Court of Appeal (WA)|2011-04-20|Before: Martin CJ

FUGRO SPATIAL SOLUTIONS PTY LTD -v- CIFUENTES [2011] WASCA 102 (20 April 2011)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : FUGRO SPATIAL SOLUTIONS PTY LTD -v- CIFUENTES [2011] WASCA 102

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : CIFUENTES -v- FUGRO SPATIAL SOLUTIONS PTY LTD [2009] WASC 316

Negligence - Fatal plane crash after engine failure - Duty of care of pilot - Standard of care in emergency

Negligence - Engine failure due to negligence of engineer - Apportionment of liability between pilot and engineer

Negligence - Pure economic loss - Whether common law action for loss of services - Rule in Baker v Bolton - Whether common law claim for death of employees

Negligence - Whether duty to prevent pure economic loss - No direct commercial relationship - Vulnerability

Trade practices - Whether implied warranties in s 74 Trade Practices Act 1974 (Cth) excluded - Whether charter contract 'in relation to the transportation or storage of goods for the purposes of a business' - Predominant purpose of contract

Trade practices - Whether breach of implied warranties in s 74 Trade Practices Act 1974 (Cth) - Whether services and materials provided with due care and skill

Damages - Whether contribution orders contrary to s 7 Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) - Whether original orders for damages reflected apportionment

Sixth Respondents : Mr M J McCusker QC & Mr A Golem

Seventh Respondent : Mr H J Langmead SC & Mr B J Morgan

Agtrack (NT) Pty Ltd v Hatfield [2005] HCA 38; (2005) 223 CLR 251

Australian Safeway Stores Pty Ltd v Zaluzna [1987] HCA 7; (1987) 162 CLR 479

Baker v Bolton [1808] EWHC KB J92; (1808) 1 Camp 493; (1808) 170 ER 1033

Braverus Maritime Inc v Port Kembla Coal Terminal Ltd [2005] FCAFC 256; (2005) 148 FCR 68

Brodie v Singleton Shire Council [2001] HCA 29; (2001) 206 CLR 512

Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' [1976] HCA 65; (1976) 136 CLR 529

Commissioner for Railways (NSW) v Scott [1959] HCA 29; (1959) 102 CLR 392

Gharibian v Propix Pty Ltd t/as Jambaru Recreation Park [2007] NSWCA 151

GIO Australia Ltd v Robson (1997) 42 NSWLR 439

Indico Holdings Pty Ltd v TNT Australia Pty Ltd (1990) 41 NSWLR 281

Leishman v Thomas (1958) 75 WN (NSW) 173

Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571

O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356

Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10

Perre v Apande Pty Ltd [1999] HCA 36; (1999) 198 CLR 180

PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301

Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492

Skripal v The State of Western Australia (Unreported, WASCA, Library No 950244, 19 May 1995)

Swan v Williams (Demolition) Pty Ltd (1987) 9 NSWLR 172

Tame v New South Wales [2002] HCA 35; (2002) 211 CLR 317

The State of New South Wales v Fahy [2007] HCA 20; (2007) 232 CLR 486

Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422

Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74

Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515

Woolworths Ltd v Crotty [1942] HCA 35; (1942) 66 CLR 603

WorkCover Queensland v Amaca Pty Ltd [2010] HCA 34; (2010) 271 ALR 203

Zamer (by his next friend Kennelly) v Zamer [2010] NSWCA 343

1 MARTIN CJ: I agree with McLure P for the reasons which she gives, that:

(a) the conclusion of the trial judge that the pilot, Mr Penberthy, was negligent should be upheld;

(b) each of Mr Penberthy and Mr Barclay should be held liable for the economic loss suffered by Nautronix, as a consequence of the injuries suffered by Mr Cifuentes, Mr Knubley and Mr Perincek, but not otherwise;

(c) the trial judge was correct to conclude that the contract between Nautronix and Fugro was a contract for or in relation to the transportation of goods for the purposes of a business carried on by Nautronix, with the result that no contractual terms were implied by s 74 of the TPA, but was in error in concluding that if terms were implied by that section, they had not been breached by Fugro; and

(d) if it had been necessary to resolve Mr Barclay's cross-appeal, it should have been concluded that:

(i) the trial judge erroneously purported to order Mr Barclay to contribute to Fugro's liability to Nautronix pursuant to the powers conferred by s 7 of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) when, on the findings made by the trial judge, that section had no application and;

(ii) the effect of the orders made by the trial judge requiring Mr Barclay to indemnify Fugro for one-third of its liabilities produced a result which was unjust and inequitable, having regard to his conclusions as to the apportionment of liability as between Mr Barclay and Mr Penberthy.

2 However, for the reasons which follow, I would dismiss ground 2 of Fugro's appeal and uphold the apportionment of liability as between Mr Penberthy and Mr Barclay which was made by the trial judge.

3 In Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492, 532, the High Court said:

A finding on a question of apportionment is a finding upon a 'question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds'. British Fame (Owners) v Macgregor (Owners) [1943] AC 197, 201. Such a finding, if made by a judge, is not lightly reviewed.

4 The trial judge found that Mr Barclay was negligent by :

(a) approving the use of an aluminium bronze alloy for the manufacture of the replacement sleeve bearing, instead of the leaded bronze alloy which had originally been used either:

(i) without knowing that he was specifying a different metallic substance, or

(ii) knowing that he was specifying a different metallic substance without analysing the effect which a different alloy would have upon the durability of the sleeve; and

(b) failing to specify a highly honed finish for the internal surface of the sleeve bearing [289] - [296].

5 The trial judge also found that the risks created by these breaches of duties were 'of a low order of magnitude' [296], although foreseeable. He further found that it was a simple task to avoid those risks, which could have been achieved at low cost [296]. The trial judge further found that the consequences of the failure of the fuel pump in flight could be dramatic [364], and inferentially, that these consequences should have been known to Mr Barclay.

6 As McLure P points out, the question of whether or not Mr Penberthy breached his duty of care is assessed by comparing his actions with those which would have been taken by a pilot acting reasonably in the circumstances in which Mr Penberthy found himself. That process of evaluation is undertaken objectively, without regard to the subjective processes of reasoning actually employed by Mr Penberthy. However, the apportionment of liability as between tortfeasors is undertaken having regard to, amongst other things, their relative culpability. In assessing culpability, subjective considerations are relevant: see, for example, Zamer (by his next friend Kennelly) v Zamer [2010] NSWCA 343 [100].

7 The following findings made by the trial judge, either expressly or inferentially, and which have not been challenged, are relevant to the assessment of Mr Penberthy's breach of duty.

8 After the right-hand engine failed, Mr Penberthy should have dealt with the emergency on the basis that the left-hand engine would continue to operate properly [113].

9 Once the right-hand engine had failed, after 'cleaning up' the aircraft, the objective of any pilot in Mr Penberthy's situation would have been to utilise the remaining engine so as to gain altitude (500 feet or more), from which the aircraft could be safely returned to a landing on the runway [112].

