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Annual Review of Insurance Law 2002 - Duty of care, Trade Practices Act and common law liability

• High Court considers duty of care of statutory authorities
• A stockbroker's flagrant breach of duty - exemplary damages awarded
• No extension of liability in favour of subsequent purchasers of commercial dwellings
• Degree of control necessary to found direct or vicarious liability
• Hotelier's duty of care towards an intoxicated patron
• Display of warning signs required?
• Reasonable foreseeability of the risk of injury and the borderline between liability and non-liability
• Duty of care and reasonable foreseeability of sporting injuries
• Occupier's liability - multiple-use sporting venue
• Negligence and occupier's liability
• When is risk of injury far-fetched and fanciful?
• Nervous shock - what limits remain?
• High Court abolishes discounting of damages for prospect of remarriage
• High Court rejects reduction of damages award under Trade Practices Act for contributory negligence
• Equitable contribution arising out of different causes of action
• What law should be applied to an action in respect of torts committed outside Australia?
• Duties and responsibilities of the expert witness

High Court considers duty of care of statutory authorities

This case involves an appeal from a decision of the Full Federal Court, as reported in our Annual Review of Insurance Law 2000.

The facts

In late 1996, there was heavy rainfall around Wallis Lake. As run-off into the lake can increase the risk of contamination from sewage and other pollutants, oyster-growers usually do not harvest oysters for a few days following heavy rain. Graham Barclay Oysters Pty Ltd (Barclay Oysters) waited a few days before harvesting. The standard tests were conducted: samples of oysters taken tested negative for E-coli bacteria (suggesting, but not guaranteeing, that the oysters were virus-free), and the oysters were depurated by being immersed in purified water and disinfected by ultra-violet radiation for 36 hours. This method was a useful, but not infallible method, of ensuring the purity of oysters for consumption. At the time, there was no known method of detecting the Hepatitis-A virus (HAV) in oysters. Despite the care taken by Barclay Oysters, it sold oysters contaminated with HAV.

Mr Ryan consumed oysters harvested from Wallis Lake. He was diagnosed with HAV after eating the oysters, in what became an epidemic. Never, in more than a century of oyster-farming at Wallis Lake, had such an outbreak occurred.

Mr Ryan launched proceedings in the Federal Court against Barclay Oysters, the NSW State Government and the local council. The claims were in negligence (and under the Trade Practices Act 1974 (Cth) for merchantability of goods).

At first instance, Justice Wilcox found that all three defendants were liable in negligence to Mr Ryan. Barclay Oysters' duty of care was uncontested, the only issue being breach. Barclay Oysters and the authorities appealed on the negligence finding.

The Full Court of the Federal Court (Justices Lee, Lindgren and Kiefel) allowed an appeal by the local council, holding it had no relevant duty of care to oyster consumers. A differently-constituted majority (Justice Lindgren dissenting) dismissed the State's and Barclay Oysters' appeal, holding that it was open to Justice Wilcox to find a duty of care in the State, and a breach of Barclay Oysters' duty to oyster consumers.

The decision

Justices Gummow and Hayne delivered a joint judgment, with which Justice Gaudron concurred. Justice McHugh delivered a separate judgment that concurred with the orders of the joint judgment. Chief Justice Gleeson and Justices Callinan and Kirby each delivered separate judgments. The findings were unanimous as to the liability of the State and council, but split four to three (Chief Justice Gleeson and Justices Callinan and Kirby dissenting) on the question of Barclay Oysters' breach of its duty of care.

Was the State liable?

Mr Ryan argued that the State had a duty to take reasonable care to protect consumers from reasonably foreseeable risks of injury as a result of oyster consumption. The source of this duty was, it was argued, a network of statutory provisions giving the State powers over aquaculture and public health. Importantly, the State could have, but did not:

• conduct sanitary surveys to identify and remedy the sources of pollution;
• close oyster fisheries that presented an unacceptable risk to public safety, or prevent them from selling oysters during periods of danger.

Their Honours found that the existence of statutory powers does not ordinarily give rise to a duty of care to persons for whom the statutory powers were created.

A public authority has no duty to take reasonable care to protect other persons merely because the legislature has invested it with a power whose exercise could prevent harm to those persons (per McHugh J at [81]).

There is no simple test for determining when an authority will owe a duty of care to an individual. However, the court attempted to explain its method by asking whether there is 'a relationship between the authority and a class of persons that, in all the circumstances, displays sufficient characteristics answering the criteria for intervention by the tort of negligence' [at 146].

The 'circumstances' of which the court was speaking include the following:

• the degree and nature of control exercised by the authority over the risk of harm that eventuated;
• the degree of vulnerability of those who depended on the exercise by the authority of its powers; and
• the consistency of the asserted duty of care with the terms, scope and purpose of the relevant statute.

In this case, the State had decided, after much consultation, to adopt a self-regulation scheme for the oyster industry. Since this was fundamentally a political decision about the nature of regulation and the allocation of resources, the members of the court noted that such a question is not appropriate for the courts to rule upon [175-176]. Once such a decision is taken, the scope of any common law duty is necessarily adjusted to reflect the insusceptibility of that decision to judicial review.

The State had decided upon self-regulation. There were no reasons to conduct sanitary surveys, as HAV had never been found in Wallis Lake oysters before. Likewise, there was no reason to order a fishery closure. Thus the court unanimously found that the State had no common law duty of care towards the oyster consumers.

Was the council liable?

As with the claim against the State, the claim failed. The council had no direct control over the farming of oysters, and between it and Mr Ryan stood the entire oyster industry, each enterprise of which markets produce presenting a potential threat to the public. The control ultimately lay with the industry and its operators.

Though the council had broad statutory powers of inspection and intervention to protect the local environment, those powers did not give the council sufficient control over all risks of harm that could emanate from any commercial enterprise in the local area. Accordingly, the powers of the council were insufficient to create a duty of care to oyster consumers such as Mr Ryan.

Was Barclay Oysters liable?

The court was divided on whether Barclay Oysters had breached its undisputed duty of care to its customers. In a four to three decision, Barclay Oysters was held not to have breached its duty. In so doing, the High Court affirmed its previous decision in Wyong Shire Council v Shirt (1980) 146 CLR 40 that a duty of care does not extend to ensuring the safety of consumers in all circumstances, but is satisfied by doing what a 'reasonable man' would do after assessing the magnitude of the risk, the probability of its occurrence, and the expense and difficulty of alleviating the risk (at [190]).

Barclay Oysters had acted reasonably in all the circumstances: it had waited an acceptable period of time before recommencing harvesting, ensured the water's salinity levels had normalised, and used the best test available for detecting bacteria. There was no available means to eliminate the possibility of HAV contamination. Ultimately, the company had acted reasonably and fulfilled its duty of care.

Orders

The appeals by the State and the Barclay companies were allowed with costs. Mr Ryan's appeal against the Federal Court's findings in favour of the council was dismissed with costs. The court, in making such orders, was effectively upholding Justice Lindgren's findings in the Full Court of the Federal Court, who reached the same conclusion but was in a minority on the liability of the State and Barclay Oysters.

A stockbroker's flagrant breach of duty - exemplary damages awarded

This well-publicised case examines the scope of duties owed by a stockbroker, and highlights the duty of stockbroking organisations to monitor and supervise their brokers' activities. It also illustrates the application of exemplary damages in cases of flagrant breaches.

