FEDERAL COURT OF AUSTRALIA

McMullin v ICI Australia Operations Pty Ltd [1999] FCA 1814

PRACTICE AND PROCEDURE – Application to reopen previous determination of categories of persons to whom respondent owed a duty not to cause pure economic loss – Judgment not yet entered – Circumstances under which the Court should allow reopening of such an issue -  Whether the decision in Perre v Apand Pty Ltd establishes that previous determination was erroneous – Application refused.

Perre v Apand Pty Ltd [1999] HCA 36, 164 ALR 606 considered

BRIAN McMULLIN and LEONE MARGARET McMULLIN v ICI AUSTRALIA OPERATIONS PTY LTD, ICI AUSTRALIA LIMITED and CROP CARE AUSTRALIA PTY LIMITED

NG305 of 1995

WILCOX J

23 DECEMBER 1999

SYDNEY

THE COURT ORDERS THAT:

1.                  The application of the applicants to reopen the issue of the categories of persons to whom the respondents owed a common law duty of care be refused.

2.                  The applicants pay the costs of the respondents in relation to that application, including the costs connected with the provision of written submissions, but limited to one-half of the costs associated with the hearing on 9 December 1999.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT (No.7)

1                     WILCOX J:  These reasons relate to an application to reconsider some views expressed by me in my decision on liability.

The decision on liability

2                     On 24 June 1997 I handed down my Reasons for Judgment on issues of liability as between the applicants (and group members) and the five then remaining respondents, ICI Australia Operations Pty Ltd, ICI Australia Limited, Crop Care Australasia Pty Ltd, the State of New South Wales and the State of Queensland.  Those reasons are reported:  see 72 FCR 1.

3                     For the reasons expressed that day, I dismissed the proceeding insofar as it related to the claims against the State of New South Wales and the State of Queensland.  I did not dismiss the proceeding insofar as it related to the three ICI companies (collectively “ICI”); but I did limit the reach of the negligence claim, as against those three respondents.  I did so because I was of the opinion that ICI lacked a duty of care towards some categories of claimants.  In order to explain this, it is necessary to refer to my earlier reasons for judgment.  I do so by reference to the pages in the Federal Court Reports.

4                     At 60 I commenced a discussion of the case in negligence against ICI by referring to the position taken by the parties in respect of the reach of ICI’s duty of care.  I discussed the relevant leading authorities.  At 69-70 I described the seven categories into which it was possible to divide the claimants.  I repeat that categorisation:

“(i)      claimants (mainly graziers) whose cattle become contaminated by CFZ during their period of ownership;

(ii)               claimants (graziers and others such as abattoir operators) who unwittingly purchased already-contaminated cattle;

(iii)             claimants, such as meat processors and exporters, who owned meat that was found to be contaminated and was, therefore, condemned;

(iv)             claimants, such as feed lot operators, who found that cattle in their possession (but not ownership) were contaminated and thereafter incurred expense in holding them in detention;

(v)               claimants whose cattle were not in fact contaminated by CFZ but were placed in detention, or on a targeted tail tag list, because of a belief they were or may be affected;

(vi)             claimants, such as gin trash transporters and trash pellet suppliers, who lost business (or their whole enterprise) because of the discovery of CFZ contamination and the resultant advice given to graziers against feeding cotton gin trash to cattle; and

(vii)           claimants, such as abattoir operators, feed lot operators, stock agents, cattle transporters, meat processors and exporters and the like, who lost business, or suffered reduced profit margins, because of the effect of the controls introduced by DepAg or QDPI or the attitude of foreign governments to CFZ contamination.”

5                     After considering the position of each of these categories of claimants, in the light of the principles articulated in the relevant authorities, I held at 82 that ICI owed a duty of care to all claimants within the first four categories, but not to those in categories (v), (vi) and (vii).  I held there was insufficient proximity between ICI and the claimants in the three last categories to give rise to a duty of care.