10 Any pilot in Mr Penberthy's situation would have been aware that the best way to achieve the objective of gaining height in order to return safely to the runway would have been to continue, as far as possible, in a straight line. Any such pilot would also have been aware that each and every turn made by the aircraft would increase drag, reduce speed and impede the achievement of the fundamental objective of gaining the altitude from which a safe landing could be achieved.

11 Because the fundamental objective in the case of engine failure is to attempt to gain altitude using the remaining engine, pilots are trained to resist the instinctive reaction to return to the ground as soon as possible after engine failure - sometimes referred to as 'get-home-itis'.

12 Mr Penberthy acted contrary to those basic principles and his training when, as soon as he had completed 'cleaning up' the aircraft, he decided to 'come around' and land as soon as possible [104], [302].

13 Although a single left turn to avoid the risk of colliding with the powerlines did not constitute a departure from an appropriate duty of care [304], the subsequent turns, made so as to implement Mr Penberthy's decision to land as soon as possible, were, in the overall view of the experts, a significant departure from an appropriate standard of care (in the words of Mr MacGillivray - 'absolutely unforgiveable' [124]; see also Mr Hillier [111] - [112], Mr Chew [130], Mr Lovegrove [146] - [147]).

14 Once further turns were made after the first left turn made in order to avoid the risk of colliding with the powerlines, the speed of the aircraft and its capacity to gain height were so compromised that a crash landing was inevitable ([113] a concession properly made by counsel for Fugro at ts 38).

15 It can also be inferred that in order to sustain his conclusions as to causation (which are not challenged), the trial judge found that if Mr Penberthy had continued in a straight line parallel to the powerlines after making a turn to avoid the risk of colliding with them, it is more likely than not that the aircraft would have gained sufficient height to enable Mr Penberthy to return the aircraft to the airstrip and make a safe landing.

The reasoning of the trial judge on apportionment

16 The trial judge expressly found that Mr Barclay's negligence was of a relatively high order of culpability [364]. The reasons given by the trial judge do not contain, in as many words, a similar finding in respect of Mr Penberthy. However, although not expressed in pellucidly clear terms, it can be inferred that the trial judge concluded that the culpability of each was of the same order, not only from the findings that he made in respect of Mr Penberthy's negligence, but also from the reasons which he gave for increasing the allocation of responsibility to Mr Penberthy which was said to be 'not so much having regard to his culpability' but as a result of their respective contributions to the causation of loss. In other words, the trial judge seems to have arrived at his apportionment on the basis that each of Mr Barclay and Mr Penberthy were equally culpable for their breaches of duty, but Mr Penberthy's breach of duty made a greater contribution to the cause of the damage than Mr Barclay's. Whatever be the proper inference drawn from the reasons of the trial judge as to Mr Penberthy's culpability, his reasoning on the relative contribution each tortfeasor made to the loss is quite clear.

17 That process of reasoning is consistent with the inferential finding of the trial judge to the effect that if Mr Penberthy had done what all the experts said he should have done, and what he and all pilots were trained to do, by flying as near as possible in a straight line parallel to the powerlines, it is more likely than not that the plane could have been landed safely. In the words of the trial judge:

Barclay presented him with the emergency, and he failed to cope because of his negligent misjudgement in the flying of the aircraft [365].

Or, as Senior Counsel for Mr Barclay put it (appropriately, having regard to the unchallenged finding as to causation):

Mr Barclay created a manageable emergency which Mr Penberthy failed to manage and it was an emergency for which he was trained (ts 167).

18 Counsel for Mr Penberthy relied, understandably, upon those cases which refer to 'the agony of the moment'. As McLure P points out, those cases do not involve any special principle, but constitute an application of general principle, to the effect that the reasonableness or otherwise of the acts or omissions of an alleged tortfeasor will be assessed in the context of the circumstances in which she or he found themselves, including the circumstance of an emergency created by the breach of duty of another. So, in the present case, the extent to which Mr Penberthy departed from an appropriate standard of care is to be assessed by reference to the response that might be expected from a trained and experienced pilot acting reasonably in the circumstances in which Mr Penberthy found himself, and which were occasioned by Mr Barclay's breach of duty.

19 One is instinctively inclined to benevolence in the evaluation of Mr Penberthy's conduct, given that the situation required him to make critical decisions within a very short period of time in a hazardous circumstance not of his making. However, it must be remembered that situations of that kind are inherent in the activity of aviation, and provide the reason why pilots, including Mr Penberthy, are trained to respond to the types of emergencies that arose in this case by making quick decisions in accordance with their training, in the interests of the safety of all on board. Mr Penberthy departed conspicuously from the standards of conduct that could have been expected from a trained and experienced pilot by succumbing to 'get-home-itis' and adopting a course of action which inevitably produced a crash landing which, on the balance of probabilities, would have been avoided if he had managed the emergency properly.

20 The findings of fact made by the trial judge have not been disturbed on appeal. On the basis of those findings, I am unable to see any error in the process of reasoning which he adopted in relation to the apportionment of liability which would justify appellate intervention, and would dismiss ground 2 of the appeal.

21 For these reasons I would dismiss grounds 1 and 2 of the appeal, uphold grounds 3 and 4 on the basis that each of Mr Penberthy and

Mr Barclay should be held liable for the economic loss suffered by Nautronix, but only to the extent that such loss was occasioned by the injury to Mr Cifuentes, Mr Knubley and Mr Perincek, and not to the extent that such loss was occasioned by the death of Mr Warriner, or Mr Protoolis. I would dismiss the cross-appeal by Nautronix. Mr Barclay's cross-appeal should be dismissed on the basis that the partial success of grounds 3 and 4 of Fugro's appeal destroys the premise upon which the cross-appeal was brought.

22 McLURE P: These appeals are from orders made in two Supreme Court actions arising out of the crash of a Cessna 404 Titan twin-engine aircraft near Jandakot Airport on 11 August 2003. The aircraft was engulfed by fire shortly after it crashed.

23 The aircraft was piloted by Mr A Penberthy, the second appellant. Mr Penberthy was employed by Fugro Spatial Solutions Pty Ltd (Fugro), the first appellant. Fugro carried on business of providing air charter services for commercial purposes [260].

24 There were five passengers on board the aircraft when it crashed: Mr Cifuentes, Mr Knubley, Mr Warriner, Mr Protoolis and Mr Perincek. All the passengers were employed by Nautronix (Holdings) Pty Ltd, the first-named sixth respondent who had taken an assignment of the second-named sixth respondent's causes of action (together referred to as Nautronix). Mr Protoolis and Mr Warriner died as a result of the crash. The remaining passengers and Mr Penberthy were injured in the crash.

25 The aircraft took off from Jandakot Airport. The right-hand engine failed immediately after the aircraft became airborne [240]. Mr Penberthy continued the take-off and from an altitude of around 100 feet, manoeuvred the aircraft with a series of left turns back towards the airport. The aircraft crashed less than two minutes after take-off.