The facts

The facts of this case were complex and hotly disputed. The trial occupied 115 days and, overall, it took more than seven months. The trial judge, Justice Smith, described the proceedings as 'the hardest fought and most hostile civil case I have experienced as a practitioner and a Judge'. The judgment delivered by Justice Smith runs more than 127 pages. There is also a 34-page annexure, which provides a chronology of the events.

The events that gave rise to this litigation had occurred between November 1997 and February 1999.

The plaintiff was Rahmat Ali (Rahmat), described as an elderly, unsophisticated man. He lived in the village of Navau in Fiji. He was a taxi proprietor and sugarcane farmer. The defendant was a firm of well-known stockbrokers, Hartley Poynton Limited (HPL).

Rahmat has never dealt directly with HPL. At all times, his son, Liyakat Ali (Liyakat) acted on his behalf as his agent. Liyakat dealt mostly with Christopher Martin (Martin), an employee of HPL.

There were two main aspects of Rahmat's claim.

1. 'Trading aspect' - whereby Martin was retained by Rahmat through Liyakat to act as his broker and produce returns of 15 to 20% compounding per week (later varied to 25 to 30% compounding per month), with the trading conducted on a discretionary basis by Martin, subject to Rahmat's instructions. Rahmat made the initial investment of $101,818.54 to be used in the trading. Further terms of the retainer is respect of the trading aspect were:

• HPL will provide $200,000 of interest-free gearing if Rahmat provided $100,000;
• Rahmat will be given extended settlement terms of at least 30 days.

In respect of the trading aspect, Martin was aware of the fact that the investment was to provide funds for the retirement of Rahmat, although the relevant forms designed to inform the broker of the personal information and the financial details of the investor were not completed by Liyakat. Liyakat informed Martin that the client's profile was one of a very risk-conscious client. During the discussions between Liyakat and Martin, prior to entering the retainer agreement, Martin made the following alleged representations to Liyakat:

• Martin would not suffer losses in excess of 5% on any individual investment in a share or financial derivative;
• Rahmat would have a period of up to six to eight weeks to settle transactions;
• that trading in shares was not risky and that Rahmat would not be exposed to losses in excess of the stop loss limit (5%);
• Martin had the ability to adapt to the market as it evolved so that he could take significant advantage and be a couple of steps ahead of everyone else; and
• that Martin had came into a lot of information before the market knew about it and that this would alleviate risk for Rahmat.

Between November 1997 and February 1999, Martin traded close to $40 million worth of shares and derivatives, earned brokerage fees of more than $130,000, and, by the end of February 1999, accumulated trading profits of more than $520,000. However, trading losses exceeded $825,000. The original investment of Rahmat was depleted, and HPL was claiming more than $67,000 in outstanding brokerage fees.

2. 'Telstra aspect' - whereby Martin was retained by Rahmat through Liyakat to acquire for Rahmat 100,000 Telstra shares (T1 shares) to be held as a long-term investment to be used to build up a portfolio of blue chip shares by means of margin lending. Rahmat made the initial investment of $195,000 to be used in establishing the portfolio.

The 100,000 T1 shares were acquired by Martin for Rahmat using applications by 13 family members of Rahmat applying for 8,000 shares each in the Telstra share offer. On 18 November 1997, Martin sold the 100,000 T1 shares, despite clear instructions to the contrary from Liyakat on behalf of Rahmat. Martin used the proceeds of the sale of the T1 shares in trading on behalf of Rahmat, and, by the end of February 1999, the entire fund was run down.

The decision

Justice Smith held that:

• Martin was engaged to advise and conduct trading on behalf of Rahmat;
• Rahmat relied on Martin;
• the relationship between Rahmat and Martin was fiduciary in nature;
• a stockbroker's duty is to furnish the client with all the relevant knowledge that the adviser possesses, concealing nothing that might reasonably be regarded as relevant to the making of an investment decision;
• there was an implied term of the retainer that the stockbroker would, in performing its obligations under the retainer, exercise such reasonable care, skill and diligence as might be expected of a reasonably competent stockbroker;
• Martin owed to Rahmat a duty of care in accordance with the Hedley Byrne principle - in particular, he knew, or ought to have known, that Rahmat would rely on the skill of Martin and the exercise of care by him in what he said; and
• HPL had an obligation to supervise and control Martin's trading with reasonable care.

Justice Smith further held that:

• Martin was reckless in making the misrepresentations that he did about risks and returns;
• Martin's conduct was extraordinarily negligent considering that all brokers would, or should, know the equation between risk and return;
• Martin did not simply fail to inform Liyakat about the risks involved in trading in warrants and short-selling, but he recklessly dismissed or ignored the risks involved;
• Martin's failure to utilise well accepted systematic techniques to minimise losses, maximise returns and manage risks was negligent;
• Martin's sale of the 100,000 T1 shares was a wilful breach of contract;
• although HPL had appropriate policies in place, there was no adequate system in place to monitor compliance with those policies, rendering those policies worthless;
• the conduct on part of Martin of which HPL was aware of, separately and in combination, put HPL on notice that Martin required very close supervision and control;
• the breaches by Martin concluding various breaches of the ASX Rules occurred because of the absence of any adequate system for supervising and controlling brokers; and
• HPL had breached its obligations to supervise and control Martin's trading with reasonable care.

Justice Smith further held that there was contributory negligence on the part of Rahmat because he did not take control of the trading and did not terminate the retainer. However, Justice Smith also considered that Rahmat's failure in taking those actions was largely attributable to Martin's gross negligence, the gross negligence of other employees of HPL, Martin's deception and the persuasive manipulative pressure applied by Martin. Consequently, Rahmat's contribution was set at 15%.

Justice Smith awarded $1,106,818.54 to Rahmat, consisting of both compensatory and exemplary damages as follows:

• $101,818.54 - Rahmat's initial investment in the trading aspect;
• $50,000 - the loss of opportunity arising from the misrepresentations about risks and returns, negligent advice, misleading conduct and negligent supervision by HPL;
• $195,000 - Rahmat's initial investment in the Telstra aspect;
• $500,000 - the loss of opportunity arising from the sale of the T1 shares in wilful breach of the retainer; and
• $260,000 - exemplary damages (consisting of the approximately $130,000 brokerage commission charged by the firm, and an additional $130,000 as penalty and deterrence).

In assessing the quantum of exemplary damages, Justice Smith noted that:

• HPL ignored its public promises, and - although it publicly promoted itself to be a firm with core values that included acting with integrity and ensuring compliance with the spirit and letter of the relevant Acts, Rules and Regulations - on the evidence, nothing effective was done to meet those promises;
• HPL ignored the rights and interests of its clients and its actions reflected that, while HPL went into some trouble to address its own financial interests, it ignored whatever rights the clients might have acquired, and the financial position of its clients; and
• HPL ignored the rights and interests of Rahmat, including the closure of his accounts without consultation, constituting a conscious contumelious disregard for the rights of Rahmat.

Justice Smith allowed a counter claim of $67,017.10 to be set off against the damages awarded for outstanding brokerage fees.

