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Allens Arthur Robinson

August  2006

Place of exposure significant in negligent manufacture claim for export products

In brief: In this edition of Recall, we look at a recent New South Wales Court of Appeal decision on identifying the system of law governing negligence claims for exported products and the effect of this decision on 'forum shopping'. We also look at the implications for Australia of the UK Compensation Act 2006 which abolishes the rule of proportionate liability for defendants in mesothelioma claims established by Barker v Corus. 

Place of exposure significant in negligent manufacture claim for export products

In brief: A recent New South Wales Court of Appeal case which considered the test for identifying the place of the tort where negligent manufacture is alleged and consequently the law governing the tort, has significant implications for manufacturers of export products. Special Counsel Nicola Nygh(view CV) and Lawyer Martin James report.

The NSW Court of Appeal decision

On 4 July 2006, the NSW Court of Appeal handed down its decision in Amaca Pty Ltd v George Bernard Frost [2006] NSWCA 173. The NSW Court of Appeal held that the relevant tort, which involved manufacture of products in NSW and supply to New Zealand where the claimant was exposed to the product and suffered damage, took place in New Zealand and was governed by New Zealand law.

The NSW Court of Appeal also held that an Australian court applying New Zealand law could not award compensatory damages where New Zealand legislation implemented a statutory compensatory scheme, and prevented claimants from bringing claims for compensatory damages 'in any court in New Zealand'. 

Background

The judgment by Justice Spigelman, with Justice Santow and Justice McColl in agreement, overturned an earlier decision of the Dust Diseases Tribunal of NSW (the DDT).

The claimant, Mr Frost, was exposed to asbestos fibres between 1963 and 1966 while working in New Zealand. He subsequently contracted respiratory diseases. The parties agreed that the source of the asbestos fibres which caused the respiratory diseases were products manufactured in NSW by the appellant, Amaca and subsequently distributed in New Zealand.

An important issue in the proceedings was whether any tort committed by Amaca was located in NSW where Amaca manufactured the products, or in New Zealand where Mr Frost was exposed to asbestos dust and fibres.

This issue was critical because if the place of tort was New Zealand, the tort would be governed by New Zealand law, which included a statutory compensation scheme preventing plaintiffs from bringing claims for compensatory damages 'in any court in New Zealand'. This case was one of a number of cases where plaintiffs have brought proceedings in NSW to try to avoid the consequences of the New Zealand legislation.

In the DDT proceedings, Amaca admitted the existence and breach of a duty-of-care to Mr Frost including, relevantly, duty and breach in respect of a number of particulars including:

  • continuing to use asbestos in the products when it knew, or should have known, that persons such as Mr Frost were at risk of inhaling asbestos dust and fibres from the products and thereby suffering the respiratory diseases; and
  • failing to substitute the asbestos in the products at its New South Wales manufacturing centre with non-asbestos materials.

Mr Frost was successful in the DDT, which held that the tort of negligence had occurred in NSW, the place where the asbestos products were manufactured. It followed from this finding that the appropriate law to be applied was NSW law, which allowed Mr Frost to recover damages based upon Amaca's negligence. 

Issues on appeal

Amaca appealed on the basis that the trial judge had erred in finding that the place of the tort was NSW. Rather, Amaca argued that the place of the tort was New Zealand, where Mr Frost was exposed to asbestos fibres in the course of his employment and, consequently, contracted the respiratory diseases.

Locating the tort

The NSW Court of Appeal drew on past authority in holding that in order to determine where the negligence had taken place, the court must identify the place:

  1. which gives the plaintiff the cause for complaint (Jackson v Spittall 1870 LR 5CP);
  2. where in substance the cause of action arose (Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458); and
  3. where the act or omission assumes significance (Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538).

The NSW Court of Appeal criticised the DDT for determining the place of the tort on the basis of two of the particulars of breach in isolation. Instead, the court held that it was necessary to consider the whole of the cause of action including the elements of duty, breach and causation. Applying these principles, the court found that the place where the cause of action arose was New Zealand, where Mr Frost was exposed to the risk of inhalation of asbestos fibres. While the place of manufacture was NSW, Mr Frost's injury was not the result of any defective manufacturing process. Rather, it was the manufacture together with the distribution of the products in New Zealand which led to Mr Frost's exposure to risk and gave him his cause of action. 

Choice of law

Having decided that the tort occurred in New Zealand, it followed that the court was, applying the choice of law principles in the High Court's decisions in John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 and Regie National des Usines Renault SA v Zhang (2002) 210 CLR 491, obliged to apply the substantive law of the place where the tort was committed – the lex loci delicti. The purpose of this rule is to promote certainty and to prevent a plaintiff from 'forum shopping' by ensuring that whatever forum is chosen, the result of the case will be the same.

