McPherson's Ltd v Eaton & Ors

McPherson's Ltd v Eaton & Ors - [2005] NSWCA 435 - NSWCA 2005 case summary — Zoe

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Andrews v Hopkinson [1957] 1 QB 229 Annetts v Australian Stations Pty Ltd (2000) 23 WAR 35 Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 Bendix Mintex Pty Ltd and Ors v Barnes (1997) 42 NSWLR 307 Brand v Bardon (unreported, NSWCA, 18 July 1997) Burfitt v Kille [1939] 2 KB 743 Burwood Council v Byrnes [2002] NSWCA 343 Christians v Homestake Enterprises Ltd 303 NW 2d 608 Clarke v Army and Navy Co-operative Society Ltd [1903] 1 KB 155 CSR Ltd v Wren (1997) 44 NSWLR 463 Cuckow v Polyester Reinforced Products Pty Ltd (1970) 19 FLR 122 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 Elliott v Bail Bungy Co [2002] NSWSC 906 Fisher v Harrods Limited [1966] 1 LI L R 500 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 Hardchrome Engineering Pty Ltd v Kambrook Distributing Pty Ltd [2000] VSC 359 Herschtal v Stewart and Ardern Ltd [1940] 1 KB 155 Hoyts Pty Ltd v Burns (2003) 201 ALR 470 Imperial Furniture Pty Ltd v Automatic Fire Sprinklers Pty Ltd [1967] 1 NSWR 29 Jones v Bartlett (2000) 205 CLR 166 Julia Farr Services Inc v Hayes (2003) 25 NSWCCR 138 Lanza v Codemo Management Pty Ltd [2001] NSWSC 845 CASES CITED: Laundess v Laundess (1994) Aust Torts Rep 81-316 Metropolitan Gas Company v Melbourne Corporation (1924) 35 CLR 186 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 Nagle v Rottnest Island Authority (1993) 177 CLR 423 Neindorf v Junkovic [2005] HCA 75 Norton Australia Pty Ltd v Streets Ice Cream Pty Ltd (1968) 120 CLR 635 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 Romeo v Conservation Commission (NT) (1998) 192 CLR 431 Sakoua v Williams [2005] NSWCA 405 Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 Sullivan v Moody (2001) 207 562 Tame v New South Wales (2002) 211 CLR 317 Temora Shire Council v Stein [2004] NSWCA 236 Teubner v Humble (1963) 108 CLR 491 Thompson v Johnson and Johnson Pty Ltd [1991] 2 VR 449 Vacwell Engineering Company Ltd v BDH Chemicals Ltd [1971] 1 QB 88 Vairy v Wyong Shire Council [2005] HCA 62 Watson v Buckley, Osborne Garrett & Company Ltd and Wyrovoys Products Ltd [1940] 1 All ER 174 Whittlesea City Council v Meric [2005] VSCA 199 Wintle v Nye [1959] 1 WLR 284 Wyong Shire Council v Shirt (1980) 146 CLR 40 Yachuk v Oliver Blais Co Ltd [1949] 2 All ER 150

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Friday 16 December 2005 McPHERSONS LIMITED v ISABELLA EATON & 3 ORS Judgment 1 MASON P: I have had the privilege of reading in draft the reasons of Ipp JA. His Honour demonstrates why the non-manufacturing distributor of goods that is ignorant of a dangerous defect does not owe the same duty of care as that of a manufacturer. There must be "something more" (Laundess v Laundess (1994) Aust Torts Rep ¶81-316 at p61,876 per Mahoney JA). 2 Ipp JA establishes error of law in the Tribunal. I agree with him and the orders he proposes. 3 In what follows, I venture some propositions as to the framework of the issue presented in an attempt to describe the "something more". Defining exactly what duty of care does exist (or, if it be different, what is the content of the relevant duty) is however complicated by several factors. 4 The first is the paucity of caselaw on the topic. And, as Ipp JA points out, several of the distributor cases assume duty while finding absence of breach or find breach (because the defendant knew or had reason to know of a defect) without enunciating the full scope of the relevant duty. Statements that it will often be difficult to prove breach of duty on the part of mere distributors (Luntz & Hambly, Torts: Cases and Commentary 5th ed at [7.3.11]) or that the matter is to be decided by reference to all of the circumstances (Cuckow v Polyester Reinforced Products Pty Ltd (1970) 19 FLR 122 esp at 143-4, the case cited by Luntz & Hambly) only mask the question about the nature or scope of the duty. 5 Secondly, the issue presents at a time when the recent jurisprudence of the High Court shows that a choice must be made about the very question to be asked. Is there a broadly-stated duty to take reasonable care to avoid foreseeable risk of injury in which the reasonableness of the distributor's conduct is a factual issue dependant on the circumstances? Or is there in this (as in some categories) a more confined duty expressed as having a particular content or scope? 6 In Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254, Hayne J at 288[99]-[105] stressed the need to address what he variously referred to as the scope, extent or content of a duty of care. The discussion (and its outcome in Modbury) reveal his Honour to be addressing an aspect of duty of care, ie a matter of law. He pointed out (at [103]-[104]) that in a simple case (like motorist and injured road user) the content issue is adequately addressed by identifying the kind of damage suffered and the class of which the plaintiff was a member. In some other areas, additional definition is called for at the duty stage. 7 In Sullivan v Moody (2001) 207 CLR 562, Gleeson CJ, Gaudron, McHugh, Hayne and Callinan JJ said (at 579[50], footnotes omitted): Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care. Sometimes the problems may be bound up with the harm suffered by the plaintiff, as, for example, where its direct cause is the criminal conduct of some third party. Sometimes they may arise because the defendant is the repository of a statutory power or discretion. Sometimes they may reflect the difficulty of confining the class of persons to whom a duty may be owned within reasonable limits. Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle.

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10 In the area of motor accidents the courts have in recent times been at pains to avoid "the substitution of a number of rigid and particular criteria for the essentially flexible and general concept of negligence" (Teubner v Humble (1963) 108 CLR 491 at 503 per Windeyer J). Likewise, for occupiers, who owe a "generalised standard of care, described as what a reasonable person would, in the circumstances, do by way of response to a foreseeable risk" (Neindorf v Junkovic [2005] HCA 75 at [8] per Gleeson CJ. See Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479. But, as to contractual entrants, see Neindorf at [65]). 11 These authoritative pronouncements show that additional matters may be factored in at the duty stage beyond the two identified by Hayne J in Modbury, but only for some situations. The present task is to know whether a non-manufacturing distributor is to be treated in a similar manner by the law; or whether, as for example, in Vairy, the motor accident cases and the occupier's liability cases, it is wrong to seek to define the content of the relevant duty with any precision. In Neindorf, Kirby J suggests reasons for preferring in most cases to avoid defining the scope of a duty of care in an overly specific fashion (see at [52]-[56]). 12 Knowing whether one is dealing with an aspect of duty of care or an aspect of breach may be vital, for example in deciding the competency of an appeal limited to questions of law (as with the present appeal), in knowing the guidance to be drawn from earlier cases in the similar category (cf Vairy), and in knowing the correct question to be posed in deciding breach and/or determining the role of contributory negligence. 13 I have (with the concurrence of Brownie AJA) recently analysed Jones v Bartlett (2000) 205 CLR 166 as authority for a duty of care whose scope or content depends on particular types of defect (see Sakoua v Williams [2005] NSWCA 405). In Jones, McHugh J (in dissent) was driven to observe (at 194[100]) that limiting the landlord's duty to "dangerous defects", "ordinary use of premises" and "unusual dangers" would reintroduce into the law the categories expelled by the High Court in Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479. I respectfully agree, yet this is what the Court in Jones appears to have done in the landlord area, albeit with some difference of opinion as to the precise scope of the landlord's duty. In saying this, I acknowledge that there is a passage in Jones in the judgment of Gleeson CJ (at 184[56]-[58]) suggestive of a broad description of the duty, requiring the issue of reasonable response to be addressed at the factual or breach stage. Cf Gummow and Hayne JJ at 214[169]. 14 Obviously there will be cases in which debate about the scope of a duty of care involves purely factual enquiries. Was a solicitor engaged to advise as to the commercial or simply the conveyancing aspects of a transaction? But, on my reading, the matters that divided the High Court in Jones as regards the nature, scope or content of the landlord's duty of care reveal their Honours to be discussing issues of law, not just debating their application to different factual situations. 15 Likewise, there are categorical distinctions between the scope of duties of an employer and of an occupier referable to personal injury. 16 Courts of Appeal in New South Wales and Victoria have been unable to agree as to whether the notion that highway users should take reasonable care for their own safety is an aspect of the highway authority's duty of care (post Brodie/Ghantous) or whether this is merely a factual matter that ought to be given close attention at the breach stage (cf Burwood Council v Byrnes [2002] NSWCA 343, Temora Shire Council v Stein [2004] NSWCA 236 and Whittlesea City Council v Meric [2005] VSCA 199). 17 In my view, it is both feasible and just to impose a particular content on the distributor's duty of care, confining it to one requiring reasonable care in the avoidance of personal injury by reference to what the distributor knows or has reason to know. I later explain why this more stringent duty does not apply to the distributor who renders the product harmful by its own conduct. The meaning of "reason to know" is also addressed below. 18 A third source of taxonomic difficulty in the present context is that some scholars favour addressing the instant problem as a causation issue. Thus, Jane Stapleton, Product Liability, 1994 p291 writes (emphasis in original): There are obvious cases where the product is defective because of a condition created by the manufacturer as a result of a manufacturing error or design choice. But a party may be a cause even if not the creator of the condition. It is true that under [1985 EEC] the Directive liability will attach only when a defendant supplies a product which was defective at the time . Our expectations of detection by parties lower down the chain than the manufacturer are usually low. For example, we do not expect Sainsbury's to detect a dead bee in a can of soup it sells. So the omission by a mere supplier to detect defects is not usually isolated as a cause of that defect.