No extension of liability in favour of subsequent purchasers of commercial dwellings

This case considers whether a future owner of a commercial building is owed a duty of care by the engineer responsible for its design.

The facts

In 1987, the then owner of a warehouse and offices in Townsville engaged engineers CDG Pty Ltd (CDG) to provide structural design and documentation for construction of a complex. In September 1992, the building was sold to Woolcock Street Investments Pty Ltd (Woolcock), who did not engage an engineer or building expert to provide a pre-purchase inspection report, and did not obtain any warranty that the complex was free of structural defects.

In 1994, substantial structural distress became apparent because of the settlement of the foundations. Woolcock alleged negligence by CDG and that it had suffered pure economic loss as a result, including the costs of demolishing and reconstructing parts of the premises, loss of rent during demolition and reconstruction, and diminution in the value of the property.

The decision

The Queensland Court of Appeal held that no duty of care was owed to Woolcock because:

1. The principle from the High Court decision in Bryan v Maloney (1995) 182 CLR 609 that a subsequent purchaser of a dwelling-house may recover pure economic loss from the negligent builder of the house is restricted to residential dwellings and is not extended to commercial premises.
2. The approach is not inconsistent with the general principles for the recovery of pure economic loss enunciated in recent High Court cases (that is, Perre v Apand Pty Ltd (1999) 198 CLR 180); and any extension of the present boundaries of liability beyond that recognised in Bryan v Maloney was a matter for the High Court or the legislature.

The court said that Bryan v Maloney rested quite heavily on the vulnerability of members of the public in acquiring their homes, and vulnerability was one of the relevant factors in Perre v Apand in determining if a category of claim for pure economic loss should be recognised.

The court noted that those engaged in commerce have capacity to protect themselves by employing expert assistance to ascertain the condition of the premises, seeking appropriate warranties and bargaining with the benefit of legal and other expert advice. This could be contrasted with an ordinary homebuyer's position, where only some, or none, of those options would be available to allow the purchaser to protect its interests.

This distinction was sufficient to find against imposing liability on builders and designers.

Degree of control necessary to found direct or vicarious liability

This case considers whether the requisite degree of control to found direct or vicarious liability can be conferred by a person's status as the holder of a certificate of registration.

The facts

On 8 January 1990, a 36-foot motor boat called the N'Gluka sank in Port Stephens. Five children, who were trapped in the front cabin when the boat sank, were drowned. The immediate family of one of the children who drowned, Amanda Frost, brought proceedings in the District Court of New South Wales against Mr and Mrs Warner, claiming damages for nervous shock suffered as a result of the accident and the death of Amanda Frost.

Mr Warner was the owner of the vessel and Mrs Warner, who had signed the certificate of registration for the vessel, was the 'registered controller' under the Water Traffic Regulations (NSW) (the regulations).

The decision

At first instance in the District Court, it was held that Mr and Mrs Warner were each liable to the appellants in negligence.

Subsequently, Mrs Warner (and not Mr Warner) appealed. The New South Wales Court of Appeal allowed Mrs Warner's appeal and set aside the trial judge's finding of liability against Mrs Warner.

The appellants appealed to the High Court on two grounds. The first ground was that the Court of Appeal erred in holding that Mrs Warner's status as 'registered controller' of the vessel did not make her responsible for the negligence of her husband. The second ground was that the Court of Appeal erred in holding that Mrs Warner did not owe a duty of care, which included a duty to prevent the vessel sailing while it was grossly overloaded, by reason of her status as 'registered controller'.

Chief Justice Gleeson and Justices Gummow and Callinan commented that the trial judge's finding that Mr Warner at all material times had de facto control of the vessel was not challenged. This meant that if the appellants' submissions were to succeed, the regulations would have to be construed such that they gave Mrs Warner the power to make another person's use of the vessel unlawful, thereby conferring an element of control upon her sufficient to found both direct and vicarious liability. The necessary 'control' was said to arise from the proper construction of two provisions of the regulations.

One of the regulations provided that a person 'who controls a registrable vessel' may apply for registration. Chief Justice Gleeson and Justices Gummow and Callinan found that this regulation did not confer control upon a successful applicant for registration either expressly or by implication. Rather, it operated in a negative sense to restrict the permissible class of applicants for registration to those who have the necessary control.

The appellants also relied on a regulation which provided that it was an offence for any person to navigate a registered vessel without the 'authority or consent of the holder of the certificate of registration'. Again, the court found that this regulation did not confer a power to refuse to authorise or consent, rather, that power arises from being in control.

In the circumstances, the fact that Mrs Warner was the holder of the certificate of registration under the regulations was not sufficient to found liability either directly or vicariously.

Justice Gaudron found that the evidence that Mr Warner always exercised actual control also made it impossible to infer that Mrs Warner specifically authorised use of the vessel of the day of it sinking, or that Mr Warner was on that day navigating the boat on Mrs Warner's behalf, whether as her servant, agent or in any other capacity. As for actual negligence, in the absence of evidence that Mr Warner would not have commenced the journey if Mrs Warner had asserted her rights as registered controller of the vessel, Justice Gaudron was not able to find that Mrs Warner had any control over the situation and, that being the case, she was under no duty of care to the appellants.

Justice Kirby, in a dissenting judgment, found that Mrs Warner had the power to stop the vessel from putting to sea she failed to exercise that power given to her by law and that failure constituted direct evidence of negligence on her part. 

Hotelier's duty of care towards an intoxicated patron

This case considers whether a hotelier owes a duty to ensure that their patrons are not injured as a result of their own intoxication. In this case, the New South Wales Court of Appeal took a different view to previous international and Australian judgments, including that of the Supreme Court of Queensland in Johns v Cosgrove (1999) 27 MVR 110.

The facts

Ms Cole was seriously injured when she was struck by a motor vehicle being driven by Ms Lawrence. Prior to the accident, Ms Cole had been drinking at premises operated by the South Tweed Heads Rugby League Football Club Ltd (the club).

Ms Cole sued both the club and the driver. The trial judge found that Ms Lawrence and the club were each 30% responsible for Ms Cole's injuries and that Ms Cole had contributed 40% to her own loss

The decision

The New South Wales Court of Appeal unanimously upheld the club's appeal from the judgment of the trial judge.

While the Court of Appeal held that the evidence did not support a finding of liability on either the club or Ms Lawrence, it nevertheless addressed the scope of the duty of care owed by hoteliers to their patrons. Justice Ipp gave the leading judgment, with which Justices Heydon and Santow agreed. He stated that to impose a duty on a hotelier to take reasonable steps to avoid injuries to patrons caused by their own voluntary and self-induced drunkenness would involve a significant extension in the scope of the general duty of care owed by occupiers to persons lawfully entering their premises.

In the court's view, the recognition of such a duty, except in extraordinary cases, would give rise to a variety of difficulties and place the hotelier in an untenable position. Some of the practical difficulties that would face a hotelier which Justice Ipp identified were:

• determining whether a patron is intoxicated;
• preventing other patrons from buying alcohol for intoxicated ones;
• detecting patrons who arrive on the premises in an intoxicated state;
• preventing intoxicated patrons from suffering injury when the hotelier has limited control over such patrons; and
• where such a duty would end.