26 The engine failed because of fuel deprivation caused by the failure of the right-hand engine-driven fuel pump [235]. The fuel pump failed because of a drive pin failure in the sleeve bearing. A properly made sleeve bearing should have been capable of operating for the minimum 1600 hours specified [293]. The sleeve bearing failed after 1353 hours. The sleeve bearing was designed by Aaron Barclay, the seventh respondent, a qualified aeronautical engineer. The drive pin failed because the aluminium bronze alloy specified by Mr Barclay for the sleeve bearing was unsuitable [289] and because Mr Barclay failed to

specify a highly honed finish to the internal surface of the sleeve bearing [292].

27 Supreme Court proceedings (CIV 1312/08) were commenced by the spouses of the deceased persons (who made claims under the Fatal Accidents Act 1959 (WA)), the injured passengers and Nautronix. The spouses of the deceased passengers and the injured passengers claimed that Fugro and Mr Barclay were negligent. The trial judge (Murray J) found that Mr Penberthy had been negligent in dealing with the emergency occasioned by the failure of the right-hand engine on take-off, that Fugro was vicariously liable for Mr Penberthy's negligence and that Mr Barclay was negligent in the design of the sleeve bearing. The trial judge apportioned liability in negligence on the basis of Mr Barclay one-third and Mr Penberthy two-thirds.

28 Nautronix claimed against Fugro, Mr Penberthy and Mr Barclay in negligence for, inter alia, pure economic loss. That claim was upheld against Fugro and Mr Penberthy but dismissed against Mr Barclay. Nautronix also claimed against Fugro for breach of the charter contract, which included a claim for breach of the implied statutory warranties in s 74 of the Trade Practices Act 1974 (Cth) (TPA). The trial judge concluded that the s 74 warranties were not implied into the charter contract and dismissed the contract claim. He also found that there was no breach of those warranties.

29 In action CIV 2279/09 Fugro claimed against Mr Barclay for damages for the loss of the aircraft and associated costs, loss of profits and an indemnity for the loss suffered by the plaintiffs in CIV 1312/08. Mr Barclay joined Mr Penberthy as a third party. The trial judge entered judgment for Fugro against Mr Barclay, ordered that Mr Barclay pay Fugro one-third of the damages to be assessed and made a declaration that Mr Barclay was liable to indemnify Fugro as to one-third in respect of Fugro's liability to Nautronix for pure economic loss and the costs of that claim in CIV 1312/08. The trial judge determined issues going to liability only in both actions.

30 Fugro and Mr Penberthy claim in the appeal that the trial judge erred (1) in finding that Mr Penberthy breached his duty of care to the passengers and Nautronix; (2) in apportioning liability in the proportion of two-thirds to Mr Penberthy and one-third to Mr Barclay; (3) in holding that Mr Penberthy owed to Nautronix a duty to take reasonable care to prevent the company suffering pure economic loss; and (4) in holding that Mr Barclay owed no duty of care to Nautronix for pure economic loss.

31 Nautronix cross appeals. It claims the trial judge erred in holding that the warranties in s 74 of the TPA were not implied into the charter contract and in concluding that there was no breach of those implied warranties in any event.

32 Mr Barclay also cross appeals. He claims the trial judge erred in declaring that Mr Barclay was liable to indemnify Fugro for one-third of Fugro's liability to Nautronix for pure economic loss and the cost of that claim.

The Fugro/Penberthy appeal - breach of duty

33 The aircraft took off on runway 24R at Jandakot Airport in a broadly south-west direction. There was a parallel runway designated 24L and a third runway aligned broadly east-west, designated 30, which accommodated aircraft landing from the east. The land immediately surrounding the runways was cleared. The balance of the airport land contained trees and other vegetation. There was a high voltage powerline around 2 kilometres to the south of the airfield. The pylons carrying the powerline were between approximately 227 to 240 feet high.

34 There was an expert reconstruction of the probable flight path taken by the aircraft from take-off until just prior to the crash. It was based on radar data and plotted onto a Google map and became exhibit 136. A summary of the flight path analysis is at annexure 'A'.

35 The trial judge made the following findings. Mr Penberthy was a highly qualified and very experienced pilot with many hours of commercial flying to his credit. He was fully familiar with the aircraft.

36 The take-off run was properly handled by Mr Penberthy; the aircraft developed power normally with no indication of any problem; rotation (the lifting of the nose wheel off the ground) occurred appropriately; the aircraft became airborne at an appropriate speed with the flaps in the correct position; and no occasion arose to abort the take-off run before the aircraft became airborne. Almost immediately after the aircraft became airborne, when the aircraft was about 10 - 15 feet above ground level, the right-hand engine-driven fuel pump failed, causing the right-hand engine almost immediately to lose power completely. Mr Penberthy reacted quickly and followed the necessary steps to make the aircraft safe and to clean it up, as dictated both by his experience as a pilot and by the aircraft manual [299] - [300].

37 By the time that was achieved and the aircraft was stabilised, having reached a height of approximately 100 feet above the ground and having achieved an adequate speed, Mr Penberthy looked up and saw the powerlines ahead. Mr Penberthy instantly decided that he had to turn left to avoid that potential obstacle. He was aware that to do so would rob the aircraft of its already substantially compromised capacity to gain airspeed and climb. The turn he undertook was relatively gentle, but nonetheless demonstrated that, while turning, the aircraft in its then state could not climb, and might indeed lose height and airspeed [303].

38 Mr Penberthy's decision to turn the aircraft to the left was not unreasonable. However, the aircraft's demonstrated lack of capacity to climb and increase its speed in the course of the turn caused Mr Penberthy to develop a case of 'gethomeitis' [304]. He became focussed on the need to return the aircraft to land at the airport. Having made the shallow left-hand turn of about 90 degrees, he transmitted to the tower his intention to return. His intention then was to land on runway 30. As the left turn was resumed in an endeavour to reach that runway, the airspeed was dangerously reduced and the capacity of the aircraft to maintain height was seriously compromised. Mr Penberthy then decided to aim for the cleared areas of the airport, which proved impossible. The trial judge continued:

In my opinion, Mr Penberthy's negligence lies in his failure to take advantage of the aircraft's residual capacity to climb and gain speed, if not before, then once he achieved a heading when he could fly the aircraft in an easterly direction, generally parallel to the obstacle, as he perceived it to be, presented by the powerlines. On that heading, as Mr Penberthy himself conceded, the aircraft was presented with no obstacle ahead for some kilometres and, as Mr Penberthy appreciated, to fly it straight would in all probability allow the aircraft its best chance to gain height and speed until it reached a safe height of somewhere between 500 feet to 1,000 feet above the ground, at which point it could be turned and flown back to the airfield, with a good chance that it could be aligned with a suitable runway and landed safely [306].

Of course, it is one's instinct, when presented with an emergency of the kind which beset Mr Penberthy, to get the aircraft back on the ground as soon as possible and a pilot is instructed to do so as soon as is practicable. But, as Mr Penberthy well understood, that was an obligation to take the steps which were best designed to enable the aircraft to be landed safely, and this he did not do. He did not decide against flying parallel to the powerlines because he perceived some obstacle in the way of doing so. He did not give that course proper consideration or, indeed, any substantial consideration. It was in that way that he breached the duty of care he owed to his passengers and their employer, Nautronix [307].