Subsequent events

6                     In the final paragraph of my reasons of 24 June 1997, I confirmed my intention of commencing the hearing of the cross claims on 4 August 1997.  However, most of the cross claims settled before that date; one was still outstanding on 4 August but it, too, settled after a couple of days hearing.  The settlements were all on the basis that the cross claims were to be dismissed.  No application was made for leave to appeal against any aspect of my 24 June judgment.  This resulted in a situation where, so far as the negligence claim (as distinct from the s52 claim) was concerned, ICI was liable to claimants in the first four categories, and only claimants in those categories.  However, there were some hundreds of claimants in those categories, so the assessment of damages was a major task.  It has occupied the period since August 1997.  I am informed by counsel for ICI that 11 claims were resolved by judgment (either by myself or Judicial Registrar Walker) and 472 claims have been settled, mostly through a mediation process.  I understand only 12 negligence claims falling within the categories specified on 24 June 1997 remain unresolved.  I am uncertain what the position may be in respect of claims based on s52 of the Trade Practices Act 1974.

The High Court decision in Perre

7                     On 12 August 1999, the High Court of Australia gave judgment on Perre v Apand Pty Ltd [1999] HCA 36; 164 ALR 606.  This was a case to which I had made a passing reference in my judgment on liability.  At first instance, before von Doussa J, it was called Sparnon v Apand Pty Ltd (unreported).  At 79 I noted that, in Sparnon, von Doussa J followed a decision of the Full Court of South Australia, Seas Sapfor Forests Pty Ltd v Electricity Trust of South Australia (1996) 187 LSJS 369, on which I placed some reliance.  The view taken in Sparnon by von Doussa J was upheld by a Full Court of this Court:  see Perre v Apand Pty Ltd (1997) 80 FCR 19.  However, the High Court disagreed with it.  All members of the High Court held the appeal should be allowed, although there was disagreement between them as to which appellants’ claims ought to proceed to assessment of damages.

The application to re-open the categories

8                     At a directions hearing on 19 October 1999, counsel for the applicants, Mr J Rowe, asked me to reconsider the categories of claimants entitled in this case to recover damages in negligence.  He stated that his application stemmed from the High Court decision in Perre and reflected a view that this decision established I had determined the issue of proximity unduly narrowly.  Mr D J Habersberger QC, who appeared with Mr G G McArthur for ICI, opposed any re-opening of the issue of proximity and submitted that Perre did not, in any event, demonstrate my previous conclusion was incorrect.

9                     It was inappropriate to resolve this issue at a directions hearing.  I directed the lodgement of written submissions by each side, addressed both to the matter of reopening the issue and the effect of Perre.  I fixed the afternoon of 9 December 1999 for oral elaboration of the written submissions.

10                  Written submissions were lodged and I heard supplementary oral submissions on 9 December, at the conclusion of which I reserved my decision.  These reasons deal with the matters raised by counsels’ submissions.

Should the Court reopen the categories?

11                  It is common ground between the parties that the Court has power to reconsider the categories of claimants to whom ICI owed a duty of care; no formal order has yet been entered– see Order 35 rule 7(1) of the Federal Court Rules – and not all the negligence claims have been yet resolved.

12                  Counsel for ICI concede my conclusions on liability constitute what is technically only an interlocutory judgment:  see Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421.  Order 35 rule 7(2)(c) confers a power to vary interlocutory judgments, even where the order has been entered.  Nevertheless, say counsel, “interlocutory orders of a substantive nature will not ordinarily be disturbed unless a material change of circumstances since the original application has occurred or there has been the discovery of new material which could not reasonably have been put before the court”:  see Darling Harbourside (Sydney) Pty Ltd v Sanirise Pty Ltd (Beaumont, Carr and Sackville JJ, 17 May 1996, not reported).

