13] It was said further that: "A liquidator may be a person claiming through or under a company because the causes of action or grounds of defence on which he relies are vested in or exercisable by the company; a trustee in bankruptcy may be such a person because the causes of action or grounds of defence on which he relies were vested in or exercisable by the bankrupt".[14]

58 The reasoning in Tanning Research and BHPB v Cosco was applied in AED Oil Ltd v Puffin FPSO Ltd (No 2) ("AED Oil").[15] In AED Oil, the company, which was the ultimate owner of a contracting party to the arbitration agreement and which had guaranteed "to ensure performance by" its subsidiary of its obligations under the transaction containing the arbitration agreement, had also received identical demands as had been made upon its subsidiary. In the circumstances the parent was held to be claiming "through or under" its subsidiary within the meaning of s 7(4) of the IAA.

59 However, in this case, I am not satisfied that there is sufficient proximity between the party to the Arbitration Agreement, namely Huhtamaki NZ, and the person that Flint Ink NZ claims is prosecuting or defending an action through or under that party, namely Huhtamaki Australia.

60 First, there is insufficient evidence as to the relationship between Huhtamaki NZ and Huhtamaki Australia. It appears to be common ground that they do not enjoy a "parent/subsidiary" relationship, and there is no evidence that one company habitually acts at the behest of the other. The highest it was put in oral argument was that the companies are two "sister" entities, but there was no evidence as to the details of that relationship.

61 Further, the evidence, such that it was, in relation to the corporate relationship between Huhtamaki NZ and Huhtamaki Australia points away from the necessary degree of proximity. It is pleaded in Lion Dairy's statement of claim that Huhtamaki Australia was incorporated in Australia. The evidence is that Huhtamaki NZ was incorporated in New Zealand. Further, in a letter written by Flint Ink NZ's solicitors to the solicitors for Huhtamaki Australia dated 14 March 2013, the following is said:

(a) the Agreement referred to in paragraph 12 of the third party statement of claim was made between Huhtamaki NZ and our client Flint Ink NZ Ltd (Flint NZ);

(b) your client Huhtamaki Australia, being the defendant in the proceeding, was never a contracting party with Flint NZ; and

(c) Flint NZ did not have any dealings with Huhtamaki Australia. All of our client's dealings were with Huhtamaki NZ.

62 It is pleaded by Huhtamaki Australia in the proposed amended third party statement of claim that Huhtamaki NZ supplied to Huhtamaki Australia film manufactured by Huhtamaki NZ using Flint Ink NZ products. Accepting this to be so, although it establishes a commercial relationship between Huhtamaki NZ and Huhtamaki Australia, it does not materially add to the evidence so as to establish a sufficient degree of proximity between the party to the Arbitration Agreement, namely Huhtamaki NZ, and the person that Flint claims is prosecuting or defending an action through or under that party, namely Huhtamaki Australia.

63 According to the common law only a party to a contract is bound by, and entitled to enforce, its terms. This rule of privity has been described as a "fundamental", "elementary" and "established" rule. In recognition of this problem, in BHPB v Cosco, Cosco sought to rely upon an English statute, the Contracts (Rights of Third Parties) Act 1999 (UK) to found an argument that, for the purposes of the UK Act, a third party beneficiary is much like the assignee of a contractual promise, and therefore the necessary degree of proximity was established.

64 This argument, of course, is not available to Flint Ink NZ in the present case.

65 However, and in any event, if the UK Act did apply, which Finkelstein J held, did not,[16] in the view of Finkelstein J, even this kind of notional statutory assignment would not, of itself, satisfy the two conditions necessary to show that a person is claiming "through or under another". This is because the conditions look to the actual relationship of the parties and the actual claim of the party seeking to arbitrate.[17]

66 On the evidence, I am not satisfied that the claim of Huhtamaki Australia in any relevant sense is derived from Huhtamaki NZ, which is the party to the Arbitration Agreement.