The court considered that the law of negligence should adopt a similar approach to that taken in contract and criminal law and recognise that adult persons must assume responsibility for their own actions while intoxicated if this intoxication results from a deliberate and voluntary decision on their part to drink to excess.

As such, the court held that the club did not owe Ms Cole any duty, other than the normal duty owed by an occupier to a lawful entrant, and was not responsible for her injuries.

Justice Ipp stated that even if such duty as contended for by Ms Cole existed, it would have been discharged by the club offering to arrange her transport home (as happened in this case).

Interestingly, the court left open the possibility that a duty of care on the part of a hotelier to protect a patron from suffering injury due to their own intoxication may arise where a patron becomes so intoxicated as to be completely incapable of any rational judgment or of looking after themselves.

Ms Cole has filed an application for special leave to appeal to the High Court. 

Display of warning signs required?

This case considers the need for warning signs when there is a reasonably foreseeable risk of injury.

The facts

The appellant had attended Hoyts Cinema in Bankstown, Sydney, in her capacity as a teacher's aide and was responsible for the welfare of a disabled child. Despite having entered the cinema when the seats were retracted, the appellant was unaware that the seats automatically retracted when unoccupied, and that, on rising to attend to the child, her seat would revert to a vertical position. She sat on her seat in the vertical position and injured her coccyx and the disks and ligaments of the lumbar spine.

The decision at first instance

At first instance, the plaintiff claimed negligence by reason of lack of a warning. Justice Gibbs, the trial judge, found for the defendant. Justice Gibbs held that the cinema seats were not inherently dangerous, and it was not unreasonable for the respondent to expect that its patrons were aware of the automatic retraction of the seats. Justice Gibbs concluded that the absence of warning signs was an irrelevant consideration, as the plaintiff would have been likely to act in a similar manner even if she had known that the seats retracted automatically. Justice Gibbs found no breach of duty, nor any relevant failure to keep the premises as safe as reasonable care and skill could make them

The decision on appeal

Justices Sheller, Heydon and Ipp found for the plaintiff. The defendant accepted it owed a duty to patrons. 'The measure of the discharge of the duty is what a reasonable man would, in the circumstances, do by way of response to the foreseeable risk.¹ The court considered that there is an obvious risk, in a darkened cinema that if a patron is not aware that the seats retract, that on standing the patron may forget that the seat has moved position and attempt to sit without putting the seat down, which may cause injury. The chance of this occurring is slight, but the risk of injury if it does occur is substantial. No details were offered by the expert, Dr Emerson, regarding availability, cost or efficacy of design modifications. The court considered that there is an overwhelming inference that the display of a warning sign would be likely to have an effect on the thought processes of patrons. The court considered an appropriate warning sign could have been placed in the foyer so it was visible to patrons before entering the cinema.

Reasonable foreseeability of the risk of injury and the borderline between liability and non-liability

The case considers the content of the duty of care owed by owners to occupiers, and the borderline between the liability or non-liability of a defendant based on the reasonable foreseeability of the risk of injury incurred.

The facts

Mr and Mrs Watkins leased a house owned by the New South Wales Land & Housing Corporation. Throughout the period in which they leased the house, they lodged a number of complaints about their hot water service, based on the fact that the system was prone to dangerous fluctuations in water temperature. However, the system was not repaired.

After six years of tenancy, Mrs Watkins fainted on one occasion while showering, and suffered spinal injuries from the fall. She brought an action in negligence, claiming that her lapse in consciousness and the resulting injury were caused by a substantial and sudden increase in water temperature.

The trial judge found for Mrs Watkins, accepting the argument that her injuries were the reasonably foreseeable result of the appellant's failure to maintain and repair the hot water service, and assessed damages at $636,923. The defendant appealed this decision in relation to both liability and the quantum of damages.

The decision

Justice Heydon, with whom Justice Hodgson agreed (Justice Powell dissenting), upheld the decision of the trial judge about the liability of the applicant, but allowed the appeal on the issue of damages. The applicant advanced the following three central arguments on appeal.

First, it was argued that Mrs Watkins had not established any reasonably foreseeable possibility that failure to repair or replace the hot water system might cause injury. Justice Heydon rejected this argument, based on both the complaints that had been made by the Watkins about the service and the element of common experience of the possibility of a fall in the shower.

Secondly, the applicant argued that the trial judge had failed to apply the calculus of negligence prescribed by the High Court in Wyong Shire Council v Shirt (1980) 146 CLR 40 in relation to magnitude of the risk, probability of occurrence, expense and difficulty of taking alleviating action, and any conflicting responsibilities of the applicant. Justice Heydon agreed that the trial judge had failed to explicitly address this issue, but found that the argument failed because when the 'calculus' was considered, the outcome was adverse to the applicant.

Finally, the applicant argued that the damages awarded by the trial judge were excessive. This argument was upheld, and the damages awarded to the respondent were reduced by a third.

Justice Heydon noted in this case that, at first sight, it might seem surprising that Mrs Watkins could recover damages for a defect in her hot water system that is common to many residences. He explained that the reasonable foreseeability of injury depended in a large part on the complaints that had been made by the Watkins. Accordingly, Justice Heydon stated that 'though it may be true that this case goes near the borderline between liability and non-liability, there is no sufficient reason to think that it crosses over it' and observed that fluctuations in water temperature may have been less acute than in other cases. 

Duty of care and reasonable foreseeability of sporting injuries

The High Court considers the extent of duty owed by an occupier of a sporting facility to provide protective equipment and to warn of specific risk of eye injuries in playing indoor cricket.

The facts

Mr Woods suffered a serious injury when he lost the sight in his right eye after being hit by the ball while playing a game of indoor cricket at a centre in Perth, owned and operated by Multi-Sport Holdings Pty Ltd (Multi-Sport).

Mr Woods was an experienced outdoor cricketer but had played indoor cricket only once before the time he was injured.

Mr Woods sued Multi-Sport and argued that it had breached its occupier's duty of care by not:

1. having suitable protective equipment, primarily a helmet with an eye guard, available to Mr Woods; and

2. displaying a suitable warning to alert Mr Woods, and players like him, of the particular dangers involved in playing indoor cricket, said to be:

(a) the danger of eye injury involved in playing a game in a confined space without an appropriate helmet with an eye guard; and

(b) the particular danger of eye injury from the ball used in an indoor cricket match penetrating the socket due to its size and malleability.

The decision

Ophthalmologist expert evidence was given at trial about the particular injuries that may result from the ball striking the eye socket in indoor cricket. There was also evidence about the then rules of the Australian Indoor Cricket Federation, which generally did not permit players to wear helmets. This was because the confined space, diving, sliding and frequent collisions between players made wearing helmets not only undesirable but hazardous.

Although Multi-Sport pleaded contributory negligence as to the stroke played by Mr Woods, the issue had no bearing on the outcome and was not pursued in the High Court.

At the District Court trial, District Court Judge French held that:

1. The scope of the standard of care owed by Multi-Sport to take all reasonable steps did not extend to the provision of helmets to protect players from injury where it had never been part of the game and was against the rules; and
2. Mr Woods was well aware when he played indoor cricket that he ran the risk of being hit by the ball in the body or the head, and there was no duty to warn of specific risks that were part of the inherent risks accepted by the player.