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See also John G Fleming, The Law of Torts, 9th ed p548. 19 This approach offers some basis for distinguishing the commission and omission categories of distributor negligence. This leads to my next point. 20 A fourth matter requiring attention in this area concerns the event leading to the personal injury that attracts the attention of the law of tort. 21 Sometimes a product has become dangerous because of what the distributor has done to it, such as storing it at the wrong temperature before sale. In such a situation, liability will ensue if the conduct was negligent and if distribution occurs without disclosure of the added harm (see Fleming, op cit, p548 fnn 155 and 156). The antecedent duty question cannot simply be ignored in those cases, but its content appears to differ from the situation in the present case. The duty is the general one of exercising reasonable care. It would appear to arise out of the very act of distribution (by sale) of the product rendered defective by the distributor's conduct. Issues stemming from the criminal intervention of third parties may require additional attention (cf Modbury Triangle). 22 But most distributor situations involve no more than omission by the distributor to disclose or warn about some inherent quality of the product distributed. The present case is an example. Unless one posits a general duty of care and concludes that the distributor's conduct was reasonable in the circumstances, something more is required for these situations before a duty of care can be found, essentially for the reason adverted to by Professor Stapleton in her Sainsbury's example. It offends common morality to find a distributor liable for nothing more than selling a dangerous product, at least if the danger of the product (generally, or in the particular case) is not known or within the "reason to know" category as regards the distributor. Because it is not possible to posit why the duty should ever be wider, then it is appropriate to distinguish the approach endorsed for the "diving cases" and to state a duty with the more confined content. 23 The difference between "ought to know" and "has reason to know" is more than semantic in the present context. It is the law's endeavour to identify the limited content/scope/extent of the relevant duty in circumstances like the present. The formulation "has reason to know" appears to capture the appropriate scope of duty, at least outside the situation of the distributor whose own activities have contributed to the harmful potential of the product (see generally Restatement of the Law, Torts 2d at s401; Elliott v Bail Bungy Co [2002] NSWSC 906 (at [24]-[28]); Fleming, op cit, p647 n148; Christians v Homestake Enterprises Ltd 303 NW 2d 608). The distinction is explained in Restatement 2d (at s401): The words "reason to know" …. are used to denote the fact that the actor has information from which a person of reasonable intelligence or of the superior intelligence of the actor would infer that the fact in question exists or that such person would govern his conduct upon the assumption that such fact exists. The words "reason to know" do not impose any duty to ascertain unknown facts, and are to be distinguished from the words "should know".

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24 This formulation of the content of the duty of reasonable care is preferable to describing it in terms of a "duty to warn". For some situations, warning would be an inadequate response. Reasonable care with reference to some dangers would require the product to be taken off the shelves. 25 Fifthly, there may be a need in some cases to distinguish between different categories of purchasers. A child who purchases an inflammable substance "with which a reasonable man, taking thought, would have foreseen that the child was likely to do himself an injury" (Yachuk v Oliver Blais Co Ltd [1949] 2 All ER 150 at 153 per Lord du Parcq) may generate a categorically different duty to that owing to an adult purchaser. 26 HODGSON JA: I agree with the orders proposed by Ipp JA and substantially with his reasons. 27 I agree that a retailer of goods has no duty of care to persons who might ultimately be affected by those goods, unless there is some additional factor, generally a factor associated with the creation of risk or knowledge of risk involved in the goods. This is because there is, in my opinion, a world of difference between originating and putting into circulation something which otherwise would not exist, and merely being one of a number of persons involved in the distribution of something originated by someone else. 28 I also agree that, in so far as the primary judge did find there was an additional factor in this case, that finding was vitiated by errors of law. In my opinion, the primary judge applied a wrong principle, in not addressing the question of what a reasonable person in the circumstances of the appellant would have done, so as to base a finding that the appellant ought to have known of the relevant risks. Alternatively, the primary judge gave no reasons which could support a conclusion that the appellant ought to have known of the relevant risks. It may be, in any event, that the relevant question is, as Mason P suggests, whether the appellant "had reason to know" of the risks; and similar comments would apply in relation to this question. 29 In my opinion, the primary judge also erred in law in not addressing the question of what form a warning might have taken, and the question of the balance between the efficacy of such a possible warning and the difficulty and expense of implementing it, so as to be able to reach a conclusion as to whether the absence of such a warning showed unreasonable conduct by the appellant. 30 This deficiency also meant that the primary judge did not address the question of whether, on the balance of probabilities, such warning as reasonable conduct by the appellant would have produced would have been efficacious in this particular case. That point was apparently not taken below, so the appeal would not have been upheld on that point alone. 31 IPP JA:

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The parties and the principal issues 32 This appeal from a decision of O'Meally P in the Dust Diseases Tribunal involves the liability of a retailer for damages sustained by an employee of a purchaser of a potentially dangerous product sold by the retailer. Significant specific issues arise as to whether the retailer owed the employee a duty of care and as to the scope of any duty that may have existed. Section 32(1) of the Dust Diseases Tribunal Act 1989 (NSW) confines the appeal to issues "in point of law". 33 The retailer in question was McPhersons and the purchaser's employee was Mr Eaton, now deceased. McPhersons is the appellant and Mr Eaton's widow, Mrs Eaton, is the first respondent. The other respondents are not parties to the appeal. 34 The question whether a duty of care existed is a question of law, although the determination of the question depends to a degree on facts found by the trial judge. The principal arguments in this connection concern whether the trial judge wrongly found that McPhersons owed a duty of care merely because it was a retailer and whether, in finding that the facts found "confirmed" that McPhersons owed Mr Eaton a duty of care, the judge applied the wrong test. 35 The scope or content of any duty of care found to have existed is also a question of law and again, the determination of that issue is dependent partly largely on factual findings made by the trial judge. The principal arguments in this connection are whether the judge erred in law by applying the wrong standard or measure of care in determining the reasonable response to the risk of harm: Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317, and whether his Honour erred in law by failing to identify with the necessary precision, by reference to considerations of the nature of those indicated in Wyong Shire Council v Shirt (1980) 146 CLR 40, the reasonable response to the risk of harm that existed: Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540. 36 The inquiry that this Court has to undertake in respect of the issues in question involves segregating the tort of negligence into elements of duty of care, scope and breach. This is an artificial (albeit necessary) exercise as the elements of the tort are dependent on each other and often can only be defined by reference to each other: Tame v New South Wales (2002) 211 CLR 317 per McHugh J, at [90], 349, Dovuro Pty Ltd v Wilkins per Kirby J at [99], 350, Annetts v Australian Stations Pty Ltd (2000) 23 WAR 35 at 49.