39 Important background to the finding of breach is the trial judge's earlier finding that 'the pilot should take the safest course to deal with the emergency on the basis that one engine was continuing to operate properly' [113].

40 The crash occurred short of the cleared area surrounding the runways. There was a conflict of evidence as to whether the landing was controlled or uncontrolled. That conflict was not resolved. In any event, part of the aircraft hit a tree after landing.

41 The trial judge does not expressly consider and find that flying parallel to the powerlines would, on the balance of probabilities, have resulted in a successful on-field landing at Jandakot. The language in which he described the prospects ('best chance', 'good chance', 'might well have been able to land' ([306], [365])) suggests he was not addressing himself to the probabilities. However, that must be implied in the trial judge's conclusion on causation. He said it was abundantly clear that the loss or damage sustained by all the plaintiffs was caused, at least in part, by Mr Penberthy's negligence [308]. The plaintiffs had to prove that 'but for' the breach (continuing the left turn instead of flying straight ahead) the aircraft would not have crashed. There is no challenge to the finding of causation. Indeed, causation was not a contested issue on the appellants' pleading or at trial (see appeal ts 206 - 207).

42 The experts who gave evidence at trial included Mr RJ MacGillivray (for the plaintiffs), Mr K Lovegrove and Mr Hillier (for Fugro and Mr Penberthy), and Mr J Chew (for Mr Barclay). The following is uncontroversial.

43 The loss of one engine of a twin-engine aircraft results in a loss of 90% of the aircraft's performance (or power). As a result, the aircraft's performance is extremely fragile and marginal. The majority of the full power of the remaining single engine is required simply for level flight performance (as distinct from climbing). Thus, the failure of an engine severely compromises an aircraft's capacity to climb.

44 An aircraft turns by banking the wings. That has the effect of reducing its lift which will cause the aircraft to descend unless there is an increase in the angle of attack. An increase in the angle of attack, whilst increasing the lift produced by the wing, also increases the drag which in turn reduces the airspeed of the aircraft. Thus, the best climb performance is when an aircraft continues in a straight line.

45 In this case, the engine failed at the absolute worst possible moment during take-off with the aircraft airborne and with the undercarriage in transit to the 'up' position. The approved flight manual for the aircraft flown by Mr Penberthy provided a detailed, stepped procedure to be followed in the event of an engine failure during take-off. The steps include locating the inoperative engine (switching off the wrong engine is not unknown), feathering its propeller to prevent it windmilling and thereby creating drag, banking and flying the aircraft five degrees towards the operative engine, and climbing at the best single engine rate of climb speed with the flaps in the take-off/approach position until 50 feet and thereafter with flaps up. The best single engine rate of climb speed is 102 knots until 50 feet and thereafter 109 knots. The final step is to land 'as soon as practical'.

46 There was nothing in the manual directing a pilot what to do in the event that it was reasonable, because of an obstacle, to change direction at low altitude at a speed well below the best single engine rate of climb. Indeed, the manual was silent in relation to turns following an engine failure.

47 However, the expert evidence was that basic flying theory is that drag increases in a turn and that the accepted practice following an engine failure is to minimise all manoeuvring.

48 Further, pilot training and preparation for flight is approached on the basis of 'when' engine failure occurs, not 'if' it occurs. Pilots are required to 'self-brief' before every take-off. That involves predetermining the decision speed (the speed prior to which the pilot would abort the take-off) and his/her actions if an engine failure was to occur during take-off after the decision speed had been reached. However, the expert evidence was that a self-brief for a take-off from runway 24R at Jandakot would not take into account the powerlines as a potential obstacle in the event of engine failure at take-off.

49 Moreover, part of a pilot's endorsement and periodic performance assessment involves training in the handling of emergencies involving the failure of an engine, including during take-off.

50 Having regard to the trial judge's finding that it was reasonable to turn the aircraft to the left to avoid the powerlines, there was only one alternative option to the course followed by Mr Penberthy. The alternative option was to fly straight ahead from the point when the aircraft's heading was generally east and parallel to the powerline (between stations 14 and 15 on exhibit 136). At that time the aircraft was still at around 103 feet above the ground with an airspeed of 91 knots.

51 It was accepted that the aircraft could not climb at an airspeed of 91 knots. It would have been necessary to fly level (that is at around 100 feet) for at least one nautical mile (1.8 km) in an attempt to increase the airspeed to a point where it was possible for the aircraft to climb. It was also estimated that it would be necessary to fly a total distance of around 15 - 20 km with the left engine delivering full power in order to reach a height of not less than 500 feet above the ground. The experts agreed that a height of not less than 500 feet (and preferably 1,000 feet) was required in order to successfully attempt an on field landing (that is, on a runway) at Jandakot Airport. An altitude of that magnitude is required in order to be able to gain airspeed as and when required (for example after a turn) by losing altitude.

52 All experts, with the exception of Mr Hillier, agreed that a prudent pilot would have flown parallel to the powerlines around station 15 in an attempt to gain sufficient height for a safe return to Jandakot. That conclusion was based on the assumption that the left engine would continue to operate at full power. The trial judge's finding concerning Mr Penberthy's negligence reflects the majority view of the experts. However, the trial judge did not expressly address the following:

whether the reasonableness of Mr Penberthy's conduct was materially affected by the emergency created by the failure of the right hand engine;
the existence and extent of any risk of not achieving an on field landing of the aircraft at Jandakot if it was flown parallel to the powerline with the aim of achieving sufficient height for such a landing;
the comparative risks of failure of the course taken by Mr Penberthy and the alternative option of flying parallel;
the nature and extent of the consequences if both options were unsuccessful; and
whether a crash was the inevitable consequence of Mr Penberthy's conduct in attempting to return to the airfield from an altitude of around 100 feet.

53 A commercial pilot is required to exercise the care and skill usual among pilots practising their profession: Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74. The determination of what a reasonable person in the pilot's position would have done involves an assessment of what would have been reasonable and practicable in the circumstances, an inquiry which is not to be undertaken in hindsight: Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 [126] - [129]; The State of New South Wales v Fahy [2007] HCA 20; (2007) 232 CLR 486 [58].

54 The reasonableness of acts or omissions in an emergency are sometimes captured in the expression 'the agony of the moment'. This was discussed by Street CJ in Leishman v Thomas (1958) 75 WN (NSW) 173 as follows:

This so-called principle of acting in the 'agony of the moment' is merely an application of the ordinary rule for ascertaining whether or not the conduct of any party has been negligent by looking to all the surrounding circumstances and ascertaining whether the defendant behaved in such a fashion as a reasonably prudent man, in the light of those circumstances, would not have behaved. It is a circumstance, and one possibly of great importance, that the defendant charged with negligence, may have been forced to act in a sudden crisis or emergency, unexpected and unheralded, without that opportunity for calm reflection which makes it easy after the event to suggest that it would have been wiser if he had done something else. The jury are required to judge his conduct in the light of the happenings of the moment, and a man is not to be charged with negligence if he, not being the creator of the crisis or emergency which has arisen, finds himself faced with a situation which requires immediate action of some sort and if, in the so-called 'agony of the moment', he makes an error of judgment and takes a step which wiser counsels and more careful thought would have suggested was unwise (175).