The Full Court of the Supreme Court of Western Australia, comprising Justice Murray, Chief Justice Malcolm and Justice Pidgeon, unanimously upheld the trial judge's decision.

In submissions to the High Court, the lower courts were criticised for relying on Justice Kirby's comment in Romeo v Conservation Commission (NT) (1998) 192 CLR 431 at 478 that:

where a risk is obvious to a person exercising reasonable care for his or her own safety, the notion that the occupier must warn the entrant about that risk is neither reasonable or just.

The High Court delivered five separate judgments and dismissed the appeal by majority. Chief Justice Gleeson said there was no error in referring to the observation of Justice Kirby and said that what reasonableness requires by way of warning from an occupier is a question of fact and depends on all the circumstances, including the obviousness of a risk.

Due to their conclusion, the majority did not deal with any argument about voluntary assumption of risk.

Occupier's liability - multiple-use sporting venue

This case considers the content of duty of care owed by an occupier of premises and examines the circumstances in which a defence of voluntary assumption of risk may succeed.

The facts

Mr Benedet (the deceased) suffered injuries and died when he stepped back into the path of a group of cyclists while playing touch football on the inner field of a velodrome owned and operated by Canterbury Municipal Council (the council). Mr Taylor (the respondent cyclist) suffered physical and psychological injuries as a result of the collision.

The respondent and the executrix of the deceased's estate sued the council, alleging negligence.

The respondent claimed that a duty of care arose from the council's occupation, control and management of the velodrome. He claimed that the council breached that duty of care by failing to:

(a) provide a barricade between the track and the field;

(b) exercise any control over or supervise the activities of the velodrome;

(c) ensure that exclusive use of the velodrome was given to either the cyclists or the touch footballers; and/or

(d) erect signs warning participants in the touch football game not to attempt to cross the cycle track while it was in use.

The decision

At first instance in the Supreme Court, Justice Barr held that the council was negligent in failing to sufficiently control the use of the velodrome, resulting in the injuries suffered by the respondent. Justice Barr assessed the respondent's contributory negligence at 50%.

The council appealed against Justice Barr's findings that it was negligent, and that the respondent had not voluntarily accepted the risk of injury. The respondent cross-appealed against the finding of contributory negligence against him and the amount of damages.

The Court of Appeal upheld Justice Barr's decision, except to reduce the respondent's contributory negligence from 50% to 25%, and upheld the respondent's cross-appeal to find the deceased 25% liable for the respondent's injuries.

Justice Ipp (with whom Chief Justice Spigelman and Acting Justice Matthews agreed) upheld Justice Barr's finding that the appellant owed a duty of care to the touch football players and cyclists who played and trained in the velodrome. He reasoned that because the appellant agreed to the dual use and tacitly authorised the cyclists to use the velodrome, they were under a duty to take reasonable care to avoid injury to touch football players and cyclists.

The court confirmed that the risk of injury arising out of the dual use of the velodrome was obvious and foreseeable. Justice Ipp noted that there were reasonable measures available to the council to prevent the dual usage of the velodrome. These included erecting warning signs, installing portable barriers and using council employees to monitor the use of the velodrome.

The appellant failed to establish a defence of voluntary assumption of risk because, while the respondent knew that there were risks in training while the football game was underway, he gave evidence that he did not think that those risks would eventuate.

Justice Ipp agreed with Justice Barr's finding that the respondent's participation in the cycling training session was negligent, given the obvious danger to all involved. However, he found that the deceased was negligent, having failed to keep a proper lookout, failing to keep off the cycling track while it was being used by the cyclists, and failing to keep out of the way of the cyclists.

In reaching his decision, Justice Ipp stated that:

I would regard the respondent and Mr Benedet as having been equally culpable. In my opinion, however, the primary cause of the collision (and the respondent's injuries) was the negligence of the appellant in breaching its duty to take reasonable care to avoid injury to the persons engaging in activities in the Velodrome, activities promoted and encouraged by it.

The court apportioned 50% of the responsibility for the respondent's injuries to the appellant, 25% to the deceased and 25% to the respondent. 

Negligence and occupier's liability

This case considers whether an occupier or owner of premises is liable to a person entering onto those premises if they are injured by a protruding paving stone on a pathway. Although this decision turns on its own facts, the court referred to High Court authority that places some limitation on whether a breach of the duty of care in these circumstances may be held to have occurred.

The facts

Ms Hansford sustained an injury when she fell on a pathway leading from a shop to a carpark at the Lavender and Berry Farm in Pemberton, in the south-west of Western Australia in August 1996. Ms Hansford was wearing hiking boots, which were said to be in good condition.

The trial judge accepted the evidence of Ms Hansford that there was a paver protruding from the pathway in the area where she fell, and that the protrusion was between half an inch to one inch. In addition, the trial judge found that the gradient of the pathway was of reasonable proportions, particularly where Ms Hansford sustained her fall.

The conclusion of the trial judge was that the owner of the property did not inspect the path with sufficient care and, had he done so, the protruding paver would have been seen. The trial judge held that the pathway on the day of the accident was unsafe.

The owner of the property appealed.

The decision

On appeal, the court accepted that the owner of the property owed a duty of care to Ms Hansford to ensure that the pathway leading from the carpark at the farm to the shops and other facilities was as safe for use by patrons as reasonable care could make it. The question was whether a reasonable person in the position of the owner of the property would have foreseen that the pathway, with some unevenness in the paving stones, created a risk of injury to Ms Hansford as she walked down it between the shops on the farm and the carpark.

The court endorsed the proposition that persons using steps, or footpaths, encounter everyday risks that they must avoid by taking care for their own safety. This principle was espoused by the High Court in Brodie and Singleton Shire Council; Ghantous v Hawkesbury City Council (2001) 75 ALJR 992, reported in the AAR Annual Review of Insurance Law 2001. The court found, in Ms Hansford's circumstances, that there was no foreseeable risk of harm to persons using the pathway taking reasonable care for their own safety. The paver was not a hazard or trap. Ms Hansford could have been expected to have exercised sufficient care in looking where she was going on the pathway to have observed any uneven paving stones. The court commented that a pathway 'is not to be criticised by the standards of a bowling green'. Here, the pathway was well laid out and, although on a gradient, relatively even.

However, the court placed significant emphasis on the fact that the accident occurred in a country or rural location. In addition, there was no evidence that complaints had been made about the pathway prior to the fall, which the court also took into account. 

When is risk of injury far-fetched and fanciful?

This case examined whether a particular set of factual circumstances satisfied the test laid down in respect of foreseeability by Justice Mason in Wyong Shire Council v Shirt (1980) 146 CLR 40.

The facts

Mr Green, the respondent, was a sound mixer hired by Mr De Oliveira, the organiser of a Brazilian Carnival. The Hakoah Club, the appellant, was the occupier of the building and hired the hall out to Mr De Oliveira for him to conduct the Brazilian Carnival. Within the hall, there was a stage and on the stage was a grand piano. The space under the piano was filled with boxes.

During the evening's activities, Mr Green decided to tell the singers to get closer to their microphones. To avoid going between the audience and the band, Mr Green went to the rear of the stage and climbed up a flight of stairs, where he was concealed from the audience. His path was blocked by the grand piano, so he climbed on top of the piano, slid across the top and attracted the attention of the singers, who then moved closer to their microphones.