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The facts 37 Between 1955 and 1963 Mr Eaton was employed by Chatterton & Stevens Pty Limited and, between 1963 and 1978, by Hillman & Howell Pty Limited. Both Chatterton & Stevens and Hillman & Howell were manufacturers and installers of air conditioning systems. 38 From about 1955 to 1974 (but not thereafter) Chatterton & Stevens and Hillman & Howell purchased from McPhersons, by retail, millboard containing asbestos. McPhersons had purchased the millboard from its manufacturers. Mr Eaton's employers used the millboard in making heater boxes used in air conditioning ducting. 39 As part of its retail business, McPhersons sold single sheets of the millboard and also sold the product by the pallet. 40 Mr Eaton, as part of his duties as an employee, cut the millboard and worked with the pieces. In so doing he used, mainly, a hand saw (although at times he used an electric saw). The process of cutting the millboard generated dust containing asbestos fibres. The millboard was sold in a standard size and it was not in dispute that McPhersons knew that it would probably be cut into smaller pieces by its customers. 41 Mr Eaton died from the effects of malignant mesothelioma caused by exposure to asbestos dust and fibre. Mrs Eaton brought proceedings against McPhersons and others for damages. The amount of damages, eventually, was agreed. 42 Over the relevant period, McPhersons was the largest hardware retail outlet in Australia. It sold "a myriad of products" and at any given time over the relevant period had several thousands of different hardware products on sale. It had thousands of employees and its sales amounted to millions of dollars. It had a research laboratory and undertook research. It had a reference library and employed a doctor to attend to its injured employees. It employed chemists and sent senior executives overseas to study and acquire the latest scientific knowledge. 43 It sold equipment that restricted the release of dust as well as respirators that contained cartridges to prevent or limit the inhalation of dust. It sold machinery designed for cutting asbestos material. 44 McPhersons knew that anyone who used a saw on asbestos products would inhale released dust and Mr Kelso, marketing manager at the time it employed Mr Eaton, said that he "supposed he knew" that there were dangers to the health of persons who inhaled dust. 45 The sale of products containing asbestos constituted only a tiny part of the total sales of McPhersons, in the order of 0.05% of total sales. 46 None of McPhersons' staff was trained to advise customers on safety issues. The reason given for this omission was that it relied for such information on the manufacturers who supplied it with articles for sale.

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The trial judge's findings 47 The trial judge found that McPhersons was liable for the agreed damages. The judgement was delivered ex tempore and, without intending any disrespect to his Honour, in some respects the reasoning does not follow a structured sequence. This, at times, makes it difficult to understand to what particular element of the tort of negligence the remarks he was making were intended to apply. In recounting his findings, I shall follow the judge's sequence. 48 His Honour observed: "There is no argument that by the mid 1960s it was known to the medical, scientific and industrial communities that asbestos inhalation constituted a risk of injury, neither could there be. That question has been considered over and over again. A remaining question is whether a retailer in the position of McPhersons ought reasonably to have known that such exposure constituted a risk of injury." 49 His Honour referred to Elliott v Bali Bungy Co [2002] NSWSC 906 and Lanza v Codemo Management Pty Ltd [2001] NSWSC 845 and said: "Those cases seem neither to reinforce nor detract from the existence of the duty of a retailer in selling goods, for here it could not be said there was a latent defect in the goods sold. The damage associated with asbestos use was and is a patent one." 50 His Honour then stated that he rejected McPhersons' submission that, as a general proposition, a retailer owed no duty of care to those who used products that it sold. He apparently regarded a general duty of care to be established merely by reason of the fact that McPhersons sold goods by retail to the public. 51 His Honour went on to say that he was "required to determine … what was the nature of that duty and what was its content" and, immediately after this remark, said: "In considering these questions it is relevant to remark once again that McPhersons at all relevant times was the largest hardware retailer in the Commonwealth of Australia. It sold a myriad of products, as is established by an examination of the catalogues which are in evidence. In respect of many of the products it sold, it undertook research and issued safety warnings. It sold machinery designed for cutting asbestos material and it also sold devices to minimise the release of dust in the cutting process. It retailed breathing apparatus to restrict the inhalation of dust, in particular asbestos dust. Its own employees handled asbestos material and the evidence is that frequently dust settled upon them and their clothing. Because it was a national corporation it had an obligation to acquaint itself with legislative and regulatory requirements concerning occupation health and safety. There were regulations relating to the use and handling of asbestos made in Victoria in 1945 and 1956 and in Queensland in 1970. As remarked earlier, there was in the medical, scientific and industrial communities and in their literature an awareness that the inhalation of asbestos constituted a risk of injury, and this awareness certainly existed before the mid 1960s in each group. Not only were there articles appearing in the medical, scientific and industrial literature concerning the dangers of asbestos, but also in newspaper articles published nationally. If McPhersons did not know of the dangers of asbestos, at least by the mid 1960s, there is, in my view, no excuse for its ignorance. As the largest retailer of hardware in Australia with a research department and a practice of sending executives and chemists overseas to acquire and increase knowledge on scientific and industrial matters it ought to have known. It ought to have consulted the literature. It ought to have known of the nature of the risks of exposure to asbestos. It ought to have known that such exposure was capable of causing serious disease, including cancers, the inevitable consequence of which was death. It ought to have known, if it did not, that not only end users of asbestos products it sold, but also its own employees, were at risk of contracting such disease. By at least the mid 1960s it ought to have known, if it did not, that exposure even to small quantities of asbestos was capable of causing serious disease. It ought to have known that asbestos products of all types, that is whether amphibole or serpentine, were capable of causing disease. It had reason to know these things. It ought to have directed its chemists, those doctors it employed, its senior staff, and its research department, to make inquiries, if it be the case that they did not make such inquiries. Those inquiries, if made, would have confirmed the risks associated with the use of asbestos. When it continued to retail asbestos material it should have given warnings which would obviate or minimise those risks. It sent its employees to factory premises of those who purchased products from it, including Chatterton and Stevens. It did know that certain asbestos products were difficult to handle and caused the liberation of dust." 52 There was no evidence that McPhersons actually knew of the dangers of asbestos and there was positive evidence from Mr Kelso that he only became aware in 1975 or 1976 that asbestos was dangerous, that is, at a time when McPhersons had ceased selling it. The judgment should be understood as accepting that McPhersons did not sell millboard to Mr Eaton's employers after 1974. 53 The judge then said that a consideration of the criteria set out in Hoyts Pty Ltd v Burns (2003) 201 ALR 470 at 486-7 (per Kirby J) relevant to the obligation to provide warnings "confirms that McPhersons did have a duty to warn and its failure to warn constituted a breach of that duty" [my emphasis]. 54 His Honour said: "… McPhersons was indifferent to the dangers and risks of selling asbestos products … Had McPhersons consulted the literature which was freely available it might have been moved to make inquiries, to give warnings or to direct that asbestos products be removed from sale." 55 He said that further evidence supporting a conclusion of indifference appeared from the fact that certain of McPhersons' officers "had an appreciation of the fact that dusts could be injurious to health". 56 The judge then said that he accepted that, had Mr Eaton known of the risk of injury and been warned to take precautions, "he would have taken such precautions as would, in effect, have minimised or obviated the inhalation of asbestos". 57 He set out the following conclusions: "In the light of these considerations I come to the conclusion that [McPherson's] from at least the mid 1960s and before, acting reasonably, ought to have foreseen there was a risk of injury, and by continuing to sell asbestos products without warning of their danger it failed to discharge the duty it owed to those who purchased those products and to those in the employ of those to whom it sold; indeed, to anyone in whose contemplation it may have been that they would come into contact with dust released. The duty of McPhersons was to warn of the dangers of which it ought to have known or had reason to know. It had reason to know of the dangers. It ought to have known of the dangers. Its failure to warn or to withdraw materials containing asbestos from sale constituted a breach of that duty. In Wyong Shire Council v Shirt (1980) 146 CLR 40 Mason J at 47 said: 'In deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant's position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk.' I think I have made it clear that my view is McPhersons ought to have warned or withdrawn asbestos products from sale. … I do not see it necessary to consider any more than thus far I have considered the position of McPhersons as a hardware retailer, in the same way that Giles JA considered in Julia Farr Services Inc v Hayes (2003) 25 NSWCCR 138 at 181 [125] the fact that the defendant there was an occupier of a building or that a defendant was a supplier of brake pads in Bendix Mintex Pty Ltd and Ors v Barnes (1997) 42 NSWLR 307. At all times there was a grave and serious risk of injury to those in the class of which the late Mr Eaton was a member. The likelihood of that risk coming home was high. The avoidance of that risk required minimal action. Taking alleviating action would have generated no inconvenience, nor would it have caused any conflict in responsibility. 58 His Honour concluded: "The evidence satisfies me that the failure to warn of the dangers of the products as well as its failure to withdraw them from sale caused, in the relevant sense, Mr Eaton's mesothelioma."