55 Steytler J summarised the position in Skripal v The State of Western Australia (Unreported, WASCA, Library No 950244, 19 May 1995):

Accepting that it is by no means the case that what a person does in an emergency created by the fault of another can never amount to negligence, it must also be accepted that a person is not required to exercise more care and skill than would any other person of ordinary prudence, firmness and experience in the circumstances of the emergency. A court will not, in such a case, 'require perfect nerve and presence of mind', enabling the person concerned 'to do the best thing possible'. (See The Bywell Castle (1879) 4 PD 219 at 226 -227 and Cortis v Baker (1968) SASR 367 at 369).

56 Mr Penberthy did not create the emergency. The emergency was created by the negligence of Mr Barclay. The question is what a reasonable pilot in Mr Penberthy's position would have done to avert the risk of harm created by the failure of the right-hand engine at the worst possible moment during take-off.

57 The appellants' position in the appeal was that they did not dispute the trial judge's findings of primary fact, only the conclusion of negligence. That position reflected their assumption that the trial judge did not find that the alternative option would probably have averted a crash. Moreover, they rely on the following additional facts:

On a course parallel to the powerline in an easterly direction, much of the land was built up in residential areas and other parts were timbered. There was no evidence of any other airfield or cleared, flat, even land over that course. If the plane had continued in that direction and been forced down through loss of power in the left engine, destruction of the aircraft and its passengers was likely;
The stall speed of the aircraft was 83 knots with the result it could not be flown or landed at a lower speed, making an off-runway landing unavoidably very dangerous; and
In the event of a crash at Jandakot airfield, rescue services were available immediately.

58 The additional facts are supported by the weight of the evidence.

59 The appellants are critical of the trial judge's finding of negligence insofar as it relies on Mr Penberthy's failure to give conscious consideration to the alternative of flying parallel to the powerlines. As the appellants correctly observed, a failure to have considered an alternative does not make an otherwise objectively reasonable response, negligent. The correct question is whether the course taken by Mr Penberthy was reasonable in all the circumstances. The existence of another reasonable alternative is not determinative.

60 The appellants also challenge the correctness of the trial judge's conclusion that Mr Penberthy should have dealt with the emergency on the basis that the left engine would continue to operate properly. Mr Hillier gave evidence that flying parallel to the powerlines would be an option but that the pilot could not assume that the good engine would continue to operate at full power. In response to that proposition the trial judge said:

For my part, it would seem to me that the pilot should take the safest course to deal with the emergency on the basis that one engine was continuing to operate properly. Of course, that response might have to be abandoned if, indeed, the remaining engine did fail, an event which, as I understand it, would leave the pilot no option but to glide to a landing on the clearest ground which was immediately available. But I cannot see the justification for taking a course which inevitably compromised the aircraft's capacity to fly and gain height on the basis that some further emergency might occur by the loss of the remaining engine, on top of the emergency with which the pilot was already confronted [113].

61 The appellants contend that the risks associated with flying east parallel with the powerline for 15 - 20 km provided ample justification and cause for Mr Penberthy's conduct. The risks relied on are (1) that of the second engine failing or losing power during the 15 - 20 km journey; and (2) that if the second engine also failed or lost power, the aircraft would certainly have been destroyed, causing injury or death not just to the occupants but also to other persons on the ground, at a considerable distance from rescue services. I accept that the trial judge significantly understated the risk of a crash in the event of a failure of the second engine or any material compromise in its performance.

62 The primary issue is the risk of the left-hand engine failing or losing power. It is the case that Mr Penberthy did not know and could not have known what caused the right engine to fail. One possibility (fuel contamination) could potentially lead to the second engine also failing. However, there was nothing in the course of the flight prior to Mr Penberthy's decision to return to Jandakot to indicate that there may have been an actual problem with the second engine. The appellants rely on Mr Penberthy's perception that from soon after the right engine failed, the aircraft was not climbing and that later, while the aircraft was on a fairly straight course (stations 16 to 20 on exhibit 136), he perceived it was not achieving any significant rate of climb (ts 808, 809, 811).

63 It is the case that by 15:33:34 (some 11 seconds after take-off) the airspeed was around 101 knots which was close to the speed at which climbing was not possible. Mr MacGillivray said the aircraft would not climb unless the speed was about 100 knots or more [117]. However, this aspect of Mr Penberthy's evidence appears to relate to his assessment that the powerlines were an obstacle which caused him to take the initial left turn rather than a perception that the aircraft would, or may, not be able to climb at all. The expert evidence does not support a finding that prior to the initial left turn, there were reasonable grounds for a perception that the aircraft may not be able to climb. Indeed, the case litigated by the appellants at trial was the possibility of future engine failure (or perhaps loss of power) not that there were reasonable grounds to suspect that there had been any loss of power in the left-hand engine.

64 Moreover, it was not reasonable to expect the aircraft to climb between stations 16 to 20 when the airspeed was 96 knots at its highest. The drop of airspeed from 96 knots to 91 knots while flying straight is not the subject of any finding. In any event, based on the content of Mr Penberthy's communications with the tower, the trial judge found that he had decided at around 15:36:08 (before station 15) to attempt a landing on runway 30 from around 100 feet. Any problems with the left engine after that time are relevant to causation but not breach.

65 The appellants' final contention is that even if Mr Penberthy made an error of judgment in deciding to undertake a series of left turns and return to the airport, he had to face a difficult choice under pressure in choosing between two highly risky alternatives.

66 It is erroneous to suggest that Mr Penberthy himself considered the alternatives. The trial judge found that he did not. However, the test of whether there has been a breach is objective: what would be the reasonable response of a competent pilot in the circumstances in which Mr Penberthy found himself. In order to properly undertake that task, it is necessary to have an understanding of the magnitude of the risks associated with each option (the risk of success or failure) and the nature and magnitude of the associated consequences of the failure. The appellants cast the alternatives in this way:

(1) fly straight ahead away from the airfield, optimise the prospect of keeping the aircraft at speed and gaining height from which it could be brought back to Jandakot, run the risk that the left engine might also fail; and if it did, the plane would certainly crash, would necessarily land on terrain which would destroy it and its occupants, would come down in a location remote from rescue services and might well kill residents of houses under the potential flight path and/or other people on the ground; or

(2) continue to turn left and attempt to bring the aircraft down on a runway or on the surrounding cleared land, avoid collateral damage and injury to property and people on the ground, put the aircraft down where, should it be damaged on landing, rescue services would be nearby; and run the risk that by making the turn back to the Jandakot airfield, airspeed and performance would diminish and the plane might lose height and become uncontrollable.

67 I start with the second alternative. There is no express finding on whether or not there was any reasonable chance of Mr Penberthy landing the aircraft on a runway at Jandakot Airport or on the surrounding cleared land. However, the clear weight of the expert evidence was that a crash was the inevitable consequence of attempting to return to the airfield from an altitude of around 100 feet. On my reading of the expert evidence, a crash would be inevitable only if there was no reasonable prospect of a controlled landing on the runway or the cleared area. Senior counsel for the appellants conceded, correctly in my view, that on the evidence, a crash was inevitable (ts 38).

