Abstract

In the vexed area of purely economic loss, described as the most difficult in the common law, policy decisions based on concepts such as vulnerability raise uncertainty and provide legal advisers with no guidance as to the potential outcome of litigation. This is not so where legal principles are the foundation for judicial determinations, since these principles provide a signpost and guidance as to a likely outcome.

The application of vulnerability is a policy decision which gives unwarranted dominance to contract, ignoring the independence and concurrent operation of tort and thereby denying compensatory justice.

The uncertainty involved in a determinant such as vulnerability, arises from issues as to when and how it will be applied. If the law persists with vulnerability as a relevant factor in tort claims for purely economic loss, guidance and clarification as to its application are needed.

Introduction

There is obvious judicial diversity as to the interrelationship of contract and tort in the adjudication of purely economic loss claims (see, for instance, the majority 5/minority 4 split decision in the Supreme Court of Canada in Ontario Inc. v Maple Leaf Foods Inc 2020 SCC 35). On one side there is the view that economic interests are the domain of contract, and a claim in tort to recover purely economic loss is an unwarranted interference into the matrix of contract. On this view, tort is the appropriate vehicle for the protection from physical harm to person or property. This historical understanding of the role of contract and tort underpins a reluctance to raise a duty of care where there is a network of contractual arrangements between commercial parties. A further impetus to deny a duty of care between parties to contractual arrangements, stems from an unwarranted, underlying floodgates fear if tort actions are superimposed on the existing contractual risk allocations.

A view that purely economic interests are the domain of contract, has led to the development of vulnerability, whereby if a claimant in tort for purely economic loss could have protected its economic interests under contract, then no duty of care arises. (see in Australia; Brookfield Multiplex Ltd v Owners Corporation Strata Plan [2014] HCA36; 88 ALJR911 and Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 78 ALJR 628

The opposing view in judicial analysis is that, where there is fault or delict causing economic damage and the elements necessary for a successful tort action in negligence are present then the fact that the parties were only brought into a close and direct relationship from a network of contracts (eg builder-original owner-subsequent purchaser) will not bar the tort action. It will be suggested below that this latter view accords with commercial reality, providing recourse in circumstances where the claimant is unlikely to have contractual protection. If the tort action is barred then the party must rely on prohibitive loss insurance.

Vulnerability: Policy or Principle

The application of vulnerability in purely economic loss cases has occurred in situations where a claimant for economic loss from negligence, has not sought an indemnity under contract.

If the victim had sought and received a contractual indemnity against the very risk of negligence for which they now seek tortious compensation there would be a convincing argument, on principle, that the claimant’s intention was to shift the risk of economic loss to the contractual party giving the indemnity and thereby relinquishing any right to sue in tort.

However, where the claimant in tort for purely economic loss has not sought nor received any contractual indemnity for the very risk they now seek compensation, any presumption that the claimant likely would have received such a contractual indemnity is commercially unrealistic. As McLachlin J (as she then was) stated in Canadian National Railway Co v Norsk Pacific Steamship Co[1]:

“the contractual allocation of risk argument rests on a number of important but questionable assumptions. First, the argument assumes that all persons or business entities organise their affairs in accordance with the laws of economic efficiency, assigning liability to the ‘least-cost risk avoider’. Second, it assumes that all parties to a transaction share an equality of bargaining power which will result in the effective allocation of risk. It is not considered that certain parties who control the situation may refuse to indemnify against the negligence of those over whom they have no control, or may demand such an exorbitant premium for this indemnification that it would be more cost-effective for the innocent victim to insure itself.”[2]

Perhaps most convincing in the comments of McLachlin J, is that a party to a contract is unlikely to indemnify against the negligence of those over whom they have no control, or that they would seek such an exorbitant premium for the indemnity that the innocent victim would opt to insure itself.

Furthermore, the presumed intention of the claimant in tort, where the claimant has not sought contractual protection, should be that they are preserving their tort rights in negligence.

The unlikelihood of the claimant obtaining a contractual warranty suggests that vulnerability is merely a label to deny a tort action where there are contractual arrangements between parties. The application of vulnerability to negate a duty of care where a claimant in tort has not sought a contractual indemnity is a policy decision.