As Mr Green moved backwards across the top of the piano, sliding himself, he tried to put his feet down on the stage. He missed the edge of the stage and fell to the floor of the hall, injuring himself.

The decision

At first instance in the District Court, the trial judge held that the appellant negligently positioned the grand piano too close to the edge of the stage.

The Court of Appeal, in setting aside the judgment of the District Court, noted that the matter was conducted on the basis that the duty of care owed by the appellant to the respondent was that described by Justice Mason in Wyong Shire Council v Shirt (1980) 146 CLR 40, where at 47-48 he said:

 . . . when we speak of a risk of injury as being 'foreseeable' we are not making any statement as to the probability or improbability of its occurrence, save that we are implicitly asserting that the risk is not one that is far-fetched or fanciful...a risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or fanciful is real and therefore foreseeable . . .

Acting Justice Brownie, with whom Justice Hodgson and Acting Justice Foster agreed, held that, given the facts of the case, 'the risk of injury to someone in the position of the respondent was [not] foreseeable' and that it was a 'far-fetched, fanciful or fantastic risk'.

Nervous shock - what limits remain?

In these cases, the High Court considers the 'special rules' that apply to the cause of action known as 'nervous shock'.

The decision of the High Court is a further development from the state of the law outlined in the case reviews of Annetts v Australian Stations Pty Limited and Hancock v Wallace in the AAR Annual Review of Insurance Law 2001.

The facts

Tame v NSW

Mrs Tame was involved in a motor vehicle collision, in which the driver of the other vehicle had a blood alcohol reading of 0.14 and was driving on the wrong side of the road. Mrs Tame's blood alcohol level was nil, but was mistakenly recorded on a police report as also being 0.14. The mistake was corrected, but Mrs Tame later became aware that an insurer had a copy of the incorrect report. She contacted the police, who provided a formal apology and an assurance that the mistake had been rectified. Mrs Tame, however, became obsessed with the mistake. She experienced shame, guilt, stress and depression. Her psychiatrist diagnosed her condition as psychotic depressive illness.

Annetts v Australian Stations Pty Limited

James, the 16-year-old son of the Annetts, went to work as a jackeroo at a cattle station owned by the respondent. The Annetts were assured that their son would be under constant supervision and generally looked after. After a few weeks, the station manager sent James to work alone at another isolated cattle station. A few days later, around 3 December 1986, the respondents suspected that James Annetts was in great danger of injury or death. On 6 December 1986, the Annetts were informed by telephone that their son was missing and believed to have run away.

Some months later, in April 1987, the vehicle driven by James Annetts was found bogged in the Gibson Desert. It appeared he had died as a result of dehydration, exhaustion and hypothermia. The Annetts claimed that they had suffered nervous shock after learning of the disappearance and death of their son.

The decision

This decision openly explores the policy issues underpinning the development of the elements of 'nervous shock'. It also foreshadows the need for a more sophisticated, or more accurate, name for the cause of action.

While the decision does address liability control measures that the courts have put in place in previous decisions, the nature of the relationship between the plaintiff and the defendant in the two cases (as opposed to that between the defendant and an injured third party) is fundamental to the outcome.

Tame v NSW

The High Court dismissed an appeal from the New South Wales Court of Appeal, finding that Mrs Tame's action failed because the relationship between her and the police officer who made the error was not one that would give rise to liability. In fact, the relationship was one that was inconsistent with a duty of care arising. The police officer was required to complete the form as part of his duty to fully investigate the conduct in question, without having to take care to protect from possible psychiatric illness a person whose conduct was the subject of investigation and report.

Further, it was not reasonably foreseeable that a person in the position of Mrs Tame would suffer a recognisable psychiatric injury as a result of the defendant's conduct, and her particular susceptibility was a relevant factor in that assessment.

Annetts v Australian Stations Pty Limited

The Western Australian Full Court had held that the absence of the requirements of 'sudden shock', 'direct perception' of the events and 'normal fortitude' precluded any duty of care arising.

The High Court granted special leave to appeal the decision, specifically rejecting the elements of sudden shock and direct perception as being a requirement to establish a duty of care.

Sudden shock and direct perception

The court identified that the requirements of sudden shock and direct perception have operated in an arbitrary and capricious manner, operating to exclude meritorious claims.

In applying that reasoning to the particular facts, Chief Justice Gleeson stated:

The process by which the applicants became aware of their son's disappearance, and then his death, was agonisingly protracted, rather than sudden. And the death by exhaustion and starvation of someone lost in the desert is not an 'event' or 'phenomenon' likely to have many witnesses. But a rigid distinction between psychiatric injury suffered by parents in those circumstances, and similar injury suffered by parents who see their son being run down by a motor car, is indefensible.

The court preferred to rely on the general concept of the reasonable foreseeability of causing harm to one's 'neighbour'. That is, one who is so closely and directly affected by the actions of the person that he or she should be in that person's contemplation as likely to be affected by their conduct. As the Annetts had made enquiries of the respondent about the arrangements that would be made for their son's safety and, in particular, had been assured that he would be under constant supervision, there was a relationship of such a nature that a duty of care arose.

Justices Kirby and Gummow held that 'sudden shock' was not a settled requirement in the common law of Australia, noting that it derived from Justice Brennan's judgment in Jaensch v Coffey. They also held there was no High Court authority for the 'direct perception' requirement to be an essential ingredient in the cause of action.

Justice Gaudron recognised that it may be that, in many cases, the risk of psychological injury will not be foreseeable in the absence of a sudden shock, but held that it was not critical to the existence of a duty of care. She saw no reason why liability should be denied to the Annetts because, instead of experiencing sudden shock, they suffered psychiatric injury as a result of uncertainty and anxiety culminating in the news of their son's death.

Justice McHugh held the relationship between the Annetts and the respondent was almost akin to a contract, and that the special rules for the cause of action were therefore not applicable. He held that the relationship was such (as is that between employee and employer) that the defendant was already under a duty to take reasonable care to avoid injury to the plaintiff.

He reasoned that the special rules were concerned with situations where the parties had no pre-existing relationship and where, before the suffering of nervous shock, there was no duty on the defendant to take care to avoid injury to the plaintiff; the rules are concerned with the issue of whether the plaintiff was the defendant's 'neighbour'. Their usual application is where the duty to take care to avoid afflicting nervous shock on the plaintiff coincides with the breach of a duty owed to a third party.

Normal fortitude

The court did not dispense with the requirement of normal fortitude, although stating it could not be the sole criterion for liability. It was identified as a relevant factor in assessing whether a risk of psychiatric injury was reasonably foreseeable.

Justice Gaudron also raised the nature of the relationship in relation to normal fortitude, making the comment that there may be special relationships or special features of relationships to render the risk of psychiatric injury foreseeable, even where it would not be foreseeable in the case of persons of normal fortitude. An example of this is where the defendant has knowledge that the plaintiff is particularly susceptible to injury of that kind.

Bearer of bad tidings

Justices Kirby and Gummow held that there can be no legal duty to break bad news gently, that neither carelessness or insensitivity in presentation will found an action in negligence against the messenger. They left open the suggestion, however, that where the psychiatric injury results from being told of the event, an action may lie against the person who caused the event. This is consistent with dispensing of the requirement for direct perception. Justices Kirby and Gummow also expressly disfavoured the requirement of 'normal fortitude'. They considered that the risk of a recognisable psychiatric illness to a person who falls outside the notion of 'normal fortitude' may nonetheless not be far-fetched or fanciful.