68 Turning to the first alternative. There was no evidence of the extent of the risk of the second engine failing when one engine had already failed. In this case, the risk is properly characterised as a theoretical possibility. Even so, it was clear from the expert evidence that the success of the alternative of attempting to gain airspeed and then a height of at least 500 feet was not a mere formality. However, Mr Lovegrove was the only expert who held to the view (with some initial support from Mr Chew (GAB 744E)) that the aircraft was 'behind the power curve' with little realistic prospect of successfully climbing to the necessary height to effect an on field landing. Notwithstanding that view, he was of the opinion that a prudent pilot would still have made the attempt. This position highlights the danger associated with uncritical acceptance of expert evidence. A failure to take an alternative course of action that was unlikely to avoid a crash outcome is unlikely to be characterised as negligent.

69 Having regard to the finding of causation, the trial judge must have rejected Mr Lovegrove's evidence and accepted that of Mr MacGillivray (ts 351, 352, 353, 354, 361) on this point. It was open on Mr MacGillivray's evidence to conclude on the balance of probabilities that the alternative of flying parallel to the powerlines would have resulted in a successful on field landing.

70 On the face of it, an option that had no prospect of avoiding a crash would be prima facie unreasonable if there was an alternative option that had a better than even chance (even if only 51%) of a safe on field landing, even if the consequences of failure of the alternative option were likely to be more significant. This assessment is made without recourse to considerations relevant to the life-threatening emergency which Mr Penberthy was placed in by the fault of another.

71 There is no doubt that Mr Penberthy was in a highly pressured situation in which there was no time for reflection or considered decision-making. In essence, he had to react instinctively or automatically by applying the predetermined steps in the manual (which he did). He was then faced with an unexpected obstacle which reasonably caused him to make the first turn which further compromised the already severely compromised climbing capacity of the aircraft. But thereafter he did not follow basic flying theory which required him to minimise turns and, there being no evidence of any compromise to the performance of the left-hand engine, attempt to fly to a minimum safe height from which to land.

72 It is unsettling to find that conduct is unreasonable because a person has not instinctively reacted in the most prudent way in the course of a life-threatening emergency created by another. However, by reason of their training and experience, much is expected of pilots. The overwhelming expert evidence was that a prudent pilot would, in the circumstances in which Mr Penberthy found himself, have applied basic flying theory and flown parallel to the powerlines for the purpose of gaining the necessary height to return to Jandakot for an on field landing. It was open to the trial judge to find that the course of action taken by Mr Penberthy, with the inevitable consequence of crashing, was unreasonable. I would dismiss ground 1.

73 The trial judge determined that liability should be apportioned one-third against Mr Barclay and two-thirds against Mr Penberthy. An appeal court will not interfere with a decision on apportionment unless the primary judge has made the type of error that would justify an appeal court setting aside a discretionary decision: Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10, 15 - 16. Error may be inferred from the outcome if it is outside the range of a reasonable judgment.

74 The trial judge described Mr Barclay's negligence as 'of a relatively high order of culpability' [364]. He noted that although the risk of failure during the anticipated life of the sleeve bearing may have been relatively low, the consequences of failure could be dramatic.

75 Turning his attention to Mr Penberthy, the trial judge said:

And yet the aircraft finally crashed because of the negligent errors of judgment made by the enormously experienced and highly qualified, Mr Penberthy. Barclay presented him with the emergency, and he failed to cope because of his negligent misjudgment in the flying of the aircraft. Had he not behaved so negligently, by turning to the left and continuing to do so, and by failing, without cause, to nurse the aircraft to a safe altitude above the ground before endeavouring to return and land at the airfield, he might well have been able to land the aircraft safely, thereby avoiding the harm suffered by the plaintiffs, for which these defendants are together liable [365].

76 The trial judge appears to be characterising the initial turn to the left to avoid the powerlines as negligent. That is inconsistent with his earlier finding. Moreover, the trial judge failed to assess the relativities of risk and consequence of the alternative options in assessing reasonableness and culpability. Further, it was as if the emergency counted for nothing in that assessment.

77 It is significant that Mr Barclay by his negligence created the emergency which put at risk the lives of Mr Penberthy and his passengers and the property of Fugro and Nautronix. Mr Barclay did not give evidence. There was nothing in terms of time frame or cost to explain Mr Barclay's departures from the standard of care expected of a person in his position.

78 Contrast this with the position of Mr Penberthy. He was left with the task of avoiding the risk of harm created by Mr Barclay. He was required to do so in an emergency situation where he was expected, by his training and experience, to react reasonably without any time for reflection or considered decision-making, notwithstanding that there were risks associated with all available options. To add to the difficulties, Mr Penberthy encountered an unforeseen obstacle, not being a matter which should have fallen within his self-brief. The manual was silent on his predicament. He had, by acting reasonably in turning to avoid the powerlines, further compromised the already highly compromised climbing capacity of the aircraft. That meant he was required to fly level for a considerable distance away from the airfield before knowing whether or not the aircraft would be able to climb.

79 In all the circumstances, it is unreasonable to conclude that Mr Penberthy's culpability exceeds that of Mr Barclay. I would uphold this ground and apportion liability as to 20% against Mr Penberthy and 80% against Mr Barclay.

Liability for economic loss (grounds 3 and 4)

80 The appellants contend the trial judge erred in holding that Mr Penberthy owed to Nautronix a duty to exercise reasonable care to prevent it suffering pure economic loss (ground 3). They claim the trial judge also erred in holding that Mr Barclay owed no duty to Nautronix to exercise reasonable care to protect it against pure economic loss (ground 4).

81 It is difficult to identify from the trial judge's reasons the precise nature of the economic loss the subject of the claim. It seems Nautronix was in the business of developing marine technology and subsea communications systems for the purpose of their commercial exploitation in the defence arena and in the oil and gas and related industries [348]. The trial judge said that the flight on 11 August 2003 was for the purpose of testing and developing that technology [324].

82 In relation to the claim against Mr Penberthy (and vicariously Fugro), the relevant loss is identified as follows:

Intellectual property in the technology in question, vested in Nautronix, was contributed substantially by its expert employees, who also had control of the advancement of the project to develop the technology to the point of sale or other contractual exploitation. The harm to and loss of those employees to Nautronix inhibited its capacity to develop and commercially exploit the technology ... [325]. (emphasis added)

83 I infer from this that the pure economic loss claimed by Nautronix relates to the loss of the services of its employees. That is consistent with its pleading. Relying on evidence given by a Mr Watson as to the nature of the technology being developed by Nautronix, the trial judge was satisfied of the general proposition that 'in the manner to which I have referred above, Nautronix suffered economic loss as a result of the accident' [328].

84 The trial judge held that Mr Penberthy owed a duty of care not to cause economic loss to Nautronix and breached that duty. He relied on the following matters: Mr Penberthy's knowledge of the purpose of the flight; that it was a commercial purpose; that the company who employed his passengers was Nautronix; and that if Mr Penberthy failed to discharge his duty of care, Nautronix was vulnerable in the sense that they were unable to protect themselves from the foreseeable harm of an economic nature caused by Mr Penberthy's negligence [346].