Nor is it appropriate to mask that policy decision behind a label such as proximity (discarded in Australia as meaningless for the very reasons outlined below) by a conclusion that no relationship of proximity sufficient for duty of care exists where the parties’ expectations are based in their contractual arrangements. Contractual arrangements say nothing and do not inform the tortious question of proximity, namely, how close and direct was the relationship between tortfeasor and victim in terms of cause and effect, measured by physical, circumstantial and causal closeness.[3] This causal closeness may result and arise from a network of contracts.[4] As Le Dain J giving judgment for a unanimous Supreme Court of Canada stated in Central and Eastern Trust Co v Rafuse;

“The common law duty of care that is created by a relationship of sufficient proximity….is not confined to relationships that arise apart from contract. Although the relationships in Donoghue v Stevenson, Hedley Byrne and Anns were all of a non-contractual nature and there was necessarily reference in the judgments to a duty of care that exists apart from or independently of contract, I find nothing in the statements of general principle in those cases to suggest that the principle was intended to be confined to relationships that arise apart from contract. Indeed, the dictum of Lord Macmillan in Donoghue v Stevenson concerning concurrent liability…would clearly suggest the contrary. Junior Books Ltd v Veitchi Co Ltd in which an owner sued flooring sub-contractors directly in tort, is authority for the proposition that a common law duty of care may be created by a relationship of proximity that would not have arisen but for a contract.”[5]

Where there is clear proximity between parties, under the historical meaning of that term (see, for instance, in the Supreme Court of Canada, Karakatsanis J’s finding of a close relationship of proximity between supplier and franchisees arising from contractual arrangements between supplier, franchisor and franchisees in Ontario Inc v Maple Leaf Foods Inc) it is unfortunate and distorts the utility of the concept to deny a relationship of proximity on a policy ground of vulnerability. This reduces the concept to a mere label to attach to a policy decision, the latter having no relevance to the historical principle. As Brennan CJ stated in the High Court of Australia in Bryan v Maloney:

“If the only role for proximity in the broader sense were to provide an umbrella of terminology to cover the different requirements for the existence of different categories of duty of care, and thereby assist in understanding and identifying them – in other words, if the requirement of proximity were not invoked as a working criterion of liability in particular cases – it would have little practical significance.”[6]

It has been suggested that the use of proximity as a mere label encompassing policy factors not related to nearness or closeness, equates the term with the duty of care question itself.[7] Dawson J in the High Court of Australia, in reference to the use of proximity as a label covering disparate circumstances unrelated to nearness or closeness of relationship, has stated that it is ‘to expect more of the term than it can provide’.[8]

Vulnerability and Uncertainty

A threshold question is whether the law should reject vulnerability altogether as a relevant policy factor in a tort claim for purely economic loss. Such a rejection would be justified on the basis that to deny a tort action for negligence because of potential contractual rights is an unjustified interference and fetter on the independence of tort law. On this view, contractual rights and obligations are irrelevant to independent tort rights which can operate concurrently.

This was the approach of the majority in the High Court of Australia (French CJ, Gummow, Hayne, Crennan and Bell JJ.) in Barclay v Penberthy[9]. In a joint judgment on the issue of a claim for negligence for purely economic loss by an employer against the tortfeasor for causing permanent injury to, and loss of services of key employees, the court ignored and dismissed as irrelevant any potential right the employer may have had to protect itself under contract from such loss of services. The majority in the High Court stated:

“Further, in order to establish the existence of a duty of care owed to [the employer] …. it was not incumbent upon the employer to establish that it could not have bargained…..for a particular contractual provision. The presence or absence of a claim in contract would not be determinative of a claim in tort”[10][the parenthesis is mine].

This was a clear rejection of vulnerability in the context of potential contractual rights, as a relevant issue in a tort claim for purely economic loss.

The abandonment of vulnerability as a potential determinant in purely economic loss would remove the uncertainty it has brought to an already vexed area of the law. At a more theoretical level, the availability and sanction of tort law as a deterrent to negligent conduct is maintained. As was stated by McLachlin J in reference to the aims of tort law, in contrast to the consensual rights and obligations of contracting parties, tort law has “an historical centrality of personal fault” and its role “in curbing negligent conduct and thus limiting the harm done to innocent parties, not all of whom are large enterprises capable of maximising their economic situation,”[11]should not be overlooked.

Alternatively, if the policy of the law is that vulnerability is a relevant issue in the adjudication of purely economic loss claims then clarification of the legal approach to its application is required. The law could adopt any of the following three approaches:

Approach 1

Where parties are linked by contractual arrangements, one approach by the law may be an absolute bar to any tort action arising between those parties. This would mean that the protection of economic interests and risk allocation are determined solely in the contractual matrix.