13                  Counsel for ICI make the point that, in Reasons for Judgment (No. 3), delivered on 18 November 1996, I gave reasons for my decision to split the hearing of issues.  At that time I made orders that substantially coincided with the applicants’ preferred orders, and had been opposed by ICI.  I did so because I thought this was the economical and practical way to proceed.  At 13 I said:

“I have come to the conclusion that, in the situation confronting the Court, wisdom lies in proceeding one step at a time.  I think it is preferable to defer consideration of the cross-claims until after determination of most, if not all, issues concerning the liability of the respondents in the principal proceeding.  This will allow concentration on those issues without the distraction of pieces of evidence that are relevant only to a particular cross-claim, or to damages, with a consequential saving in hearing time and costs.  Moreover, this course probably would allow the cross respondents to consolidate their representation at the first hearing, if they wish.  It seems unlikely that there would be any conflict of interest between cross respondents at this stage.  Of course, consistently with the views expressed above, I intend that the cross-respondents would be bound by the findings made in respect of the evidence led at this first hearing.  And the evidence itself would be evidence in the cross-claims, if they proceed.”

The subsequent hearing proceeded on that basis. 

14                  Counsel for ICI say:

“The applicants having had the benefit of a split trial, now seek to use the fact that your Honour has not handed down a final judgment, to use the interlocutory nature of your Honour’s findings to re-open those findings.  Yet it is clear from your Honour’s language that the findings on liability vis-à-vis the respondents were meant to be final.”

15                  These matters are relevant, say counsel, “because the decision to grant leave to reopen the reasons for judgment in interlocutory decisions is discretionary”.  They go on:

“In our submission, given the time that has now expired and the events that have occurred in the intervening period and that the reasons for decision were meant to be final in any event, the discretion should not be exercised in favour of the application to re-open.”

16                  Counsel for ICI point out that, in Autodesk Inc v Dyason (No. 2)(1993) 176 CLR 300, even Mason CJ, who delivered a dissenting judgment favouring the respondents’ application to reopen the appeal, emphasised the limited circumstances in which this is the appropriate course.  At 302 the Chief Justice referred to “the public interest in the finality of litigation” and described it as an “exceptional step” to review or rehear an issue.  At 303 his Honour said:

“However, it must be emphasized that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put.  What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing.  The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to re-argue their cases.”

17                  Counsel contend that “(s)ubsequent decisions of higher courts in later cases have never been a basis for reopening final decisions in earlier cases.”

18                  In a reply to these submissions, Mr Rowe concedes that my earlier ruling ought not be disturbed unless there has been a material change of circumstances.  His position is that there has been such a change.  He goes on:

“We disagree that leave to reopen is discretionary … when a superior Court has made a decision effecting Your Honour’s judgment or reasons.  In such circumstances it is the duty or [sic: of] counsel to bring such a decision to Your Honour’s attention and Your Honour is required to judiciously consider that case and its effect, if any, on the interlocutory judgment.”

19                  Counsel for ICI are correct in saying that I intended the hearing held in March-April 1997, and which gave rise to the judgment of 24 June 1997, to be a final hearing on certain issues.  The relevant issues were specified in the order I made on 18 November 1996.  They included:

“Whether ICI owed a duty of care to persons in the position of the applicants and group members (para 25 of the Second Further Amended Statement of Claim), leaving aside any fact relevant to that issue that is peculiar to the applicants or a particular group member.”

This is the very issue Mr Rowe asks me now to revisit.  The concluding rider is not relevant.

20                  Notwithstanding my intention on 18 November 1996 and the continuation of that intention up to and including 24 June 1997, I accept that I have a discretion to reopen the issue of the ambit of ICI’s duty of care.  However, for the reasons expressed by counsel for ICI, this is a step that ought to be taken only in a clear case, where it is incontestable that the earlier decision is wrong.  It would not be right to reopen an issue merely to enable a party to re-agitate arguments already considered by the Court, even if the re-agitation has the benefit of a more recent High Court decision.  That brings me to consideration of in Perre.

Perre

21                  The claims made in Perre arose out of the circumstance that the respondent, Apand, transmitted to the Sparnon property a quantity of seed potatoes that were affected by bacterial wilt.  The appellants were persons connected with land that lay within about 3km of the Sparnon property.  The appellants included the owners of that land and associated persons who were involved in the growing of potatoes on the land and the buying of potatoes from others, for packing and sale with their own produce.  Bacterial wilt did not affect the appellants’ land or the potatoes they grew or packed.  The case was one of pure economic loss, in the sense that the loss was not the result of any physical injury.  Rather, as Gaudron J described the situation in para [24]:

“the loss occurred because, by reason of the outbreak of bacterial wilt on the Sparnon property, Warruga Farms and the Rangara joint venture were unable to sell their potatoes into the Western Australian market and, for a period of five years, the other appellants were unable to use their land or equipment for the production or preparation of potatoes for that market.”