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His Honour said at 61,876: "I do not think that that additional factor can be stated in a simple formula of words. The circumstances in which a duty of care will be imposed upon a vendor of goods must in my opinion depend upon the nature of the goods, the risk involved, and the circumstances of the case." 61 The significant requirement articulated by his Honour is that there must be "something more than a mere relationship of vendor and purchaser" before a duty of care arises. 62 The authorities bear out the view taken by Mahoney JA (although in many no distinction was drawn between duty of care and breach). I shall refer to the authorities to which we were taken on this issue as well as others. 63 In Clarke v Army and Navy Co-operative Society Ltd [1903] 1 KB 155 the vendor of a tin containing disinfectant powder was held liable to a person who opened it. The ground of liability was that the vendor actually knew that the tin was likely to cause danger to a person opening it unless special care was taken. This decision rested on the actual knowledge of the vendor. 64 In Burfitt v Kille [1939] 2 KB 743 the vendor of a pistol was held liable for selling the pistol to a 12 year old boy who, while playing with it, injured a younger child when he fired the pistol into the air. The shot resulted in the other child receiving a small piece of copper in his eye. The additional factor here was the fact that the vendor had sold a pistol and ammunition that together, constituted an obvious danger that, to his knowledge, "never ought to have been put into the hands of one so young" (at 379). 65 In Watson v Buckley, Osborne Garrett & Company Ltd and Wyrovoys Products Ltd [1940] 1 All ER 174 distributors of a hair dye were held liable to a person who had suffered injuries while using it. The ground of liability was that the hair dye was an article that was dangerous in itself. The additional factor was that the distributors actually knew that the hair dye was dangerous "to quite a percentage of people by whom it will be used" (per Stable J at 184). 66 Herschtal v Stewart and Ardern Ltd (1940) 1 KB 155 was a second hand car vehicle case which was explained by Mahoney JA in Laundess v Laundess at [61,877] as follows: "The essence of the decision in Herschtal was, as far as is here relevant, the fact that the defect arose from the fact that the defendant itself had fixed the wheel in a negligent manner or that there was negligence in failing properly to overhaul the car in the reconditioning that it was to carry out. The case did not deal with the obligation of a vendor to discover a defect for which it had not been in any way responsible.". 67 In Andrews v Hopkinson [1957] 1 QB 229 the vendor (a dealer) of a second hand vehicle was held liable for "failing to make the necessary examination, or at least in failing to warn the plaintiff that no such examination had been carried out" (per McNair J at 237) for damages the purchaser sustained when injured as a result of a defect in the vehicle. There were at least two additional factors here. Firstly, the vendor had represented that the vehicle, in effect, was in good condition. Secondly, in the case of an old car (as the vehicle was) the danger spot was in the steering mechanism (where the defect was found) and could have been discovered by a competent mechanic. See also the criticism of this decision in Laundess at [61,878]. 68 In Fisher v Harrods Ltd [1966] 1 Ll L R 500 the vendor of jewellery cleaning fluid was held liable to a person who had been given the fluid by another who had purchased it from the vendor's store. The "something more" factor here was the finding that the vendor knew that the bottles containing the cleaning fluid leaked and (as McNair J held) this should have put the vendor on inquiry. 69 In Imperial Furniture Pty Limited v Automatic Fire Sprinklers Pty Ltd [1967] 1 NSWR 29 Jacobs JA said at 38 to 39: "…[I]f in the case of goods dangerous in themselves no knowledge of the danger is necessary in the distributor but in the case of goods not dangerous in themselves knowledge, actual or imputed, is necessary before a distributor can be made liable in negligence, then the distinction [between things dangerous in themselves and things not dangerous in themselves] would seem to be a lively one. However, one can reach no conclusion on the necessity or otherwise of the ingredient of knowledge of the danger until one has analysed what is meant by a thing dangerous in itself. An analysis of the cases on things dangerous in themselves with all the variety and variation which appear in those cases leads me to the conclusion that a thing is dangerous in itself when the danger of such a thing is of such public notoriety that a defendant will not be heard to say that he in particular did not know the danger. The notorious danger may arise spontaneously or only when the thing is used in some way in which it may reasonably be foreseen that it may be used, but in any case the danger must be publicly notorious. If a thing is notoriously dangerous it is in the same position as a thing known to the defendant to be defective. In either case it is not sufficient for the defendant to say that he was unaware of the danger. If there is a notorious danger, he cannot be heard to say otherwise. If the danger is not notorious but if there is a defect known to him, likewise he cannot be heard to say that he did not know of the danger. Therefore, in my opinion, the true inquiry in the present case is whether a process and spray gun of the kind alleged in the declaration can be regarded as so notoriously dangerous when used in any manner in which it may reasonably be foreseen that it may be used that the defendant is not entitled to rely on the fact that it did not know that it was dangerous, with the result that it is unnecessary for the plaintiff to prove that the defendant had that knowledge … In respect of [things not dangerous in themselves] it is in my opinion not possible to cast upon a distributor, as distinct from a manufacturer, in relation to persons with whom no contractual relations exist or with whom no contractual relations are relied upon (as in the present case) a liability irrespective of a knowledge actual or imputed in the particular circumstances . This would be to extend too far and to extend beyond proper limited reason the liability of distributors and lenders and persons other than manufacturers of the dangerous thing" [My emphasis].

[39]