On this approach, the actual vulnerability of a party is irrelevant, since even if a party was vulnerable in the sense of an inability under contract to protect against an economic risk from negligence, there is an absolute bar to any duty of care arising. Such a policy approach reduces the meaning of vulnerability to a mere label.

Approach 2

A second approach to the application of vulnerability is that where parties have entered a network of contracts and one of those parties is seeking a tort remedy in negligence for its economic loss, it must have sought contractual indemnification against the very risk for which it now seeks compensation. The claimant under this approach must produce evidence of a failed attempt to obtain contractual indemnity against the risk for which it now seeks tortious compensation.

This approach to vulnerability casts the onus of proof on the claimant to prove a negative, namely, that they sought and could not obtain a contractual warranty, thereby leaving them vulnerable.

Under this approach, if the claimant in tort either did not seek a contractual warranty, or was successful in obtaining such a warranty, then in either instance the claimant has not satisfied the onus of proof of vulnerability and a duty of care does not arise.

This second approach is that advanced by Heydon J in the High Court of Australia in Barclay v Penberthy.[12] Heydon J in that case made reference to a submission by the claimant in tort, the submission being that there was no evidence that the claimant could have negotiated [a contractual warranty]. Heydon J commented on that submission as follows:

“But that impermissibly reverses the burden of proof.  The correct question was: was there evidence that it could not have negotiated a warranty? On that question the evidence was silent……..there was no evidence about whether [the party with whom the claimant contracted] was open to change [the terms] after negotiation.”[13] [the parentheses are mine].

Approach 3

A third approach to the issue of vulnerability would be that the law does not require a claimant in tort actually to have sought an indemnity in contract. But the claimant still carries the onus of proof, on the totality of evidence, to establish that it is more probable than not that they would have been unable to obtain any contractual warranty, thus leaving them exposed and vulnerable to economic loss from negligence.

Under this third approach, for the reasons given earlier in this paper, and in the absence of specific evidence to the contrary, probabilities are (in accordance with commercial reality) that no contractual indemnity would be given.

Whatever approach is adopted, vulnerability should be examined as a separate issue from principles such as reasonable foreseeability and proximity. This is the Anns approach (see Anns v Merton London Borough Council[14]) to adjudication of purely economic loss claims, whereby reasonable foreseeability and proximity establish a prima facie case of duty and policy issues are then examined to determine if there is a reason to negate the prima facie duty. The Anns approach was applied by Karakatsanis J, in giving judgment on behalf of the minority in the Supreme Court of Canada in Ontario Inc v Maple Leaf Foods Inc.[15]In a clear and compelling judgment by Karakatsanis J[16], concepts of reasonable foreseeability and proximity (the latter in its historical context) were analysed and then policy was addressed.

In the interests of certainty, the Anns approach to adjudication of purely economic loss claims should be the methodology of the common law of Australia.

Conclusion

There are strong policy grounds to conclude that the negation of tort rights in the face of contractual arrangements is an unjustified and unwarranted interference, preventing a victim of negligence from any legal recourse for its loss. The commercial improbability of a party either seeking or obtaining a contractual indemnity for the economic loss it now claims adds impetus to the injustice of denying tort rights on the basis of vulnerability

If vulnerability is to continue as a potential determinant in purely economic loss claims, the uncertainty surrounding its application provides no guidance to legal advisers on the likely outcome of potentially large economic claims. Clarification as to its application is needed either by legislative intervention or judicial pronouncement.

*LL.B, LL.M, PhD (Barrister at Law)

[1] [1992] 1 SCR 1021

[2] Ibid at [1158],[1160]

[3] See the exhaustive analysis and articulation of the concept of proximity in the High Court of Australia in the judgment of Deane J in Jaensch v Coffey (1984) 155 CLR 549

[4] Central & Eastern Trust Co v Rafuse [1986] 2 SCR 147

[5] Ibid at [204-205]

[6] (1995) 182 CLR 609 at 654 per Brennan CJ

[7] M H McHugh “Neighbourhood, Proximity and Reliance” in Finn (Ed) Essays on Torts (Law Book Company Limited, Sydney, (1989) p38

[8] Hill v Van Erp [1997] HCA 9; 188 CLR 159 per Dawson J

[9] [2012] HCA 40; 246 CLR 258

[10] Ibid at [47]

[11]Canadian National Railway Co v Norsk Pacific Steamship Co [1992] 1 SCR 1158,1160

[12] Barclay v Penberthy [2012] HCA 40

[13] Ibid at [87] per Heydon J

[14] [1978] AC 73

[15] 2020 SCC 35

[16] Ibid at [97] ff, per Karakatsanis J

Abstract

The resolution of claims in tort law for purely economic loss has been described as the most difficult and challenging in the common law, not least because of the range of relevant policy factors.