High Court abolishes discounting of damages for prospect of remarriage

In this case, the High Court considered whether, in assessing damages to be awarded to a surviving spouse under fatal accidents legislation, any account should be taken of the chance of the surviving spouse remarrying and obtaining some financial benefit that may offset or diminish the loss. The court also considered whether such consideration should be made separately from, or included in, the discount that is made for the 'vicissitudes of life'.

The facts

Following the death of her husband in a farm accident at Mr Ingrilli's farm, Mrs De Sales commenced proceedings in the District Court of Western Australia under the Fatal Accidents Act 1959 (WA). Mrs De Sales claimed damages under that Act on behalf of herself and her two children for the financial loss suffered as a result of Mr Ingrilli negligently causing her husband's death.

At first instance, Mr Ingrilli's liability having been established, the trial judge assessed the damages and applied a discount of 5% to the damages awarded to Mrs De Sales to reflect the chance that she would obtain financial support from remarriage in the future. On appeal, the Full Court of the Supreme Court increased the deduction made to Mrs De Sales' damages from 5% to 20% for the possibility of remarriage, and also added 5% for general contingencies.

The decision

Mrs De Sales appealed to the High Court contending that there should not have been any discount by the trial judge for the prospect of remarriage and that, if that was not accepted, the figure of 5% should not have been increased to 20% by the Full Court.

The joint decision of Justices Gaudron, Gummow and Hayne and the separate decision of Justice Kirby established:

(a) in assessing the future benefits that would have flowed from a deceased person to his or her relatives, it is wrong to treat the prospect of remarriage or the prospect of forming some new continuing relationship as a separate item for which an identified discount must be made; and

(b) the prospect of remarriage is also not a matter that should enlarge the discount made to damages under the general heading of the 'vicissitudes of life'.

(c) This is not to say, however, that if there is evidence at trial that a new relationship had been formed, the trial judge cannot have regard to evidence revealing whether that relationship brought with it financial advantage or disadvantage.

Chief Justice Gleeson reached the conclusion that, in the ordinary case, the prospect of remarriage should be treated only as part of the vicissitudes of life. It would only be where there are special or unusual circumstances that indicate an unusually low or high chance of remarriage that a separate and substantial discount is warranted.

Both Justices McHugh and Callinan, for different reasons, ruled against the court abolishing the rule that a court should assess and value the chance of a surviving spouse obtaining financial support in future. 

High Court rejects reduction of damages award under Trade Practices Act for contributory negligence

The High Court has overturned the decision of the Queensland Court of Appeal (reported in our Annual Review of Insurance Law 2000). The Queensland Court of Appeal held that section 87 of the Trade Practices Act 1974 (Cth) (the Act) could be used to reduce damages awarded to a plaintiff in cases where the plaintiff was partly at fault.

Background to sections 82 and 87 of the Act

Section 82 of the Act enables a plaintiff to recover damages from a defendant contravening the Act where the plaintiff has suffered loss or damage 'by' the defendant's contravention.

Section 87 permits the court in such proceedings to make a wide range of orders and to 'make sure order or orders as it thinks appropriate against the person who engaged in the conduct or a person who is involved in the contravention . . . if the court considers that the orders will compensate the first mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage'.

The facts

Camworth Pty Ltd (Camworth) owned land that it proposed to sub-divide and develop. In early 1995, Camworth sought refinancing and obtained a valuation of its land from the respondent (HTW) to assist its loan application. HTW provided Camworth with a valuation of the land for $1.576 million. Camworth used that valuation to seek and obtain a loan of $950,000 from I&L, secured by the land.

Camworth defaulted on the loan and eventually went into liquidation. I&L realised the security and received net proceeds of $592,367. I&L sued HTW for the difference between the loan and proceeds of sale on the basis of a negligently prepared/misleading valuation.

At first instance, the Supreme Court of Queensland awarded damages for negligence and breaching the Act. In both cases, I&L's claim for damages was reduced by a third on the basis that I&L contributed to the loss by failing to assess Camworth's ability to repay, and for not undertaking a proper risk assessment of Camworth.

I&L appealed to the Queensland Court of Appeal, which upheld the original decision but on a different basis. The Court of Appeal relied on s87 of the Act rather than s82.

I&L then appealed to the High Court raising two issues for determination:

• Can a court use s87 of the Act to reduce damages that might otherwise be awarded under s82?
• Does s82 permit an apportionment of damages where the plaintiff's failure to take reasonable care of its own interests was also a cause of the loss?

The decision

A Full Court of seven gave their judgments and allowed the appeal, with only one judge (Justice Kirby) dissenting. As to the first issue, the majority found that, as between s82 and s87, s82 was to take precedence. Chief Justice Gleeson remarked that:

There is no warrant for reading section 87 as conferring upon a Court a discretionary power to take away, or modify, the right conferred by section 82.

The majority also considered that s82 did not permit a court to divide the responsibility for a loss that is causally connected in the common law sense with a respondent's breach of Parts IV and V of the Act.

The main rationale for affording s82 such primacy over s87 was that the sections provided different remedies for different situations. As Justice McHugh stated:

Section 82 gives a specific remedy. On the other hand, section 87 is couched in general terms and gives a 'smorgasbord' of remedies. Section 87 cannot be regarded as a dominant provision to which section 82 is subject. Nor does section 87 provide the framework in which the power preferred by section 82 must be exercised. Sections 82 and 87 provide complementary but independent powers.

Justice Callinan dealt with a submission by HTW that the apportionment of damages merely reflected an analysis of what the plaintiff's conduct had actually resulted in. Despite noting the attractiveness of that argument, and the fact that it would produce a fair and just result, Justice Callinan felt bound by his analysis of s82 and its relationship to s87 to reject it.

The second issue for determination was easily disposed of with a reiteration of the views espoused by the majority in Henville v Walker (reported in the AAR Annual Review of Insurance Law 2001) that s82 does not provide for contributory negligence and apportionment of damages. 

Equitable contribution arising out of different causes of action

The case considers the question of equitable contribution between wrongdoers who are liable to the innocent party for the same damage but under different causes of action.

The facts

Mr Burke (Burke) was a director of, and the solicitor for, Hanave Pty Ltd (Hanave). Hanave purchased retail premises (premises) from LFOT Pty Ltd (LFOT). Burke acted as Hanave's solicitor on the purchase.

Prior to settlement, LFOT engaged in misleading and deceptive conduct, principally by representing that a particular tenant of the premises was a high-quality tenant when it was not.

Burke negligently, and in breach of his retainer, failed to advise Hanave to make appropriate inquiries about the quality of that tenant. Had the inquiries been made, the purchase would have proceeded on different terms, or not at all.

Hanave brought proceedings in the Federal Court against LFOT claiming damages for misleading and deceptive conduct. LFOT cross-claimed against Burke, alleging that, if it was liable to pay damages to Hanave, it was entitled to equitable contribution from Burke by reason of his negligence.