Wallace P agreed with the reasons of Jacobs JA as did Asprey JA on this issue (see at 44). Generally, Asprey JA regarded the issue as one depending on all the circumstances of the case. 70 I would interpose the comment that O'Meally P did not find that the dangers of inhaling asbestos fibres released by the cutting of the millboard were publicly notorious in the sense described by Jacobs JA. He found that the dangers of asbestos were actually known by the "medical, scientific and industrial communities", which is a different thing. 71 In Cuckow v Polyester Reinforced Products Pty Ltd (1970) 19 FLR 122 the additional factor was the actual knowledge of the distributor that the polyurethane foam it supplied was a potential fire hazard. 72 In Vacwell Engineering Company Limited v BDH Chemicals Ltd [1971] 1 QB 88 at 109 a well known manufacturer and supplier of chemicals supplied a uniquely dangerous industrial chemical to Vacwell. The chemical was "new, or little known" (at 99). Rees J held that the supplier had a duty to investigate and carry out research into such a chemical before marketing it. The additional factors were the inherently potentially dangerous nature of chemicals generally (that being common knowledge to the public as a whole) and the fact that so little was known about the particular chemical supplied by the specialist supplier in circumstances where it was reasonably foreseeable that it might be dangerous (see the observations of Mahoney JA in Laundess at [61,878]). 73 Thompson v Johnson and Johnson Pty Ltd [1991] 2 VR 449 is distinguishable as the defendant was both the distributor and manufacturer of the product. The same applies to the suppliers of brake pads in Bendix Mintex Pty Ltd and Ors v Barnes (1997) 42 NSWLR 307 74 In Brand v Bardon (unreported, NSWCA, 18 July 1997) Stein JA (with whom Handley JA agreed) held that the importer and retailer of a beauty cream owed the respondent purchaser a duty of care. The scope of the duty of care was not articulated. Three points may be made about this decision. Firstly, Stein JA said that the importer retailer was "on notice that there were some 'special circumstances' pertaining to the respondent". That was because the respondent requested the retailer to sell her a product suitable for sensitive skin. Secondly, the judgment does not reveal whether or not the retailer had actual knowledge of the risks that use of the cream would have for a person with sensitive skin (although, the general import of the decision is that it did). Thirdly, no reference was made to Laundess. 75 In CSR Ltd v Wren (1998) 15 NSWCCR 650 at 692-3 (the relevant part being omitted from the report in (1997) 44 NSWLR 463) the additional factor was that the supplier (ABA), had actual knowledge that exposure to asbestos dust could cause disability and fatal disease. 76 In Hardchrome Engineering Pty Ltd v Kambrook Distributing Pty Ltd [2000] VSC 359 the additional factor was that the supplier was not simply the retailer. "It was involved in the design, inspection of the product after manufacture and before shipment, and inspection of the product prior to sale in Australia" per Gillard J at [496]. 77 In Lanza v Codemo Wood CJ at CL at [171] accepted that the mere fact of entry into a contract for the sale of goods did not necessarily establish a duty of care. His Honour relied on Laundess, Cavanagh & Phegan "Product Liability in Australia" 510, and Fleming "The Law of Torts in Australia" 9th Ed, 457 for this proposition. His Honour went on to say: "The existence of the duty depends upon the nature of the goods sold, the risk involved and the extent to which that risk was known to, or should have reasonably been known to the supplier." 78 In Elliott v Bali Bungy Company Young CJ in Eq held that the general duty of retail dealers was to warn of dangers of which they knew or had reason to know but not of which they "should have known". As I understand his Honour, "should have known" in this context means duty- bound to know. His Honour referred to a number of text books to this effect. To those to which his Honour referred I would add Clerk & Lindsell on Torts, 18th Ed 531 (at para 9-12) where the learned authors say that retailers may be liable in tort "if they sell goods with reason to know they are likely to be used to harm others". See also the reporter's notes to paragraph 401 of the "Restatement of Law of Torts" (2nd Ed). 79 In Graham Barclay Oysters Pty Ltd v Ryan the distributors grew and harvested the oysters (that being the additional factor). 80 In Dovuro Pty Limited v Wilkins the distributor also produced the canola seed. 81 We were not referred to any other case in Australia or England, nor have I been able to find one, where a duty of care has been imposed on a retailer merely because a relationship of vendor and purchaser, or vendor and end-consumer, existed. 82 In my opinion the relationship of vendor and purchaser, or vendor and end-consumer, does not automatically give rise to a duty of care. Such relationships do not fall within the familiar categories of cases where, by the mere existence of these relationships, a duty of care arises: cf Vairy v Wyong Shire Council [2005] HCA 62 at paras 25-27 per McHugh J. I agree with Mahoney JA's view that "something more" must exist before a duty of care arises. 83 I come to this conclusion not only because of the authorities to which I have referred. There are compelling policy reasons for requiring the presence of some additional factor falling within the recognised criteria for the establishment of a duty of care. Without the requirement of some additional factor, a retailer would continuously be at risk if it did not investigate the potentially hazardous characteristics of all the products sold by it, and the constituents of such products as well. A large hardware retailer like McPhersons sells vast quantities of products of many kinds. Smaller retailers sell less but still sell many. The installation and implementation of systems discovering and identifying potential hazards of products and their constituents would be an expensive exercise for retailers. The increased costs could have considerable flow-on effects (affecting the financial capacity of some retailers to employ workers, the need to obtain costly insurance, the general cost of living, and the very viability of some businesses). In the end, the cost of complying with the proposed automatic duty of care would be borne by the community as a whole (cf ALRC Product Liability Research Paper No 2, January, 1989 at paras 26-30). 84 The social need for recognising a duty of care owed automatically by a retailer simply because it sells a particular article is not strong. In the circumstances in which it might be sought to hold such a retailer liable for a defect in the article, it is likely that liability would attach to the manufacturer (cf Graham Barclay Oysters at [145], 596 where Gummow and Hayne JJ took into account the fact that, in the circumstances of that case, the field of endeavour was "populated by self-interested commercial actors who themselves possess some power to avert those risks"). The proposition that retailers owe an automatic duty of care amounts, in effect, to the retailer being vicariously liable for the fault of the manufacturer in producing a defective article. This is not a proposition that our law has embraced.

[40]

The importance attached by the judge to the element of "ought to know" 85 Despite rejecting McPhersons' submission that a retailer did not automatically owe a duty of care to those who used products that it sold, O'Meally P proceeded to refer to other factors that reinforced (i.e., confirmed) his finding that it owed Mr Eaton a duty of care. These factors bear repeating. 86 His Honour said that McPhersons ought to have consulted the literature and it ought to have directed its chemists, the doctors it employed, its senior staff, and its research department, to make inquiries. He said that those inquiries, if made, would have confirmed the risks associated with the use of asbestos. 87 He said that McPhersons ought to have known of the nature of the risks of exposure to asbestos. It ought to have known that such exposure was capable of causing serious disease, including cancers, the inevitable consequence of which was death. It ought to have known that not only end users of asbestos products it sold, but also its own employees, were at risk of contracting such disease. 88 His Honour said that McPhersons knew that certain asbestos products were difficult to handle and caused liberation of dust (although he did not explain how this knowledge related to the sale of the millboard or how McPhersons knew or had reason to know that the quantities of asbestos dust released by the millboard would have been dangerous to persons who inhaled the dust). 89 He said that, by at least the mid 1960s, McPhersons ought to have known that exposure even to small quantities of asbestos was capable of causing serous disease and that asbestos products of all types were capable of causing disease. Thus, he said, from at least the mid 1960s, McPhersons ought to have foreseen there was a risk of injury (from small quantities of asbestos released into the atmosphere). 90 He said, as I have mentioned, that a consideration of the criteria set out by Kirby J in Hoyts Pty Ltd v Burns at [71] 486 as to the obligation to provide warnings confirmed that McPhersons had a duty to warn. Amongst the criteria to which Kirby J referred were whether, because of previous incidents, public discussion or otherwise, an occupier could be expected to know of any particular risks against which warnings should be given and whether there was any hidden feature of the place occupied or activity in that place that might not be plain to an ordinary entrant but which should be known to, or reasonably discoverable by the occupier, calling for a warning. 91 The finding that McPhersons ought to have known of the dangers of asbestos is capable of constituting "something more" in the Laundess sense and resulting in McPhersons owing a duty of care, at least to a defined class of persons. The question is whether that finding was made according to law so that it applied to a retailer in the position of McPhersons.

[41]

The criteria governing the inquiry whether a person "ought to know" 92 The phrase "ought to know" is commonplace in our law, particularly in the law relating to negligence; it is often used to impute knowledge to a tortfeasor. Reasonable foreseeability lies at the root of the concept of "ought to know" and is of particular importance in situations where a pre-existing relationship or circumstances that automatically give rise to a duty do not exist. This was emphasised in Tame v New South Wales (2002) 211 CLR 317 where McHugh J said at [103], 355: "In dealing with the duty issue, however, it is often necessary to consider the issue of reasonable foresight as a separate issue. In the duty situation, the issue is whether the law imposes or ought to impose an obligation on the defendant to avoid conduct that exposes persons in the position of the plaintiff to unreasonable risks of harm. Absent a pre-existing relationship or circumstances that automatically give rise to a duty - such as lawful entry onto land - reasonable foreseeability of harm to others is a necessary condition of duty." 93 In my opinion, "ought to know," means the knowledge that a person, acting reasonably in all the circumstances of the case, should know. There is ample authority to this effect. But there are several matters that need to be noticed when regard is had to "all the circumstances of the case". 94 Firstly, when the imputed knowledge of the defendant (the "ought to know" issue) is being considered for the purposes of ascertaining whether the defendant owes a duty of care, the "circumstances of the case" do not include an assumed duty of care; otherwise the reasoning would be circular. Although the word "ought" is the language of duty, the assumption of a duty of care forms no part of the inquiry at the stage the duty of care is being determined. The imputed knowledge depends on the existence of proved facts that call for the requisite inference to be drawn. 95 Secondly, a finding that a defendant ought to know of the risk of particular harm may lead to the existence of duties to take reasonable care, to investigate, to do research or to warn. Such a finding, and the existence of such duties, are based to a significant degree, on reasonable foreseeability and depend largely on whether it is reasonably foreseeable that the risk that should be investigated, researched, or warned against might materialise. Reasonable foreseeability, for example, underlies the duty to investigate before a car dealer sells a second-hand vehicle, the duty to research before a manufacturer and importer of industrial chemicals sells a new untested chemical, and the duty to warn when a retailer sells an article that it knows can be dangerous if used in a particular way or by a particular class of person. 96 Thirdly, when determining reasonable foreseeability, the standard must be that of a reasonable retailer in the position of McPhersons. In Dovuro Hayne and Callinan JJ pointed out at [162] 369 that the primary judge had concluded that Dovuro had acted unreasonably. One of the steps critical to the judge's conclusion was that it should have been "readily evident, especially to a person trained in agricultural science" that it would be impossible for a regulatory authority to anticipate by declaration every exotic weed that might enter the state and threaten agriculture. Their Honours said (at [163], 369): "As Finkelstein J rightly pointed out, the usual knowledge of an agricultural scientist cannot set the standard of care to be observed by a seed merchant. Further, common knowledge of the kind to which the primary judge referred is of no significance unless there is a basis for concluding that the reasonable person in Dovuro's position not only ought reasonably to have known, or to have found out, whether any of the three plants already grew in the area concerned, but also knew, or ought reasonably to have known that, if the plants were exotic, they would or may later be declared to be prohibited plants. The Wilkin's case depended upon them demonstrating that Dovuro knew, or ought reasonably to have known, that importing and selling the seed for a distribution in Western Australia exposed the Wilkins, and other purchasers of the Karoo seed, to a risk of the injury that would follow if the three plants whose seeds were found in what was distributed were declared to be prohibited."