Sir Harry Gibbs’s lasting contribution to this vexed area of the law was the articulation of a principle providing a workable methodology across the spectrum of varied circumstances of purely economic loss.

Introduction

There are parallels in the contribution to the law of tort by the two eminent jurists, namely, Lord Atkin and Sir Harry Gibbs (hereafter referred to as Gibbs J) but it is the latter’s contribution that is the subject of this article. Their early links to Queensland is of historical note only, and there are no coincidences of time as their respective, lasting contributions to tort law, occurred some 44 years apart. The parallel or similarity in their respective contributions was the formulation and articulation of overarching principles providing a methodology for determining duty of care in any circumstance and which satisfied a range of policy issues.

Lord Atkin’s articulation of the neighbourhood principle was in the context of physical damage, whereas Gibbs J’s formulation was propounded 44 years later in the context of purely economic loss.

Below is a discussion of Gibbs J’s contribution.

The Search for a Principle in Purely Economic Loss Claims

The twin requirements propounded by Lord Atkin of reasonable foreseeability, and a close and direct relationship between defendant and plaintiff,[i] provided a principled methodology for resolving the duty question in the vast majority of physical damage cases. This was so, since the physical consequences of negligence were usually immediate, and spent at a single remove from the negligent act.

This was not so with purely economic loss which could occur at several removes (the ripple effect) from the negligence, and to a vast number of persons. The apprehension of opening a limitless number of claims was, and still underpins the cautious approach of courts to a novel finding of duty of care in claims for purely economic loss.

Cardozo C J’s statement that purely economic loss claims could expose defendants ‘to liability in an indeterminate amount for an indeterminate time to an indeterminate class’[ii] gave impetus to a clear policy that defendant tortfeasors should not be subject to a vast number of claims from an unascertained class of plaintiffs suffering purely economic loss. It was both unjust and unreasonable that a single act of negligence might require the defendant to meet an unlimited number of claims for economic loss.

The development of the exclusionary rule in the UK, denying any recovery for purely economic loss was an overreaction, and while providing certainty in the law, denied to economic victims of negligence any compensatory justice, even in circumstances where there was no threat of indeterminate liability to the defendant.

The retreat from the exclusionary rule which occurred in Hedley Byrne,[iii] applied only to negligent statements causing purely economic loss to an identified and intended user of the statement for a known purpose. There was no reason in justice to draw a distinction between negligent statements and negligent acts, if compensating the victim or victims, would not expose the defendant to indeterminate liability to an unascertained class.

Consequently, if the law was to progress to allow recovery for purely economic loss caused by negligent acts, as well as statements, it was necessary to provide a principle or methodology which would negate any duty of care to an indeterminate, unascertained class, but would facilitate recovery only to an individual or limited and ascertainable class of persons.

This was the task presented to Gibbs J in the High Court of Australia in the now celebrated decision of Caltex.

Gibbs J’s Formulation in Caltex

Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad”[iv] concerned the fracture of a pipeline owned by a third party. The pipeline carried oil to the plaintiff’s terminal. The fracture of the pipe by the negligent act of the defendant caused purely economic loss to the plaintiff resulting from extra costs associated with alternate means of transporting the oil.

This case therefore squarely raised the issue of potential recovery by a plaintiff of relational economic loss at one remove from the direct effect of the defendant’s negligence, namely damage to property (pipeline) not owned by the plaintiff.

The test of neighbourhood or proximity propounded by Lord Atkin, which was intended as a control mechanism on reasonable foreseeability, was that you owed a duty of care only to “persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected…”.[v] The difficulty was in purely economic loss claims of determining who is so closely and directly affected that the defendant ought reasonably to have them in contemplation. Was the answer to this question to be determined as a value judgment, or a policy decision by individual judges on the facts of a particular case? No guidance or principle on what was a sufficiently close and direct relationship that the defendant ought to have had the plaintiff or plaintiffs in contemplation, was available.

For instance, if a canal was closed by a shipping accident caused by a negligent navigator, was the navigator in such a close and direct relationship to the general users of the canal, that the defendant ought to have had them in contemplation as likely to suffer economic loss? Similarly, if a contractor negligently severed a powerline thereby depriving a large commercial area of power for a substantial period, were all those suffering economic loss in their businesses, persons who were so closely and directly affected that they ought to have been in the defendant’s contemplation?