67 For this reason too, I find that Huhtamaki Australia is not claiming through or under Huhtamaki NZ within the meaning of s 7(4) of the IAA, with the result that s 7 of the IAA has no application.

Whether Negligence Claim Within Arbitration Agreement

68 It was further submitted by Huhtamaki Australia that the negligence claim made by it under the third party notice is not capable of settlement by arbitration "in pursuance of the agreement". As Deane and Gaudron JJ said in Tanning Research:

The words "capable of settlement by arbitration" indicate that the controversy must be one falling within the scope of the arbitration agreement ...[18]

69 The negligence claim by Huhtamaki Australia against Flint Ink NZ, it was submitted, is not of that character.

70 For this further reason it was submitted that the IAA has no application.

71 Clause 13.3, which constitutes the Arbitration Agreement, is of wide import. It has operation in relation to "any dispute, controversy or claim arising out of or relating to [the agreement in question which is the Flint Ink Supply Agreement between Huhtamaki NZ and Flint Ink NZ], or the breach, termination or validity thereof ..."

72 The words "relating to" found in clause 13.3 are words of very wide connection.[19]

73 In IBM Australia Ltd v National Distribution Services Ltd ("IBM")[20] Kirby P traced a change in attitude to arbitration clauses in the case law, as part of a wider development in the law to provide "efficient means of dispute resolution alternative to the courts".[21] Against this background, the Court of Appeal of NSW construed an arbitration clause in an agreement which was expressed to govern "any controversy or claim arising out of or related to this agreement, or a breach thereof" as sufficiently wide to include claims for relief and orders made under the TPA, Kirby P observing:

From the foregoing trend of authority, both in Australian and overseas courts, it can be seen that an arbitration clause, expressed in the language of the clause here under consideration, is not to be narrowly construed. It is sufficiently wide to include claims for rectification and for relief on the ground of misrepresentation or mistake.[22]

74 Handley JA in IBM also included a related claim in tort within the potential ambit of the arbitration clause, saying:

The arbitration clause in this case covered "any controversy or claim arising out of or related to this Agreement or the breach thereof".

...

These are wide words which should not be read down in absence of some compelling reason for doing so...

These words can only have been added to include within the submission claims other than in contract such as claims in tort, in restitution, or in equity. I can see no basis for excluding claims arising under statues which grant remedies enforceable in or confer powers on courts of general jurisdiction.[23]

75 IBM was followed in Francis Travel v Virgin Atlantic Airways,[24] where Gleeson CJ said, with the agreement of the other members of the Court of Appeal:

Indeed, it is consistent with the modern policy of encouragement of various forms of alternative dispute resolution, including arbitration, mediation and conciliation, that courts should facilitate, rather than impede, agreements for the private resolution of all forms of dispute, including disputes involving claims under statutes such as the Trade Practices Act 1974 (Cth).[25]

76 In this case, Flint Ink NZ points to the third party statement of claim as filed, and as proposed to be amended, and pleads the Flint Ink Supply Agreement between Huhtamaki NZ and Flint Ink NZ which contains the arbitration clause. It also pleads the fact that Flint Ink NZ supplied the ink to Huhtamaki NZ, and it pleads that Huhtamaki NZ then onsupplied the ink to Huhtamaki Australia. The allegation of negligence is that Flint Ink NZ was negligent in the provision of advice and the supply of ink under the agreement.

77 In my opinion, under Australian law, clause 13.3, which constitutes the Arbitration Agreement, was sufficiently wide to cover and include allegations of negligence arising from the provision of advice and the supply of ink under the Flint Ink Supply Agreement. Accordingly, if Flint Ink NZ was negligent in the course of supply to Huhtamaki NZ under the agreement and in performance of that agreement, any such allegation, under Australian law, was capable of being referred to arbitration under the Arbitration Agreement.

78 This, however, for the reasons already canvassed, does not provide any foundation to order a stay of the present or proposed third party proceedings in this case.