85 The trial judge identified the claim by Nautronix against Barclay as follows:

The case was fought on the basis that the relevant economic loss attributable to the negligent conduct of Barclay was that, as a result of the crash, by the deaths and injuries suffered by the senior staff of Nautronix who were passengers on the plane, and the damage or destruction of its equipment, economic loss was caused to Nautronix [347].

This arose, I accept, by reason of the delays to which Mr Watson referred, in developing and testing the marine technology and subsea communications systems for the purpose of their commercial exploitation in the defence arena, and in the oil and gas and related industries. I have found it to be the case, without, of course, embarking upon any assessment of damages, that Nautronix lost the intellectual property and corporate knowledge of the technology and communication systems which it was in the process of testing and developing for the purposes of its business [348].

87 The trial judge here identified two types of economic loss being (1) that resulting from the death and injury to 'senior staff of Nautronix'; and (2) that related to the damage or destruction of its equipment. A claim for economic loss that is consequential upon damage to the plaintiff's property does not fall within the rubric of 'pure economic loss'. Pure economic loss is a financial loss that is not causally connected to physical injury to person or property suffered by the same plaintiff.

88 The trial judge accepted that the class of persons that Mr Barclay ought reasonably to have had in mind as being at risk of foreseeable harm were those persons who hired the aircraft, presumably for a variety of commercial purposes, or simply to provide chartered air transport [351].

89 In concluding that Mr Barclay did not owe a duty of care to Nautronix in relation to pure economic loss, the trial judge relied on a modified version of the statement of McHugh J in Perre v Apande Pty Ltd [1999] HCA 36; (1999) 198 CLR 180, [112]. The modified version is as follows:

[A]s a general rule, no duty will be owed to those who suffer loss as part of a ripple effect. Ordinarily, it will be an artificial exercise to conclude that, before acting or failing to act, the defendant should have contemplated the interests of those persons who suffer loss because of the ripple effect of economic loss on the first line victims. While the defendant might reasonably foresee that the first line victims might have contractual and similar relationships with others, it would usually be stretching the concept of determinacy to hold that the defendant could have realistically calculated its liability to second line victims.

90 In fact, McHugh J was not stating a general rule but addressing the care required when relying on 'constructive knowledge' of the specific plaintiff or an ascertainable class in relation to second line victims. He is referring to 'first line victims' of pure economic loss, not victims who suffer consequential economic loss as a result of personal injury, death or property damage as a consequence of the negligent act of the defendant. 'Second line victims' are those who suffer pure economic loss as a result of pure economic loss caused to first line victims. Nautronix was a first line victim in relation to its pure economic loss claim.

91 The trial judge made the unchallenged finding that Mr Barclay lacked any knowledge of the use by Nautronix of Fugro aircraft and of the highly specialised work of Nautronix [350]. The trial judge accepted that economic loss was reasonably foreseeable but that Nautronix was not within 'a reasonably determinate class of persons at risk of that foreseeable harm' [353]. The trial judge continued:

The class identified by Nautronix is essentially indeterminate. It can be narrowed no further than being comprised of any user of the aircraft under any type of arrangement who might suffer loss of a purely financial kind, in whatever manner it might be incurred, if the aircraft crashed. That may be a class even wider than those users of the aircraft who might be described as doing so in furtherance of a commercial interest [353].

92 Further, the trial judge concluded that Nautronix was not vulnerable in the sense that it was unable, reasonably, to protect itself from such harm. He accepted Mr Barclay's submission that Nautronix could have entered into a contractual arrangement with Fugro which would enable it to recover losses incurred if the contract for the hire of the aircraft was breached by a failure to deliver the service for which it had contracted.

93 Whilst rejecting Nautronix's claim that Mr Barclay owed a duty of care to Nautronix to avoid inflicting pure economic loss, the trial judge held that Mr Barclay owed a duty to exercise reasonable care to protect Fugro against pure economic loss [355].

94 Mr Barclay took the view that Nautronix's pleading of its claim for pure economic loss also relied on the action for loss of services (actio per quod servitium amisit). On my reading of the reasons, the trial judge regarded that claim, but not its negligence claim, as unavailable in relation to the passengers who died as a result of the crash. The trial judge said:

For completeness then, I express the view that had I considered that Nautronix had available to it an action against Barclay for the negligent damage to its financial interests, I would not have held that action to be foreclosed, so far as the loss relied upon resulted from the deaths of Messrs Protoolis and Warriner. I would have taken the view that the claim being made was for the damage to the financial interests of Nautronix caused by the breach of the duty of care owed by Barclay, an action to recover for the damage represented by the interference with the intellectual property in the technology being developed by Nautronix, rather than an action concerned to directly compensate Nautronix for the loss, whether entirely or for a time, of the services provided by the five employees who were either killed or injured as a result of the crash of the aircraft [359].

95 The appellants contend the trial judge erred in the manner in which he applied the test of vulnerability to the relationship between Mr Penberthy and Nautronix, claiming that Nautronix was in a position to protect itself in advance of any negligence or damage occurring by making suitable commercial arrangements in the charter contract with Fugro.

96 The appellants make a reverse contention in relation to Mr Barclay. They contend the trial judge erred in concluding that Nautronix was not vulnerable in the relevant sense. They also claim the trial judge's conclusion that Nautronix was not within a 'reasonably determinate class of persons at risk of foreseeable harm' is inconsistent with the trial judge's earlier findings of foreseeability which gave rise to his conclusion that Mr Barclay owed a duty of care to the injured passengers and to the loss and damage to Nautronix's property. The trial judge held that Mr Barclay owed a duty of care to Nautronix in relation to its property [279] and was held liable as to one-third in respect of the Nautronix property loss claim [434].

97 Finally, the appellants also contend (see [58] of their written submissions) that any common law duty owed to Nautronix in relation to economic loss had to be confined to that resulting from the injury to Messrs Cifuentes, Knubley and Perincek, the law not recognising any claim upon the deaths of Messrs Warriner and Protoolis.

Legal principles - economic loss and loss of services

98 The law of negligence in Australia has in large measure moved away from inflexible fixed rules, control mechanisms and categories in favour of rules of general application. See for example the current law relating to liability for pure psychiatric injury (Tame v New South Wales [2002] HCA 35; (2002) 211 CLR 317); occupiers' liability (Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479); the liability of highway authorities (Brodie v Singleton Shire Council [2001] HCA 29; (2001) 206 CLR 512) and liability for pure economic loss (Perre).

99 However, the considerations or factors that underpinned the imposition of fixed rules, control mechanisms and categories continue to be relevant to an assessment of whether there is a duty of care, although the weight attaching to them may differ according to the circumstances of a particular case.

100 Where the existence of a duty of care is well-established and well understood, little analysis or reference to first principles will be required. It is required in this case.