22                  The appellants’ potatoes were to be exported to Western Australia, but Western Australia law prohibited the importation of uncertified potatoes grown within 20 km of an occurrence of bacterial wilt.

23                  Understanding of Perre is not rendered easier by the circumstance that the Court spoke with seven voices.  As indicated, there was some disagreement amongst the Justices as to which of the appellants were entitled to succeed.

24                  Gleeson CJ at para  [12] agreed with the reasons given by Gummow J for concluding Apand owed the appellants a duty of care.  In para [198] Gummow J said that, in determining whether the relationship is so close that the duty of care arises, “attention is to be paid to the particular connections of the parties”.  He eschewed the imposition of a fixed system of categories, preferring to search for “salient features” of the particular case that might combine to constitute a sufficiently close relationship to give rise to a duty of care.  In Perre he found those features in the circumstances that von Doussa J had held Apand owed a duty of care to the Sparnons, in relation to providing seed for planting on their property, and that Apand knew (or ought to have known) there were also others within a 20 km radius of that property who grew potatoes for export to Western Australia.  His Honour emphasised Apand’s control of the situation and the powerlessness of the Perres:  see paras [203] to [208].

25                  For Gaudron J the significant factor was that the actions of Apand interfered with the appellants’ legal rights.  At para [42], her Honour said:

“In my view, where a person knows or ought to know that his or her acts or omissions may cause the loss or impairment of legal rights possessed, enjoyed or exercised by another, whether as an individual or as a member of a class, and that that latter person is in no position to protect his or her own interests, there is a relationship such that the law should impose a duty of care on the former to take reasonable steps to avoid a foreseeable risk of economic loss resulting from the loss or impairment of those rights.”

26                  McHugh J summarised his position, at para [50], in this way:

“The losses suffered by the Perres were a reasonably foreseeable consequence of Apand’s conduct in supplying the diseased seed; the Perres were members of a class whose members, whether numerous or not, were ascertainable by Apand; the Perres’ business was vulnerably exposed to Apand’s conduct because the Perres’ business was vulnerably exposed to Apand’s conduct because the Perres were not in a position to protect themselves against the effects of Apand’s negligence apart from insurance (which is not a relevant factor); imposing the duty on Apand does not expose it to indeterminate liability although its liability may be large; imposing the duty does not unreasonably interfere with Apand’s commercial freedom because it was already under a duty to the Sparnons to take reasonable care; and Apand knew of the risk to potato growers and the consequences of that risk occurring.”

27                  At para [259] Kirby J followed the approach he had adopted in Pyrenees Shire Council v Day (1998) 192 CLR 330; that is, to consider the following three questions:

“1.      Was it reasonably foreseeable to the alleged wrongdoer that particular conduct or an omission on its part would be likely to cause harm to persons who have suffered damage or a person in the same position?

2.                 Does there exist between the alleged wrongdoer and such a person a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’?

3.                 If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrongdoer for the benefit of such a person?”

28                  Hayne J thought recovery should be limited to the owner of the property upon which the appellants’ potatoes were grown; so restricted, the class of possible plaintiffs was not only capable of definition but actually known:  see para [341].

29                  Callinan J emphasised Apand’s leading role in the industry, which placed it in a special relationship to growers and handlers of potatoes.  He thought Apand was in effective control of the operation which led to the embargo on export to Western Australia that caused the appellants’ damage.  He also thought the appellants were members of a determinate class, because of the 20 km radius:  see paras [407] to [409].