79 It was put in the alternative by Flint Ink NZ, that in any event Article 8 of the Model Law applies.

80 As referred to above, the Model Law has force of law in Australia by virtue of ss 16(1) and (2) of the IAA.

Article 8. Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

82 It was submitted by Flint Ink NZ that the operation of Article 8 is not conditional upon there being an action issued by a party to an arbitration agreement. Article 8, it was submitted, will be enlivened when any person issues an action where the matter is the subject of an arbitration agreement.

83 Under Article 8 of the Model Law, it was submitted, it is a "court" before which an action is brought in a matter which is the subject of an arbitration agreement which is obliged to stay the action if so requested by a party to the arbitration agreement. This means, so it was put, any party to an arbitration agreement, including a party that is not the party that has issued the proceeding in court.

84 It was further submitted that here, the matters alleged in the third party statement of claim are very closely connected to the subject of the Arbitration Agreement; sufficiently connected to enliven Article 8 of the Model Law.

85 I accept that Article 8 of the Model Law is a freestanding provision and has an operation independent of s 7 of the IAA. In Comandate Marine Corp v Pan Australia Shipping Pty Ltd,[26] in considering whether the primary judge was obliged by s 7(2) of the IAA to stay Pan's Federal Court proceeding, Comandate Marine having applied under that section for such an order, Allsop J said as to the relationship between Article 8 of the Model Law and s 7 of the IAA.

Through s 16(1) of the International Arbitration Act, Article 8 of the Model Law has the force of law in Australia. It has the effect of an Act of the Commonwealth Parliament. Its command is simple. The Court should refer parties to arbitration, unless it finds the arbitration agreement to be null and void, inoperative or incapable of being performed. No provision of Part III of the International Arbitration Act and no aspect of the terms of Article 8 of the Model Law expressly subject the operation of Article 8 to s 7 of the International Arbitration Act and, in particular, to s 7(2)(b) thereof.[27]

86 However, there is no evidence that Huhtamaki NZ has suffered any loss and damage. There is therefore nothing to refer to arbitration as far as it is concerned, and nothing for an arbitration to determine. There is therefore nothing to refer to arbitration under Article 8 of the Model Law.

87 Further, the other party to the Arbitration Agreement is not before the Court.

88 Accordingly, I decline to make any reference under Article 8 of the Model Law.

Section 8 of the CAA

89 Section 7 of the CAA defines an arbitration agreement as an agreement by "the parties" to submit to arbitration.

90 The paramount object of the CAA is set out in s 1AC:

1AC. Paramount object of Act

(1) The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense.

(2) This Act aims to achieve its paramount object by-

(a) enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and

(b) providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.

(3) This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.

(4) Subsection (3) does not affect the application of section 35 of the Interpretation of Legislation Act 1984 for the purposes of interpreting this Act.

91 In the alternative, Flint Ink NZ submitted that even if the Arbitration Agreement did not provide for an international arbitration, the CAA had such application. Reference was made to "[t]he paramount objective of the Act [being] to facilitate the fair and final resolution of commercial disputes by impartial arbitrary tribunals without unnecessary delay or expense." It was submitted further that the CAA must be interpreted and the functions of the appointed arbitral tribunal must be exercised so that, as far as practicable, the paramount objective of the Act is achieved.

92 Reliance was placed on s 8(1) of the CAA, which provides:

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

[Emphasis added.]

93 However, Huhtamaki Australia was not a party to the Arbitration Agreement.

94 McPherson JA said in Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd, that where there is no arbitration agreement, "there is no reason and no power, inherent or otherwise, to grant a stay".[28]

95 To like effect in Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd, Marshall J held that, in considering whether a proceeding should be stayed pursuant to s 8 of the CAA, the first question is -

whether there is an "arbitration agreement" to which two or more of the prospective participants in the proposed proceeding in the Court are parties.[29]

96 In this case, the answer to Marshall J's question in Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd is clearly no.