The decision

At first instance, Hanave was awarded judgment against LFOT in the sum of $750,000, being the difference between the purchase price and the true value of the premises, and Burke was ordered to pay contribution to LFOT in the sum of $375,000.

Burke appealed against the order for contribution. His appeal to the Full Federal Court was dismissed, but his appeal to the High Court was allowed, by a majority of four to one (Justice Kirby dissenting).

Justice Callinan, applying the traditional test as to whether contribution should be ordered, held that LFOT was not entitled to contribution as the respective obligations of Burke and LFOT were not of the same nature or extent.

Justices Gaudron and Hayne gave greater emphasis to the fact that equitable contribution is founded on concepts of fairness and justice. It is these concepts that require that, if one of several persons has paid more than their proper share towards discharging a 'common obligation', they are entitled to be recompensed by those who have not. Applying these principles, they held that LFOT was not entitled to contribution because:

• it would result in LFOT profiting from its misleading conduct (any reduction in its own liability would result in it retaining an amount in excess of the true value of the premises) or, although this next reason was given less emphasis,
• Mr Burke was himself misled by LFOT.

What law should be applied to an action in respect of torts committed outside Australia?

The case considers what law (the law of the tort or the law of the forum) should be applied by courts in Australia in determining substantive issues about 'foreign torts', ie torts committed outside Australia. It also examines the issues to be considered in determining whether a court is an 'inappropriate forum' for an action to be tried.

The facts

Mr Zhang (an Australian citizen residing in NSW) was injured while driving a rented motor vehicle in New Caledonia (a 'department' of France). He alleged that his injuries were caused by the defective design and manufacture of the Renault vehicle he was driving. He sued the Renault companies (two French companies) in tort in the Supreme Court of New South Wales on the basis that he continued to suffer damage after he returned to NSW.

As neither of the Renault companies had a presence in Australia, Mr Zhang invoked the 'long arm' jurisdiction of the Supreme Court of NSW, which provides that an originating process may be served outside of Australia in certain circumstances, including where the proceedings are for the recovery of damages in respect of 'damage suffered in the State caused by a tortious act or omission wherever occurring'. The Renault companies sought a stay of the proceedings on the basis that the Supreme Court of NSW was an 'inappropriate forum' in which to try Mr Zhang's actions against them.

At first instance, Justice Smart (Supreme Court of NSW) granted the stay. The Court of Appeal overturned that decision. The Renault companies appealed the orders made by the Court of Appeal to the High Court.

The decision

Although the question of whether the Supreme Court of NSW is an 'inappropriate forum' to try Mr Zhang's claim is a question of jurisdiction and not of choice of law, the majority considered that it was necessary to consider the law that would be applied to the substantive issues in proceedings if a court did hear a matter in determining whether that court was an 'inappropriate forum'.

Traditionally, the law to be applied by Australian courts in determining substantive issues relating to foreign torts was the law of the forum. Prior to the decision of the High Court in Pfeiffer v Rogerson (2000) 201 CLR 503 in June 2001, this was also the position on intranational torts.

The High Court reversed the traditional position on intranational torts in Pfeiffer when it held that the law to be applied by Australian courts in determining the substantive issues about torts committed in Australia, but which have an interstate element, is the law of the place of the act or omission giving rise to the plaintiff's cause of action. The court reserved the question of whether this rule should be extended to apply to foreign torts.

In this case, the court held that the rule in Pfeiffer should be extended to foreign torts. As a result, the law to be applied by Australian courts in determining substantive issues about foreign torts is now also the law of the place of the act or omission giving rise to the cause of action.

Having determined this issue, the court then considered whether the Supreme Court was an 'inappropriate forum' to try Mr Zhang's cause of action. The majority (Justice Kirby dissenting) held that the meaning of 'inappropriate forum' can be determined by reference to the authoritative Australian decisions on the meaning of the common law concept of 'clearly inappropriate forum'. On this basis, a court will only be an 'inappropriate forum' for trying a matter if the continuation of the proceedings in that court would be:

oppressive, in the sense of 'seriously and unfairly burdensome, prejudicial or damaging', or, vexatious, in the sense of 'productive or serious and unjustified trouble and harassment'.

The majority (Justices Kirby and Callinan dissenting) held that, on the basis of this test, the proceedings were not oppressive or vexatious and, therefore, that the Supreme Court of NSW was not an inappropriate forum to hear the matter. The majority also added that an Australian court cannot be a clearly inappropriate forum merely by virtue of the fact that a foreign law is to be applied to the substantive issues.

The majority also confirmed the abolition of the 'double actionability' requirement for founding a cause of action on a tort committed outside Australia. 

Duties and responsibilities of the expert witness

The case considers the basis on which expert evidence is admissible both at common law and under the Evidence Act 1995 (NSW), and the duties and responsibilities of expert witnesses in civil cases.

The facts

In June 1986, Mrs Sprowles fell at her place of employment on a flight of stairs leading from a car park on the roof of the building to the offices below, where she worked. Mrs Sprowles sued her employer, Makita (Australia) Pty Ltd (Makita) for negligence, and relied at trial on the evidence of an expert witness, Professor Morton. Professor Morton, a physicist who specialised in the investigation of slipping cases, gave evidence that, in his opinion, the tread of the stairs was slippery, and that this had caused Mrs Sprowles' fall. Against this evidence was the evidence of other Makita employees, who said that the stairs were frequently used, that no other person was reported to have slipped on the stairs, and that Mrs Sprowles had used the stairs probably more than 500 times prior to her fall without slipping.

The trial judge accepted the evidence of Professor Morton that the slipperiness of the stairs was the reason for the fall, found Makita liable, and awarded damages to Mrs Sprowles.

Makita appealed to the New South Wales Court of Appeal on the question of liability and quantum of damages awarded.

The decision

In upholding Makita's appeal, the NSW Court of Appeal unanimously held that the trial judge had erred in accepting the opinion of Professor Morton that the stairs were slippery, because that opinion contradicted uncontradictable facts (ie the history of incident-free use) that showed that the stairs were not slippery in the ordinary meaning of the word. The stairs did not have the characteristic that persons walking on them with ordinary care would, from time to time, slip.

Justice Heydon provided an extensive review of the authorities relating to the duties and responsibilities of the expert witness. The general principles to be derived from Justice Heydon's review are essentially that for expert opinion evidence to be admissible:

1. it must be agreed or demonstrated that there is a field of 'specialised knowledge';
2. the witness's expertise in that field must be demonstrated;
3. the opinion proffered must be wholly or substantially based on the witness's expert knowledge;
4. the facts 'observed' by the expert on which the opinion is based must be identified and admissibly proved; and
5. any assumptions must be identified and proved; and
6. the relevance of the expert's specialised knowledge to the facts assumed or observed must also be demonstrated.

The court (implicitly) found that the evidence of Professor Morton had not complied with these principles, and, on the basis of apparent internal deficiencies, should be afforded little weight. It was held that if the stairs were not slippery (as the lay evidence indicated) then Makita was not in breach of its duty of care as occupier and employer and the appeal should be allowed.

Mrs Sprowles made an application for special leave to the High Court, which was refused on 31 May 2002. 

Footnotes

1. Hackshaw v Shaw (1984) 155 CLR 614 at 663; Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 614.

Annual Review of Insurance Law 2002: Legislative and regulatory developments