Under New Zealand law, the Accident Insurance Act (NZ) (the Act) prohibits a person who is entitled to compensation under the Act from bringing proceedings 'in any court in New Zealand'. Mr Frost had received compensation for his injury under the Act. The court therefore had to consider whether it followed from a literal reading of the Act that Mr Frost could nonetheless commence an action in a court in Australia.

In order to answer this, the court had first to consider whether the relevant provision formed part of the substantive law of New Zealand, or whether it was merely procedural, since the principal of lex loci delicti applies only to the substantive law governing the matter in issue. If the provision was merely procedural, then it would not apply to the present proceeding.

The finding

After considering expert evidence on New Zealand law, the court determined that the New Zealand Parliament intended that the Act implement a no-fault compensation regime, which served as a 'social contract' and replaced any common law rights of action. Thus the prohibition on proceedings was an element of substantive, and not merely procedural, law and should be applied to the present proceeding.

In regard to the express prohibition on the institution of proceedings 'in New Zealand', the court found that the New Zealand Parliament adopted this wording because it recognised that it was not empowered to pass legislation purporting to take effect in another state without the consent of that other state. However, the substance and the intent of the legislation was that a person entitled to recover under the statutory compensation scheme should not also be able to recover damages through any common law action. It would defeat the purpose of the legislative regime to allow a person to commence a damages action in another jurisdiction. 

The NSW Court of Appeal also concluded that under Australian choice of law rules, proceedings cannot be brought in Australia for a foreign tort, where such proceedings could not be brought in courts of the country where the tort occurred. In particular, this decision is consistent with the recent High Court decision, Neilson v Overseas Project Corp of Victoria Ltd [2005] HCA 54, where the various judges in the majority emphasised the need for choice of law rules to ensure, so far as possible, that the result is the same whichever jurisdiction the plaintiff chooses to sue in.

On this basis, the court declined to grant relief to the claimant, overturning the earlier decision of the DDT.

Conclusion

The NSW Court of Appeal's decision is a good decision for manufacturers because it promotes certainty in the law and discourages forum shopping. The decision is consistent with earlier NSW Court of Appeal decisions1, and reaffirms the principle that plaintiffs injured overseas should be able to achieve no better result by suing in Australia than they would have achieved if they had sued in the place where they were injured.

The NSW Court of Appeal's decision is subject to an application for special leave to appeal to the High Court. Allens Arthur Robinson acted for Amaca in the DDT and in the NSW Court of Appeal.

References
  1. In particular James Hardie & Coy Pty Limited v Hall as administrator of the Estate of Putt (1998) 45 NSWLR 554.

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Joint and Several liability reintroduced for defendants in UK mesothelioma claims

In brief: On 25 July 2006, the UK Parliament passed the Compensation Act 2006 (UK). This Act overrules the House of Lords decision of 3 May 2006 in Barker v Corus [2006] UK HL 20, which provided for proportionate liability for defendants in mesothelioma claims instead of joint and several liability. Special Counsel Nicola Nygh(view CV) reports. 

Background

In the July 2006 edition of Recall, we discussed a UK House of Lords decision, Barker v Corus, which established that in a mesothelioma claim where there are multiple defendants who each wrongfully exposed the claimant to asbestos dust and fibre at different times, each defendant's liability is proportionate to the probability that that defendant caused the harm. This formed an exception to the usual rule of joint and several liability.

The decision

The House of Lords' decision has now been overruled by the Compensation Act 2006 (UK). The Compensation Act provides for the relaxation of the rules of causation for mesothelioma claims in accordance with the House of Lords' decision in Fairchild v Glenhaven Funeral Services [2003] 1 AC 32. That is, a claimant who has developed mesothelioma can sue any of the entities that wrongfully exposed the claimant to asbestos, even though on the current state of scientific knowledge the claimant cannot prove which exposure caused the disease.

However, the rule in Barker, which was intended to ameliorate any unjustness to defendants which may flow from the Fairchild exception, has been abolished by the Compensation Act. Instead, each defendant in a mesothelioma claim will be jointly and severally responsible for the whole of the damage caused to the claimant by the disease. 

Conclusion

Neither the decision in Fairchild, nor that in Barker, represent the current law in Australia, although the facts before the House of Lords in those cases have not been squarely considered by the High Court. If Australian courts were to adopt the approaches taken by the House of Lords in Fairchild and Barker, it would not be surprising if the state legislatures respond in the same way as the UK Parliament.

 

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