98 It was suggested in passing during argument that the Court should exercise an inherent jurisdiction founded upon the existence of the Arbitration Agreement, to grant a stay of the third party proceeding.

99 A divergence in the laws of Australia and England is evident on the issue as to whether a court has inherent jurisdiction to stay a proceeding in these circumstances.

100 As Finkelstein J observed in BHPB v Cosco,[30] in England, it is no longer necessary to find power in a statute to give effect to a submission to a foreign court. It has been the settled position since 1943 that courts have an inherent power to stay an action brought in breach of such an agreement.[31] As Finkelstein J observed:

The position that now holds in England is that a foreign jurisdiction clause and an arbitration clause will be enforced by appeal to the court's inherent jurisdiction: Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyd's Rep 522, 524-525; A v B [2007] 1 Lloyd's Rep 237, 253-254.[32]

101 However, Finkelstein J in BHPB v Cosco concluded that the position in Australia is unsettled,[33] citing a cluster of cases that have followed the High Court in Anderson v G H Michell & Sons Ltd,[34] while noting that others have followed the English authorities.[35]

102 Having analysed the position further, Finkelstein J concluded that there is no inherent power to grant relief by way of a stay founded upon the existence of a private arbitration agreement, observing that: "This is so notwithstanding that the High Court may well in the future adopt the English approach".[36]

103 His Honour noted in BHPB v Cosco that in any event, even if there were an inherent power to grant a stay, it should not be exercised in that case.[37]

104 In this case too, there is a powerful consideration against granting a stay of the third party proceeding, even if the Court has such an inherent power.

105 If Flint Ink NZ were to be successful, Huhtamaki Australia would at least potentially face two sets of proceedings. First, defending the claims made against it in the present proceeding, in respect of which it has already incurred costs. Second, possibly being joined to or involved in an arbitration. In Incitec Ltd v Alkimos Shipping Co,[38] Allsop J said:

The very existence of the possibility, if not probability, of duplicated litigation is, on modern authority of the highest persuasive stature a cogent consideration in assessing the effect of an exclusive jurisdiction clause. This is for good and powerful reasons based on the cost and inconvenience of litigation and the desire not to foster the circumstances of courts coming to different conclusions about the same facts on perhaps different, or even the same, evidence.[39]

106 Rule 23.01 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (the "Rules") provides:

(1) Where a proceeding generally or any claim in a proceeding-

(a) does not disclose a cause of action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the Court-

the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.

107 I accept, as it was submitted by Huhtamaki Australia that, as a matter of general principle, it is a drastic step to permanently stay a proceeding on the basis of abuse of process. The grant of permanent stay is a most exceptional course.[40]

108 Flint Ink NZ's application founded on r 23.01(1) in part rested on an alleged abuse of process arising by reason of the Arbitration Agreement. That argument falls to be determined by reference to the reasoning on the Arbitration Agreement, as set out above.

109 Flint Ink NZ's also relied on sub-r 23.01(1)(a) of the Rules. It argued that the claim does not disclose a cause of action. Huhtamaki Australia submitted that the application must fail because, having regard to the nature of the claim (a claim in negligence for pure economic loss), the Court is required to weigh all of the circumstances and salient features in determining whether the claim could succeed.

110 It was further submitted by Huhtamaki Australia that the proper test to apply is that a Court will only dismiss a claim if the Defendant can establish that the case of the Plaintiff is so clearly untenable that it cannot possibly succeed. It relied on General Steel Industries Inc v Commissioner for Railways (NSW);[41] Spencer v Commonwealth;[42] and Alcoa of Australia Ltd v Apache Energy Ltd ("Alcoa").[43]

111 Reference is made to Caltex Refineries (Qld) Pty Ltd v Stavar ("Stavar")[44] where Allsop P noted the rejection by the High Court, then held that, in determining whether a duty of care exists in circumstances that do not fall within an accepted category of duty:

This rejection of any particular formula or methodology or test the application of which will yield an answer to the question whether there exists in any given circumstance a duty of care, and if so, its scope or content, has been accompanied by the identification of an approach to be used to assist in drawing the conclusion whether in novel circumstances the law imputes a duty and, if so, in identifying its scope or content. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to the 'salient features' or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury.[45]

(a) the foreseeability of harm;

(b) the nature of the harm alleged;

(c) the degree and nature of control able to be exercised by the defendant to avoid harm;

(d) the degree of vulnerability of the plaintiff to harm from the defendant's conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;

(e) the degree of reliance by the plaintiff upon the defendant;

(f) any assumption of responsibility by the defendant;

(g) the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;

(h) the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;

(i) the nature of the activity undertaken by the defendant;

(j) the nature or the degree of the hazard or danger liable to be caused by the defendant's conduct or the activity or substance controlled by the defendant;

(k) knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff;

(l) any potential indeterminacy of liability;

(m) the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;

(n) the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one's own interests;

(o) the existence of conflicting duties arising from other principles of law or statute;

(p) consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and

(q) the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.[46]

112 In Makawe Pty Ltd v Randwick City Council,[47] the NSW Court of Appeal held that the approach in Stavar was appropriate for claims in relation to pure economic loss. The list of salient features is not exhaustive and, although some features may assume more importance than others, no single feature is essential, or so important that a failure to establish it would automatically mean there is no duty of care. In Stavar, Allsop P said:

There is no suggestion in the cases that it is compulsory in any given case to make findings about all of these features. Nor should the list be seen as exhaustive. Rather, it provides a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content.[48]

113 The task of the Court in determining whether a duty of care exists is to weigh the salient features on a case-by-case basis. In Stewart v Ronalds,[49] Allsop P said:

The proper approach to be employed in ascertaining whether in novel circumstances the law imputes a duty to another to exercise reasonable care and, if so, in identifying its scope or content, is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by reference to "salient features" or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury in the circumstances. See generally the discussion of the relevant High Court authorities in Caltex Refineries (Qld) Pty Limited v Stavar [2009] NSWCA 258 at [101]- [106], where the various salient features were set out. These salient features include foreseeability, reliance, vulnerability, control, the nature of the activity, coherence with other branches of the law and conformance with other legal duties.[50]

114 In these circumstances, it is generally inappropriate to summarily determine whether a duty of care exists. Whether or not the duty exists should be determined having regard to findings of fact at trial. In Alcoa, Le Miere J made observations to this effect when determining a summary judgment and strikeout application brought by the defendants:

[61] It is not appropriate to summarily determine whether or not Alcoa was vulnerable. In Perre v Apand, [51] McHugh J said:

The degree and nature of vulnerability sufficient to found a duty of care will no doubt vary from category to category and from case to case. Although each category will have to formulate a particular standard, the ultimate question will be one of fact.[52]

...

[64] If the posited duty of care does not fall within an established category of case it will often be inappropriate to summarily determine whether or not a duty of care exists. It is inappropriate in this case. That task should ne undertaken by a close analysis of the facts. The facts pleaded in this statement of claim to give rise to the claimed duty of care are at a high level of generality. Whether or not a duty of care exists should be determined having regard to findings of fact made at trial.[53]

115 Various salient features of the relationship between Huhtamaki Australia, Huhtamaki NZ and Flint Ink NZ are pleaded and particularised throughout the proposed amended third party statement of claim. In my opinion, they constitute a sufficient basis for the plea of a duty of care in relation to the giving of advice, and warrant consideration at trial. The following salient features are referred to:

(a) Huhtamaki NZ's known reliance on Flint Ink NZ to advise it what would be suitable ink products. Such known reliance gives rise to a Hedley Byrne duty of care.

(b) The proximity of the relationship between Huhtamaki NZ, Huhtamaki Australia and Flint Ink NZ.