[43]

Did McPhersons owe Mr Eaton a duty of care? 97 I have pointed out that O'Meally P found that the mere relationship of vendor and purchaser automatically imposed a duty of care on McPhersons. I have expressed the view that his Honour thereby erred. 98 I have pointed out that, in addition, O'Meally P referred to other factors that, in effect, confirmed his opinion, that McPhersons owed Mr Eaton a duty of care. The essential element in these factors was the finding that McPhersons ought to have known of the relevant dangers of asbestos when selling the millboard to Mr Eaton's employers. 99 The finding that McPhersons ought to have known of the relevant dangers of asbestos is a question of fact. Nevertheless, the question arises whether the judge made errors of law in making that finding. In my opinion that question must be answered in the affirmative. 100 Although O'Meally P stated expressly that he was required to consider whether McPhersons, as a hardware retailer, owed a duty of care to a user of the millboard, and said, rightly, that the question was "whether a retailer in the position of McPhersons ought reasonably to have known that such exposure constituted a risk of injury," I do not think that he in fact conducted that specific inquiry and applied that standard. 101 In conducting the requisite inquiry, the judge was required to have regard to the fact that McPhersons was a retailer (and not a manufacturer); that it sold a vast number of products made up of a possibly unknowable number of constituents; and that products containing asbestos comprised less than one per cent of the products that it sold. McPhersons did not have actual knowledge of the dangers of asbestos. Thus, the judge needed to determine the practical difficulties (even with the resources available to it) that faced McPhersons in learning about and keeping track of the dangers connected with each one of its products it sold. His Honour needed to determine whether, in this context, there was any fact that should have led McPhersons to know, not only that the inhalation of asbestos was dangerous, but that asbestos fibres, in the quantities likely to be released when millboard was cut, might be dangerous. This required proof of actual facts from which a reasonable inference might be drawn, not merely the exercise of some moral or other judgment based on a world view of the duties of retailers generally. In addition, regard had to be had to the reasonableness, in the existing circumstances, of McPhersons' explanation that it relied on the manufacturers to inform it if there were any dangers in the use of the products they sold. 102 Courts have held that distributors professing a particular expertise should have known certain facts relating to such expertise. This is based on the inference that a person having or professing such expertise could reasonably be expected to know of such facts. Sometimes it is self-evident that such an inference should be drawn but usually evidence will be required. For example, evidence to that effect would be needed for a court to draw the inference that a reasonable motor dealer could be expected to know that an old second-hand car might have a defect in its steering column and, therefore, the steering column should be checked before the car is sold. In the same way, evidence would be required of facts supporting the inference that a reasonable retailer would know of the dangers of inhaling asbestos released by cutting millboard. It would not be appropriate to draw such an inference merely by making some kind of value judgment based on the judge's view of what a retailer, generally, should know merely by reason of the fact that the retailer is a hardware retailer, or a large hardware retailer employing doctors and chemists and possessing a library. There must be some fact that should have alerted a reasonable hardware retailer in McPhersons' position to the risks involved. 103 His Honour observed that McPhersons was a very large hardware retailer, that it had thousands of employees and its sales amounted to millions of dollars, that it had a research laboratory and a reference library and undertook research, that it employed a doctor to attend to its injured employees and chemists and sent senior executives overseas to study and acquire the latest scientific knowledge. These matters, however, are evidence that McPhersons could have learned of the dangers of asbestos, not that it should have. 104 The idiosyncratic features of the size of McPhersons' business and the facilities available to it do not lead to the inference that it should have investigated the possible dangers of asbestos. As I have indicated, before such a finding could be made there had to be evidence and a consideration of facts from which it could be said that McPhersons had reason to know that the quantities of asbestos dust likely to be released into the atmosphere when the millboard was cut, would be potentially harmful to those who, without proper protection, were working with it, or that it had reason to make inquiries as to whether the cutting of the millboard would be unsafe. Without such evidence there was no reason for McPhersons to know that the asbestos in the millboard was possibly dangerous. 105 There was evidence before his Honour (tendered by Mrs Eaton) that, as late as in 1985, there was wide community ignorance about the effects of asbestos and how it should be handled (Dr Kilpatrick at Blue 623 M-T), and that, over the period 1978 to 1991, there was a significant need in the community for advice about the hazardous effects of asbestos, the diseases caused by it, and ways of minimising risk, including dust control (Dr Kilpatrick at Blue Vol 3 622 G-L and 623 M-T). The omission of the judge to deal with evidence of this kind and to explain why, despite it, there was reason to find that a reasonable hardware retailer in McPhersons' position would know of the dangers caused by cutting millboard, supports the inference that he did not conduct the inquiry according to the principles required by the law of negligence. 106 Examples of facts that might support a finding of reasonable foreseeability include evidence that the dangers of asbestos were generally known to hardware retailers as a group, or published in articles that a retailer such as McPhersons, acting diligently, could be expected to read, or that there was public discussion of such dangers (not confined to particular specialist groups), or that McPhersons held itself out in a way that induced others to rely on it to ensure that the products it sold would contain warnings as to the safe way to work with asbestos and to cut the millboard. 107 There is a lack of reality, in my view, in assuming that merely because of its size and the facilities available to it, a hardware retailer would have been alerted to the dangers of asbestos contained in a product that constituted less than 0.5% of its sales in the context of selling thousands of products for millions of dollars. 108 The fact that his Honour did not refer to any evidence tending to establish a reason (of the kind I have mentioned) for McPhersons to make inquiries about the use of asbestos also supports the proposition that the judge did not properly consider whether McPhersons, as a hardware retailer, should reasonably have foreseen the dangers of asbestos released by the cutting of the millboard. 109 In this context, it is also necessary to have regard to his Honour's reliance on his finding that by the mid 1960s it was known to the medical, scientific and industrial communities that asbestos inhalation constituted a risk of injury. On my reading of the evidence this fact was known to persons, in particular specialist fields in such communities, who were working with or who had experience in the field of asbestos or asbestos-related products or asbestos-related diseases or in public health, but not generally to persons in other walks of life. While there was some evidence that other persons would or might have known of the risk of asbestos inhalation, it would be difficult indeed to attribute such knowledge to hardware retailers as a group. 110 O'Meally P did not discuss why, if certain groups within the medical, scientific and industrial communities knew about the risk, a reasonable retailer should also have had that knowledge. His Honour did not reveal any reasoning process leading to the finding that, as a matter of fact, because certain groups within the medical, scientific and industrial communities knew about the dangers of asbestos inhalation, a reasonable hardware retailer in McPhersons' position should also have known about them. 111 The comments made in the previous paragraph apply also to the judge's reference to the literature of the medical, scientific and industrial communities in which mention was made of the dangers of asbestos. There was no evidence and no discussion by his Honour of any fact that showed that a reasonable retailer would have read that literature. While there was evidence of articles in medical and scientific journals, and a few relating to the manufacturing industry that dealt with asbestos (see Blue Vol 3, 524-5), we were not referred to and I have not been able to find any evidence of such articles in journals intended specifically for the retail trade. 112 In finding that McPhersons ought to have known of the dangers of inhaling asbestos, the judge said that articles concerning the dangers of asbestos appeared in "newspaper articles published nationally". On the evidence to which senior counsel for Mrs Eaton referred and my own reading of the evidence, the evidence relating to the articles in question was as set out in the next paragraph. 113 An article concerning the dangers of asbestos appeared in the Melbourne Age in 1956 (in which, relevantly, a Dr Thomas referred to a survey which "found a disturbingly high incidence of asbestosis among workers regularly handling asbestos"). An article in the Queensland Telegraph on 2 August 1966 referred to the chance that workers who came into regular contact with asbestos dust could die from asbestosis. The article called for research "on the basis of finding out precisely the hazards existing with asbestos and seeking to eliminate them". There was an article about asbestos in the Courier Mail on 14 November 1967 but this did not refer to any specific dangers of asbestos - it raised the issue of disablement of workers by the disease of asbestosis. On 4 March 1969 the Queensland Telegraph and on 7 March 1969 The Australian newspaper contained articles that called for "recognition" that tobacco smoking and exposure to asbestos together greatly increased the possibility of lung cancer. The articles said that the inhalation of asbestos dust was a potential menace to health that was worrying the medical profession. The Courier Mail of 27 May 1970 quoted a doctor who said that statistics showed a high incidence of lung cancer among people who worked with asbestos. The Australian of 17 March 1972 contained a statement that "unionists blame asbestos for a large scale epidemic of cancer". The Sydney Telegraph of 3 December 1972 quoted a health agency which stated: "While even for non-smokers the asbestos dust presents a risk of lung cancer, for heavy smokers in the asbestos industry the combination is quite disastrous."