30                  Mr Rowe submits that the situation in Perre was similar to that affecting the group members in the fifth, sixth and seventh categories identified in my judgment on liability.  He says ICI was in a position of control, in respect of chlorfluazuron (“CFZ”); the group members were powerless.  Furthermore, he argues, it was foreseeable that damage would be caused to persons within these categories if Helix, ICI’s CFZ product, affected the marketability of cattle.  In that eventuality, it was predictable that some cattle not actually contaminated by CFZ might be mistakenly placed in detention, or on a targeted tail tag list; thereby causing their owners to suffer damage.  It was also foreseeable that people involved in the supply or transport of cotton trash or trash pellets would lose business, or their whole enterprise, because of advice against feeding cotton gin trash to cattle.  It was also predictable that persons such as abattoir owners, feed lot operators, stock agents etc would lose business.

31                  There is no evidence that ICI was aware of the practice of feeding cotton gin trash to cattle; but I held it ought to have been aware of that practice:  see the judgment on liability at 80.  That being so, I accept the predictability of loss to all of the persons in the categories under discussion, if the use of Helix might lead to CFZ contamination of cattle.  However, although the circumstances under which the courts will impose liability for pure economic loss appear to be expanding, no Australian court has yet held that foreseeability alone justifies imposition of a duty of care.  None of the later High Court decisions has questioned the insistence of Deane J in Jaensch v Coffey (1984) 155 CLR 549 on something more than foreseeability; although the “something more” has been variously described in later judgments.

32                  I appreciate the force of the points made by Mr Rowe.  However, the difficulty is that, if he is right, there is no stopping point short of where foreseeability ends.  Mr Rowe agreed that, on his approach, ICI would be liable to an abattoir owner in north Queensland (remote from the cotton fields where Helix was used) who lost export sales as a result of a ban by a particular country on the importation of Australian beef caused by CFZ concern.  The documents tendered in evidence clearly established ICI was aware that contamination of beef by any chemical would have general repercussions for the Australian beef industry including, particularly, the export trade.  Mr Rowe accepts his argument means that Weller & Co v Foot & Mouth Disease Research Institute [1966] 1 QB 569 (discussed in the liability judgment at 65 and 68-69) was incorrectly decided.

33                  The time may come when the law will reach the point advocated by Mr Rowe.  I am not persuaded it has yet done so.  Although Perre may be seen as going further than previous cases, in relation to the range of people to whom there is a duty not to cause pure economic loss, all members of the High Court were careful to confine that range in some way.  For most members of the Court (Gleeson CJ, McHugh J, Gummow J, Hayne J and Callinan J) a critical factor was the limited number of people involved in the growing and processing of potatoes within 20 km of the Sparnon’s farm.  Gaudron J tied her judgment to Apand’s interference with the appellants’ legal rights to export potatoes to Western Australia.  Kirby J applied a three-question test that included an open textured question about reasonableness.  His Honour answered that question, substantially, by emphasising the appellants’ geographical proximity to the Sparnon’s farm.

34                  In the liability judgment at 79 I said:

“In recent years the High Court has several times insisted on the need for proximity, as well as foreseeability.  While the Court has been disposed to take a pragmatic, and increasingly liberal, view of what facts constitute the necessary special relationship, the Court has continued to insist on a connecting link.  In the present case, once one moves away from the cattle (or meat) trail, there is no connecting link.  The situation becomes similar to that described by Widgery J in Weller, for contamination, like foot and mouth disease, can be ‘a tragedy which can foreseeably affect almost all businesses in (an agricultural) area’.”

35                  Perre may be seen as the latest example of the increasingly liberal view taken by the High Court, but it remains true that the Court has continued to insist on a connecting link.  It also remains true that, “once one moves away from the cattle (or meat) trail, there is no connecting link”. 

Orders

36                  I do not think Perre compels the view that I erred in my previous determination of the categories of persons to whom ICI owed a duty of care.  Accordingly, I refuse the applicants’ application to reopen that question.

37                  The applicants should pay the costs incurred by ICI in relation to the application to reopen.  Those costs will include the costs relating to ICI’s written submission.  As the hearing of 9 December 1999 was also concerned, to a significant extent, in directions about other matters, the order ought to extend to only one half of the costs incurred by ICI in respect of the hearing held that day.

Associate:

Dated:              23 December 1999