(c) The assumption of responsibility by Flint Ink NZ to advise Huhtamaki NZ as to suitable ink products, by giving advice in a business context for the purpose of selling its ink products to Huhtamaki Australia;

(d) The nature and/or degree of danger associated with the use of ink products, particularly having regard to the fact that the products were to be applied to goods to be used for containing liquids and/or foods for human consumption;

(e) The foreseeability of harm if the advice were given negligently; and

(f) Huhtamaki NZ's and Huhtamaki Australia's vulnerability to any want of care by Flint Ink NZ in advising Huhtamaki NZ as to what were suitable ink products (including known reliance).

116 Further, even if it were the case that Huhtamaki Australia and Huhtamaki NZ were not vulnerable, that would not justify a conclusion at an interlocutory stage that there is no duty of care. Vulnerability can be an important feature in establishing a duty of care to prevent economic loss, but is not necessarily an essential element of such a duty of care. Reference is made to Barclay v Penberthy where Kiefel J held that an implied contractual term to take reasonable care in flying an aeroplane, combined with knowledge that a failure to take reasonable care could cause economic loss to the employer of the passengers who were travelling on business, were "sufficient to give rise to a duty of care" to avoid economic loss.[54]

Section 63 of the Civil Procedure Act 2010 (Vic)

117 Section 63 of the Civil Procedure Act 2010 (Vic) (the "Civil Procedure Act") provides:

Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospects of success.

118 An application based on s 63 of the Civil Procedure Act proceeds on the basis of the principles set out in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[55] where Warren CJ and Nettle JA said:

1. the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a "real" as opposed to a "fanciful" chance of success;
2. the test is to be applied by reference to its own language and without paraphrase or comparison with the "hopeless" or "bound to fail test" essayed in General Steel;

1. it should be understood, however, that the test is to some degree a more liberal test than the "hopeless" or "bound to fail" test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;

1. at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[56]

119 Huhtamaki Australia submits that for the same reasons as in its submissions on r 23.01, this argument must fail.

120 It submits that Huhtamaki Australia should be permitted to file and serve the amended third party statement of claim and that Flint Ink NZ's application should be refused.

121 I am satisfied that Huhtamaki Australia's amended third party statement of claim has a "real", as opposed to a "fanciful", chance of success. Further, it is far from clear that there is no real question to be tried on the third party proceedings.

122 For this reason I will not enter judgment for Flint Ink NZ on the third party claim pursuant to s 63 of the Civil Procedure Act.

Amended Third Party Statement of Claim and Orders

123 With one exception, I will permit the amendments to the third party statement of claim foreshadowed by the defendant, Huhtamaki Australia.

124 The exception is to paragraph 19 of the proposed amended third party statement of claim which pleads that:

Further or alternatively, if the packaging material was not safe or fit for the purpose as alleged by [Lion Dairy] then:

(i) It was not safe and/or fit for purpose because the Melam ink was not suitable for use with a corona treated substrate;

(ii) The supply of such product by Flint Ink to Huhtamaki NZ was in breach of the warranty in the Flint Ink Supply Agreement.

125 I am unable to see how the plea in paragraph 19 is at all relevant to the claim by Huhtamaki Australia against the third party Flint Ink NZ, when Huhtamaki Australia was not a party to any agreement between Flint Ink NZ and Huhtamaki NZ, and was therefore not in any position to take advantage of the alleged warranty contained in such agreement.

126 Otherwise, I will dismiss each of the applications brought on the summons of the third party, and hear the parties on costs.

[1] Casaceli v Natuzzi S.p.A [2012] FCA 691, [34].

[2] Casaceli v Natuzzi S.p.A [2012] FCA 691, [35].

[3] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 351.

[4] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 351-352.

[5] Casaceli v Natuzzi S.p.A [2012] FCA 691, [36].

[6] Recyclers of Australia Pty Ltd v Hettinga Equipment Inc [2000] FCA 547; (2000) 100 FCR 420.

[7] Recyclers of Australia Pty Ltd v Hettinga Equipment Inc [2000] FCA 547; (2000) 100 FCR 420, [18]-[20].

[8] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169.