[44]

The Australian Financial Review on 28 November 1973 warned that asbestos workers were at much increased risk of developing asbestosis, lung cancer and mesothelioma. Time Magazine on 28 January 1974 reported that, based on previous experience with asbestos-caused diseases, 300 of 869 persons employed by an American asbestos insulation works were likely to die from asbestosis and lung and other cancers. 114 We were not referred to any other article in a newspaper or magazine (intended to be read by the general public), published during the relevant period, concerning the dangers of asbestos. In my view, the existence of the articles to which I have referred, on their own, do not establish that it was publicly known that the release of small quantities of asbestos fibres into the atmosphere constituted a health risk or that a reasonable hardware retailer should have known this fact. 115 While the effect of the articles is a question of fact, it may be expected of a judge applying the appropriate standard (that is, relating to a hardware retailer in the position of McPhersons), to set out the evidence to which I have referred and to explain the basis of the findings arrived at. The omission to do so is a further indication that his Honour did not bear that standard in mind when making his factual finding on this issue. 116 Related to the judge moving without explanation from the knowledge of medical, scientific and industrial communities to the knowledge of McPhersons is his finding that the "damage associated with asbestos use was and is a patent one". If "patent" is given its ordinary meaning of "clear, evident, obvious" (Oxford English Dictionary Online June 2005) or "manifest; evident; plain" (The Macquarie Dictionary, Federation ed. at 1400) that conclusion could not be arrived at. The dangers of asbestos are not evident from the material itself; appreciation of the dangers is dependent on actual knowledge of them. The finding that the dangers were patent also supports the inference that, in fact, his Honour did not turn his mind to the specific position of a reasonable retailer. 117 O'Meally P said that because McPhersons was a national corporation it had an obligation to acquaint itself with legislative and regulatory requirements concerning occupational health and safety. At the relevant time, the regulations required that workers not be exposed to an atmospheric concentration of asbestos exceeding 5,000,000 particles per cubic foot all day on an ongoing basis. On the evidence, 5,000,000 particles per cubic foot is equivalent to 176 fibres per cubic centimetre. The judge made no reference in his reasons to whether the cutting up of the millboard would have released anything like that volume of asbestos into the air and, if so, whether a reasonable retailer in the position of McPhersons should have known that fact. Indeed, there was evidence that the concentration of asbestos generated by power tools cutting the millboard was only 4 to 12 fibres per cubic centimetre. Senior counsel for Mrs Eaton said that this evidence was disputed, but the point is that the judge did not appear to bear in mind that he was required to make a finding on this question so as to be able to determine what a reasonable retailer ought to know. 118 Indeed, the judge's several and repeated references to the fact that McPhersons "ought to have known" of those dangers, and the absence of any reference to evidence of an actual fact from which it could be inferred that there was reason for McPhersons to know of the possibility of such dangers, suggests, strongly, that his Honour considered that McPhersons was duty bound to research or investigate the possibility of such dangers. As I have indicated, such an approach - at the duty stage - would be an error of law. 119 O'Meally P had regard to the facts that McPhersons issued safety warnings in respect of certain of the products it sold, that it sold machinery designed for cutting asbestos material, devices to minimise the release of dust in the cutting process and breathing apparatus to restrict the inhalation of dust, and the fact that its own employees handled asbestos material and dust from that material settled upon them and their clothing. 120 I see no reason to infer, from the mere fact that McPhersons sold the items in question, that it had reason to know or should have known of the dangers of inhaling the asbestos fibres in the quantities that would be released by the cutting of millboard, or indeed any quantities. These items were merely a few amongst the vast quantity of different products that it sold. Further, the giving of safety warnings in respect of certain products does not lead to an inference that McPhersons should have known that safety warnings should be given in respect of other products. 121 McPhersons knew that inhaling dust in sufficient quantities might be harmful to health but it does not follow from that that, at the relevant time, it had reason to know or should have known that inhaling asbestos (in particular quantities or at all) had special dangers. The mere possibility that dust of some kind might be inhaled when an article sold might be cut would not give rise to a duty of care. For example, it would not be possible to contend that a retailer that sold planks of timber had a duty to warn purchasers that sawdust from cutting the timber might cause injury to persons who inhaled it. 122 I also see no reason to draw an inference that McPhersons had reason to know or should have known of such dangers by reason of the fact that, from time to time its own employees handled asbestos material and asbestos dust settled upon them and their clothing. More than this would be required to establish that a reasonable retailer in its position should have made inquiries into the possible risks involved. 123 I mention the matters referred to in the preceding three paragraphs, on which the judge relied, solely to indicate that I do not think that they can support an inference that his Honour applied the appropriate test in determining whether a reasonable retailer in the position of McPhersons should have known of the particular dangers in this case. 124 His Honour, as I have mentioned, said that he did not see it necessary to consider "any more than thus far I have considered the position of McPhersons as a hardware retailer, in the same way that Giles JA considered in Julia Farr Services Inc v Hayes (2003) 25 NSWCCR 138 at 181 [125] the fact that the defendant there was an occupier of a building or that a defendant was a supplier of brake pads in Bendix Mintex Pty Ltd and Ors v Barnes (1997) 42 NSWLR 307." This passage is revealing. 125 In Julia Farr Services Inc Giles JA considered the question of foreseeability as it related to breach (not the existence of a duty) and in so doing had no regard to whether the dangers of asbestos were foreseeable to a reasonable occupier. In Bendix Mintex Pty Ltd the defendant suppliers of the brake pads were also the manufacturers of the product. Beazley JA (with whom Mason P agreed on this issue) made a finding as to foreseeability that was general in its terms. Her Honour held, generally, that it was foreseeable that the plaintiff could contract mesothelioma from exposure to asbestos (at 332). Beazley JA (understandably) did not consider whether the defendants, specifically as suppliers of asbestos, should reasonably have foreseen the possibility in question and did not address the position of a reasonable supplier, this not being a point which was argued in the case. 126 The judge's remarks equating his inquiry into the foreseeability of a reasonable retailer with that of the occupier in Julia Farr and the suppliers (and manufacturers) in Bendix Mintex Pty Ltd is a further indication that his Honour did not properly consider whether a reasonable retailer in the position of McPhersons would have foreseen the risk of dangers from inhalation of asbestos. The implication from his Honour's remarks is that, in fact, he directed no significant attention to the position of McPhersons as a hardware retailer. 127 Taking into account all the matters to which I have referred under this heading, I conclude that O'Meally P did not apply the appropriate standard (despite his Honour's correct expression of that standard) in determining that at the relevant time McPhersons ought to have known of the dangers of asbestos inhalation. In my view, his Honour thereby erred in law (see Seltsam Pty Ltd v Ghaleb [2005] NSWCA 208 at [3], Wintle v Nye [1959] 1 WLR 284).