101 Reasonable foreseeability of harm of the kind suffered is a necessary although insufficient condition for the existence of a duty of care: Tame [12]. Reasonableness is the test for the imposition of a duty of care (Tame [35], [109], [185], [272], [331]). This marks a return to the words of Lord Aitkin in Donoghue v Stevenson [1932] AC 562, 580, that a duty of care is only owed to those:

[S]o closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

102 There are a variety of factors that are, or may be, relevant to whether it is reasonable to impose a duty of care, the relevance and weight of which may vary according to the nature of the case. Relevant factors include physical, temporal, relational and causal closeness, assumption of responsibility, general reliance, control, vulnerability, and actual or constructive knowledge of relevant matters.

103 Assumption of responsibility and known reliance figure prominently in the establishment of a duty of care for negligent misstatement. The meaning and importance of vulnerability in the context of a claim for pure economic loss was most recently addressed by the High Court in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515. The plurality (Gleeson CJ, Gummow, Hayne & Heydon JJ) said:

Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. 'Vulnerability', in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, 'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant. So, in Perre, the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp, the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords, the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company [23].

104 The trial judge's finding that the test of foreseeability was satisfied in relation to Nautronix's property damage claim is not inconsistent with his finding that Mr Barclay did not owe a duty of care to Nautronix in relation to pure economic loss. Economic loss consequential upon injury to the person or property of the plaintiff is routinely awarded. That is not the case with pure economic loss, to which different considerations apply. They include the spectre of indeterminate liability, whether in terms of time, amount or the class of potential plaintiffs. Secondly, greater priority is accorded by the common law to physical injury to person or property. That is partly because the infliction of economic loss in some circumstances is an accepted and acceptable part of a competitive economy. It may also be partly attributable to the fact that parties involved in a competitive economy can reasonably be expected to take into account and allocate the risk of pure economic loss, with this allocation reflected in the pricing of goods and services.

105 Whatever be the explanation, the case law demonstrates that the scope of liability for negligently caused pure economic loss is significantly narrower than liability for loss caused by physical injury to person or property. There is no single or fixed control mechanism for achieving this outcome. Nor are there different or additional rules that must be satisfied in order for liability for pure economic loss to attach. For example, the content of the requirement of foreseeability (which applies to duty, breach, causation and remoteness of damage) does not alter. But if the minimum requirement of foreseeability is exceeded on the facts, that is a factor which may weigh heavily in the assessment of whether it is reasonable to impose a duty of care to avoid inflicting pure economic loss. That was so in Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad' [1976] HCA 65; (1976) 136 CLR 529 and Perre.

106 The minimum requirement of foreseeability may be exceeded either because the specific plaintiff is foreseeable or because the specific type of economic loss actually suffered is foreseeable, or because the defendant was aware of and considered the actual risk which eventuated to an ascertainable class of plaintiff. At least one of these factors was present in Caltex and Perre. Further, in both those cases the vulnerability of the plaintiff was another weighty factor: the plaintiffs had no knowledge of the proposed conduct the source of the risk and there was no commercial relationship, or chain of commercial relationships, linking the plaintiff with the creator of the risk. The combination of factors in those cases rendered it reasonable to impose a duty to take reasonable care to avoid pure economic loss. Those factors were absent in Woolcock.

107 However, it is also relevant that the common law has long recognised an action for loss of services which permits a master (employer) to recover damages from a negligent defendant for pure economic loss caused by an injury to a servant (employee): Commissioner for Railways (NSW) v Scott [1959] HCA 29; (1959) 102 CLR 392; GIO Australia Ltd v Robson (1997) 42 NSWLR 439. Any question as to the continued existence of this common law action, which has been labelled as out-dated and anomalous, is a matter for the High Court.

108 The action had its origins at a time when a master was understood to have a quasi-proprietary interest in his servants (and later his services), in which event the economic loss would be seen to be consequential and its recovery unexceptional: see Jones G, 'Per Quod Servitium Amisit' (1958) 74 Law Quarterly Review 39. Moreover, no issue of indeterminacy arises because of the need for the plaintiff to have an existing employment relationship.

109 As to the scope of the action for loss of services, the New South Wales Court of Appeal in Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571, noted that in exceptional circumstances an employer might recover loss of profits resulting from the loss of the employee's services. By way of example, reference was made to a person who was literally irreplaceable because of their unique capacity or knowledge in a new field. I see no justification for departing from this position.

110 In my view, the existence of this common law action is directly relevant to whether it is reasonable to impose a duty of care in negligence. Consistency between closely related common law actions is a legitimate expectation. Whilst the action for loss of services remains part of the common law of Australia, it is difficult to avoid the conclusion that a negligent defendant must owe to an employer a common law duty to take reasonable care to avoid causing pure economic loss by injuring its employees. That conclusion is applicable to both Mr Penberthy and Mr Barclay.

111 The final issue of principle is whether Nautronix's claim relating to the deaths of Mr Protoolis and Mr Warriner is defeated by what is known as the rule in Baker v Bolton [1808] EWHC KB J92; (1808) 1 Camp 493; (1808) 170 ER 1033. The rule is stated in terms that '[i]n a civil court, the death of a human being could not be complained of as an injury'. That rule has been approved by the High Court: Woolworths Ltd v Crotty [1942] HCA 35; (1942) 66 CLR 603; Agtrack (NT) Pty Ltd v Hatfield [2005] HCA 38; (2005) 223 CLR 251 [3]; Nguyen v Nguyen [1990] HCA 9; (1990) 169 CLR 245, 251 - 252; WorkCover Queensland v Amaca Pty Ltd [2010] HCA 34; (2010) 271 ALR 203 [34]. The Fatal Accidents Act 1959 (WA) created a right of action where none existed at common law.

112 The rule in Baker v Bolton applies to both an action for loss of services and an action in negligence: Woolworths Ltd v Crotty (616); Swan v Williams (Demolition) Pty Ltd (1987) 9 NSWLR 172, 175 - 184. The New South Wales Court of Appeal in Swan held that an action may not be brought at common law at the suit of an employer for damages caused by the negligently occasioned death of an employee.

113 Moreover, the gap in the common law cannot be bridged by the device of characterising the deaths as the loss of intellectual property (or capital).

114 Based on my conclusion that the rule in Baker v Bolton is still part of the common law of Australia, I would uphold the appellant's claim that Nautronix has no common law claim arising from the death of Mr Protoolis and Mr Warriner.

115 Based on my conclusion that the common law continues to recognise an action by an employer for negligently caused loss of employee services, I would conclude that both Mr Penberthy and Mr Barclay owed a duty to Nautronix to take reasonable care to avoid pure economic loss caused by injury to its employees.

116 However, for the sake of completeness, I propose to consider the common law duty of care question on the basis that the common law action for loss of services has not survived or alternatively does not require the imposition of a duty of care in negligence.

Negligence - Pure economic loss - Whether common law action for loss of services - Rule in Baker v Bolton - Whether common law claim for death of employees

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (341 paragraphs)

FUGRO SPATIAL SOLUTIONS PTY LTD -v- CIFUENTES [2011] WASCA 102 (20 April 2011)

The reasoning of the trial judge on apportionment

Legal principles - economic loss and loss of services

Parties

Legislation Cited (4)

Cases Cited (25)