Duty Pure Economic Loss By Negligent Acts - Torts Law

Class 5- Duty- Pure economic loss by negligent acts:

Negligent acts or omissions:

• The courts are reluctant to allow a recovery for this because competition for profits is necessary and recovery for a loss in profits is therefore ridiculous.

• They put extra limiting factors on these cases.

• There is a duty in this case for pure economic loss but how far can this duty extend?

• According to Gibbs J, as a general rule damages are recoverable for economic loss which is not consequential upon injury to the plaintiff’s person or property? False. They are not recoverable (no damages) except in exceptional cases.

• What does Gibbs J consider to determine if this is an exceptional case? They had knowledge that the AOR refinery led to Caltex’s terminal. They knew property damage would cause loss to Caltex and they had charts showing the pipeline. The individual person was known and not an unascertainable class of peoples (it is more determinable). The dredge knew the physical means through which the harm would occur.

• Stephen J sees ‘reasonable foresee-ability’ as too general and that there is a need for some ‘control mechanism’? True (you need both in torts). There should be a control mechanism based upon notions of proximity between the tortuous act and resultant detriment to take place of the exclusionary rule.

• What will no doubt be recognised as characteristic of one particular class of case among the generality of cases involving economic loss? Salient features: knowledge of the ascertained class and knowledge of what would occur if they did the act, that they already owed a duty of care to the owners of the pipeline, the nature of the detriment suffered and the claims made (they were known to the dredge). They are compensated not for loss of profit but for the money spent in finding other ways to transport the oil. Salient features: Knowledge, control, vulnerability, responsibility, proximity, policy (e.g. public interest). Or they are features to work out proximity.

• What features comprise whether there is proximity, according to Stephen J? Actual or constructive knowledge (you knew at the time). This is the element of knowledge required. They had knowledge of the prospective use of the pipeline.

• Why does the presence of actual or constructive knowledge assume significance in this case? Because the dredge had to have knowledge of Caltex at the time and not after the event.

Page 309

Caltex Oil v The Dredge “Willemstadt” (1976) – A case where a defendant can have a duty of care to not cause economic loss to a plaintiff that does not own the property but is directly affected by any carelessness that damages the property.

Facts:

• The Dredge passed over a pipeline while dredging in Botany Bay.

• (A dredge is a device for scraping or sucking the seabed. A dredger is a ship or boat equipped with a dredge. The process of dredging creates excess material, which are conveyed to a different location. Dredging can produce materials for land reclamation or other purposes, usually construction-related)

• It meant to avoid the pipeline.

• The pipeline was damaged.

• AOR owned the pipeline. Caltex was using it to transfer oil. The damage caused Caltex expenses.

Remedy sought:

• Caltex wants damages in the High Court for the failure to take care in avoiding damage to the pipeline which consequently caused them to suffer economic loss.

Legal issue:

• Was the economic loss suffered by Caltex when the pipeline was damaged reasonably foreseeable to the Dredge considering that it was AOL who owned the pipeline and not Caltex?

• Did the Dredge have knowledge that Caltex relied on the pipeline for delivery of petroleum products and so would be adversely affected by their carelessness?

Outcome:

• Caltex won. Appeal allowed.

Legal reasoning:

• Gibbs J reasoned that there are exceptional cases where a defendant will have knowledge that their carelessness will cause loss to a plaintiff who does not personally own the property. The employees of the Dredge knew the pipeline led to a Caltex terminal and was important for transporting their products. They therefore should have had Caltex in contemplation as a person who would suffer economic loss if the pipes were broken. They owed a duty to Caltex not to damage the pipeline.

• Stephen J reasoned that there was sufficient proximity between the parties. The Dredge had the knowledge that the property damage would inherently cause economic loss to Caltex who rely directly on the pipeline’s use. They had charts that showed the pipeline extend from the AOR refinery to the Caltex terminal. Caltex was in the reasonable contemplation of the Dredge. They knew they would suffer loss of use and loss of finding alternative modes of transport.

Ratio decidendi:

• The general rule is damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff’s person or property.

• However in exceptional cases, the defendant does have a duty of care if they can reasonably foresee that the plaintiff is likely to suffer economic loss as a result of their actions (despite the fact that the plaintiff does not own the property).

• This requires the parties to have sufficient proximity with one another and to have knowledge of the economic loss that would be caused to the plaintiff as a result of carelessness.

• There is no exclusionary rule- where a person owed no duty to avoid causing economic loss to another person.

• McHugh J:

• Duty of care and proximity (311-313):

  • The demise of proximity as a unifying theme. No longer the be all and end all that proximity establishes a duty of care. So we need a new framework.

  • The need for a new framework for determining the existence of a duty of care.

  • The need for predictability.

• The reasons for denying or imposing a duty of care in cases of pure economic loss (313-18):

  • Indeterminacy. We want to know who can sue in the situations.

  • Unreasonable burdens on the autonomy of individuals.

  • Vulnerability. Very important.

  • Insurance.

  • Knowledge and reasonable foresee-ability. Talked about in Caltex case.

1. Was the loss suffered by the Perres or members of the group reasonably foreseeable?

2. If yes, would the imposition of a duty of care impose indeterminate liability on Apand?

3. If no, would the imposition of a duty of care impose an unreasonable burden on the autonomy of Apand?

4. If no, were the Perres or some of them vulnerable to loss from the conduct of Apand?

5. Did Apand know that its conduct could cause harm to individuals such as the Perres?

• Apand owed a duty of care (318-321):

  • The class. The class of people who could sue was defined by the 20km radius.

  • Unreasonable burdens on the autonomy of Apand.

  • Vulnerability. There was nothing Perre could do to stop being in the 20km radius from the bacterial wilt.

• Gummow J (321-24):

  • Review of law.

  • The interests for which protection is sought.

  • No general formula. Reasonable foresee-ability is a factor but not in pure economic loss. The case does not fall in a unified field.

  • The salient features of the present case. When combined they constitute a sufficiently close relationship to give rise to a duty of care. Appand had exclusive control of the...