[45]

The scope or content of the duty 128 In Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431 Kirby J (at 475) distinguished between the duty of care and the measure or scope of that duty. His Honour said (at 478): "It is one thing to hold that a person owes a duty of care of some kind to another. But the critical question is commonly the measure or scope of that duty. The failure to distinguish these concepts can only lead to confusion." 129 Hayne J also dealt with this question in Romeo, saying at (487): "It was not (and could not be) seriously suggested that the respondent in this case owed no duty of care to members of the public that might go to areas which it manages. The real subject for debate was what that duty required of it, for it is only when the content or scope of the duty is identified that questions of breach and causation of damage can be considered. So, too, in Nagle v Rottnest Island Authority (1993) 177 CLR 423 the central question was not whether the Board owed any duty of care to those visitors lawfully visiting the island, it was what that duty of care required it to do." 130 Gummow and Hayne JJ in Jones v Bartlett (2000) 205 CLR 166 emphasised the importance of the scope or content of a general duty of care. Their Honours, having accepted that there was a general duty on a landlord to exercise reasonable care in regard to any person who may be on the premises at any given time, said at [166] to [167], 213: "…[T]he respondents conceded that they owed a duty of care to the appellant, the issues being its content and the presence of a breach of duty in the circumstances of the case. In our view, this concession was properly made, but to find the content of the duty in the particular case requires consideration of the wider question left unanswered in Northern Sandblasting Pty Limited v Harris (1997) 188 CLR 313. In doing so, it would be of no utility merely to conclude that the duty is to be expressed simply as one to take reasonable care to avoid a foreseeable risk of injury to a person in the situation of the appellant. That would be to leave unanswered the critical questions respecting the content of the term 'reasonable' and hence the content of the duty of care, matters essential for the determination of this case, for without them the issue of breach cannot be decided." 131 In Graham Barclay Oysters Pty Ltd v Ryan Gummow and Hayne JJ at [192], 611 to 612 said: "A duty of care that is formulated retrospectively as an obligation purely to avoid the particular act or omission said to have caused loss, or to avert the particular harm that in fact eventuated, is of its nature likely to obscure the proper inquiry as to breach. That inquiry involves identifying, with some precision, what a reasonable person in the position of the defendant would do by way of response to the reasonably foreseeable risk. As Isaacs A-CJ observed in 1924, '[N]o conclusion of negligence can be arrived at until, first, the mind conceives affirmatively what should have been done' ( Metropolitan Gas Company v Melbourne Corporation (1924) 35 CLR 186 at 194). The trial judge and the majority of the Full Court in the present case failed to identify with the necessary precision, by reference to considerations of the nature of those indicated in Wyong Shire Council , the reasonable response to the risk of harm that existed. In so failing their Honours fell into an error of law." 132 In Dovuro Hayne and Callinan JJ said at [158], 367: "In cases where the extent of the relevant duty is not clear, it is useful to begin by considering the damage which the plaintiff suffered and the particular want of care which was alleged against the defendant. That may reveal the scope of the duty upon which the allegations of breach and damage depended." 133 In the present case, the extent of the duty of care found to have been owed is by no means clear. It was therefore incumbent on the judge to identify with the necessary precision, by reference to considerations of the nature of those indicated in Wyong Shire Council v Shirt, the reasonable response to the risk of harm that existed. 134 The judge identified the scope of the duty by saying that McPhersons' duty was to "warn of the dangers of which it ought to have known or had reason to know". At another stage in his reasons, the judge said, "I think I have made it clear that my view is McPhersons ought to have warned or withdrawn asbestos products from sale." 135 His Honour then said, as I have mentioned, "The evidence satisfies me that the failure to warn of the dangers of the products as well as [McPhersons'] failure to withdraw them from sale caused, in the relevant sense, Mr Eaton's mesothelioma". 136 O'Meally P did not identify what warning should have been given, how it should have been given and to whom it should have been given. 137 The nature of the warning whose absence betokens liability for McPhersons must depend on precisely what a retailer in the position of McPhersons should have known about the dangers of asbestos. 138 Knowledge of experts in the fields of the dangers of asbestos has developed gradually over the relevant period. Legislative and protective standards have changed over the years. The knowledge of the general public (and, by inference retailers such as McPhersons) must have followed behind the knowledge acquired by the experts. Different expert witnesses whose evidence was tendered by Mrs Eaton gave different answers to the particular knowledge amongst experts at different times. These matters called for factual findings as to the particular facts that should have been known to a retailer in McPhersons' position in regard to the particular dangers of asbestos over the relevant period. The judge did not undertake this exercise. 139 The legislative standard at the time, as to the quantities of asbestos that might be released into the air, differed from the notion of small quantities of asbestos to which the judge referred. Is the legislative standard to be imputed to McPhersons? Or is McPhersons to be taken to know the dangers that could be caused by small quantities? The judge, in effect, said McPhersons should have known both but - in my view (for the reasons I have expressed) - those findings were not properly made. These questions needed to be addressed specifically in order to determine with the requisite precision the terms of the warning and how it was to be given. 140 To whom was the warning to be given? The judge's finding seems to involve a duty to give a warning not merely to purchasers but to all the people who might be affected by the cutting of the millboards. This arises from the judge's findings that by continuing to sell asbestos products without warning of their danger McPhersons "failed to discharge the duty it owed to those who purchased those products and to those in the employ of those to whom it sold; indeed, to anyone in whose contemplation it may have been that they would come into contact with dust released" [my emphasis]. 141 Norton Australia Pty Ltd v Streets Ice Cream Pty Ltd (1968) 120 CLR 635 involved the liability of a manufacturer of an adhesive for damage caused to the plaintiff's premises. The negligence of the manufacturer was said to be its failure to give a purchaser of the adhesive adequate warning of its dangerous quality. Barwick CJ (with whom McTiernan J agreed) accepted that the warning should have been given to the purchaser. He said at 646: "…[H]ere, the reasonable contemplation, in my opinion, is that the purchaser, an industrial user of adhesives, apprised of the dangerous qualities of the adhesive, will know the simple safeguards to be observed and will accordingly arrange its use of the adhesive and appropriately direct his employees."

[47]

142 Consideration of the identity of the possible purchasers was necessary. That fact (as Barwick CJ pointed out) was relevant to the terms of the warning. This was not a matter that the trial judge took into account in this case. 143 In fact, his Honour made no findings as to how the warning was to be given. There was some suggestion that the millboard was too fragile for warnings to be pasted on to the boards themselves, but this issue was not decided, or even discussed. Whether the warning should have been placed on the packaging of the millboard was also not discussed and there was no finding that the millboard had packaging capable of bearing a warning. Another possibility is that the warning should have been contained in pamphlets or brochures accompanying the millboard sold, but this too was not discussed by the judge. 144 The approach of the judge was akin to that of the trial judge in Graham Barclay Oysters Pty Ltd in respect of which McHugh J said at [106], 585: "The duty of care owed by a manufacturer or producer to a consumer is a duty to take reasonable care to avoid injury to the consumer. To formulate the duty in more specific terms invites error because it is likely to mix a question of law (whether a duty existed) with a question of fact (whether a breach occurred). If the duty is formulated in specific terms, the issue on breach is whether the duty has been performed in accordance with the terms of the duty as formulated. But as Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48 shows, the question of breach is far more complex than an affirmative or negative answer to the question whether the defendant carried out the duty as formulated. It involves evaluating and weighing a number of competing considerations. Both the trial judge and the majority judges in the Full Court did not attempt to evaluate and weigh the competing considerations. In failing to do so, they erred in law." 145 Any warning would have cost implications (as I have indicated) and an appropriate evaluation of all relevant factors (including cost, risk and nature and effectiveness of warnings) in accordance with Shirt should have been undertaken. His Honour made express reference to Shirt but his reasoning reveals no considered evaluation as required by that authority. 146 The judge found that, as an alternative to giving a warning, McPhersons should have withdrawn the millboard from sale. This is an extreme position that should only be taken after careful consideration of the effectiveness of a warning and a proper evaluation of the various factors mentioned in Shirt. See the discussion in Graham Barclay Oysters by McHugh J at [112] and Gummow and Hayne JJ at [202]. The judge did not embark on any such consideration and evaluation. 147 Further, in my opinion, the judge failed to identify, with appropriate precision, what a reasonable person in the position of McPhersons would do by way of response to the reasonably foreseeable risk and thereby committed an error of law: Graham Barclay Oysters at [192], 611 to 612. 148 In my opinion, the judge - by simply giving a negative answer to the question whether McPhersons carried out the duty as formulated by him - erred in law by not undertaking the required evaluation exercise.

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Judgment (49 paragraphs)

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Legislation Cited (2)

Cases Cited (31)