1. [9] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332; Mangion v James Hardie & Co Pty Ltd (1990) 20 NSWLR 100; Mount Cook (Northland) Ltd v Swedish Motors Ltd [1986] 1 NZLR 720, 725; Alto Constructions Pty Ltd v University of New South Wales (unreported, Supreme Court of NSW, Young J, 15 December 1995), 13; Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471; [2002] 2 Qd R 514, 530; McHutchison v Western Research and Development Ltd [2004] FCA 419, [15].

[10] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [15].

[11] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 342.

[12] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332.

[13] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 341-342.

[14] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 342.

[15] AED Oil Ltd v Puffin FPSO Ltd (No 2) [2009] VSC 534, [73], and upheld on appeal: AED Oil Ltd v Puffin FPSO Ltd (No 2) [2010] VSCA 37; (2010) 27 VR 22, [38]-[39].

[16] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [23]-[26].

[17] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [27].

[18] Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332, 351.

[19] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 472 (per Kirby P), 483 (per Clarke JA), and 487 (per Handley JA).

[20] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466.

[21] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 472.

[22] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 477.

[23] IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 487. (Citations omitted.)

[24] Francis Travel v Virgin Atlantic Airways (1996) 39 NSWLR 160.

[25] Francis Travel v Virgin Atlantic Airways (1996) 39 NSWLR 160, 166.

[26] Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; [2006] 157 FCR 45.

[27] Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; [2006] 157 FCR 45, [197].

[28] Mulgrave Central Mill Co Ltd v Hagglunds Drives Pty Ltd [2001] QCA 471; [2002] 2 Qd R 514, 529.

[29] Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253, [24].

[30] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [37].

[31] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [37]. Here, Finkelstein J refers to the English authority of Racecourse Betting Control Board v Secretary for Air [1944] 1 ChD 114.

[32] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [41].

[33] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [42].

[34] Anderson v G H Michell & Sons Ltd [1941] HCA 30; (1941) 65 CLR 543.

[35] BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd [2008] FCA 551; (2008) 168 FCR 169, [43].

[36] Anderson v G H Michell & Sons Ltd [1941] HCA 30; (1941) 65 CLR 543, [45].

[37] Anderson v G H Michell & Sons Ltd [1941] HCA 30; (1941) 65 CLR 543.

[38] Incitec Ltd v Alkimos Shipping Co [2004] FCA 698; (2004) 138 FCR 496, 508.

[39] Thomas v Star Maid International Pty Ltd [1999] FCA 911.

[40] ASIC v Lindberg (No 2) (2010) 26 VR 355, [69].

[41] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 129 (per Barwick CJ).

[42] Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118, [24] (French CJ & Gummow J), and [54], [55] and [57] (Hayne, Crennan, Kiefel & Bell JJ).

[43] Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, [28].

[44] Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649.

[45] Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649, [102].

[46] Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649, [103].

[47] Makawe Pty Ltd v Randwick City Council [2009] NSWCA 412, [17].

[48] Caltex Refineries (Qld) Pty Ltd v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649, [104]. See also Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515, [24]; Barclay v Penberthy [2012] HCA 40; (2012) 246 CLR 258, [175]; and Alcoa [2012] WASC 209, [50]-[52].

[49] Stewart v Ronalds [2009] NSWCA 277; (2009) 76 NSWLR 99.

[50] Stewart v Ronalds [2009] NSWCA 277; (2009) 76 NSWLR 99, [51].

[51] Perre and Others v Apand Pty Ltd [1999] HCA 36; (1999) 164 ALR 606.

[52] Perre and Others v Apand Pty Ltd [1999] HCA 36; (1999) 164 ALR 606, [129]

[53] Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, [61] and [64]. (Citations omitted.).

[54] Barclay v Penberthy [2012] HCA 40; (2012) 246 CLR 258, [177]. (Emphasis added.)

[55] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158.

[56] Barclay v Penberthy [2012] HCA 40; (2012) 246 CLR 258, [35].