Was there a principle that could fill out the content of Lord Atkin’s neighbourhood test, providing a workable solution to the question of what was a sufficiently close and direct relationship that the defendant ought to have had the victim or victims in contemplation.

It was here that Gibbs J (as he then was) in Caltex formulated and articulated what has subsequently become known as the “known plaintiff” test which provided an answer to the broad question posed by the Atkinian statement of proximity.

Gibbs J stated:

“In my opinion it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff’s person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act”[vi]

Gibbs J continued:

“In the present case [the defendants] knew that the pipeline led directly from the refinery to Caltex’s terminal. They should have known that, whatever the contractual or other relationship between Caltex and A.O.R. might have been, the pipeline was the physical means by which the products flowed from the refinery to the terminal. Moreover, the pipeline appeared to be designed to serve the terminal particularly (although no doubt it would have been possible for it to serve other persons as well) and was not like a water main or electric cable serving the public generally”[vii] [the parenthesis is mine].

Gibbs J having formulated the “known plaintiff” test then applied that test to Lord Atkin’s statement of proximity.

Gibbs J concluded:

“In these circumstances [the defendants] should have had Caltex [the plaintiff] in contemplation as a person who would probably suffer economic loss if the pipes were broken”[viii] [the parentheses are mine].

The achievement of Gibbs J’s principle in Caltex was to provide a basis for recovery of purely economic loss by a limited and ascertainable class of persons, and thereby preventing an indeterminate liability.

The Utility and Application of Gibbs J’s Principle

For nearly 50 years, Gibbs J’s formulation in Caltex has provided a prima facie test for duty of care across a varied range of claims for purely economic loss. Discrete categories of economic loss, caused both by negligent acts and statements, can be identified. It is intended below to briefly highlight some of these categories.

Public Utilities and Bridge Cases

The “known plaintiff” test from Caltex has exceptionally allowed recovery for purely economic loss caused to an identified individual or limited group of individuals suffering economic loss from negligent interference with the supply of electricity. For instance, where the power supply was to a specific individual only, or a small group of identifiable individuals which was known, or ought to have been known to the defendant.

The “known plaintiff” test has also been applied in situations of negligently caused damage to bridges, where the plaintiff was known to the defendant as a specific user of the bridge (although not the owner of the bridge). [see eg the Canadian National Railways[ix] case in the Supreme Court of Canada]

Noteworthy is the fact that Gibbs J’s test has not facilitated recovery to an unascertained class of plaintiff suffering economic loss as a result of a general downturn in commercial activity caused by the closure of a bridge or other public utility (eg power supply).

Disappointed Beneficiary Cases

In these cases the negligence of solicitors, under their contract with the client testator, has caused a will to fail and thereby deprived plaintiff beneficiaries of their financial inheritance. The application of the Gibbs’ principle allowed recovery, since the solicitor had knowledge or means of knowledge of the specific beneficiaries under the failed will (see eg White v Jones[x] in the House of Lords).

Relational Loss to the Plaintiff by injury to a Third Party

Instances of this category, where the “known plaintiff” principle has been utilised, are negligently caused injuries to, for example, employees with resultant economic loss to the plaintiff employer from loss of services of these injured employees. A relationship of proximity, sufficient for liability, has been found where the defendant knew, or ought to have been aware, that the injured third parties were key employees of a known employer (see Barclay v Penberthy[xi] in the High Court of Australia).

Negligent Misstatement

Gibbs J’s principle has been utilised to allow recovery of economic loss, beyond the Hedley Byrne situation of an intended user of negligent advice or information for a specific purpose, to a known user (though not the intended recipient). The “known plaintiff” test, for instance, has allowed recovery to a plaintiff mortgagor who was a known user (known to the defendant) of the defendant valuer’s negligent valuation supplied to a mortgagee building society. (see Smith v Bush[xii] in the House of Lords).

The above is not an exhaustive list of the categories across which the Gibbs’ principle has been applied, but they exemplify the utility of his jurisprudence in purely economic loss claims.

Conclusion

The aim of the above writings is to give due recognition to the contribution of Gibbs J in the vexed area of purely economic loss.

His formulation of a workable principle, capable of meeting the need of compensatory justice, while also preventing an indeterminate liability to defendants, has assisted courts for almost half a century in resolving differing circumstances of purely economic loss.

Despite more recent inroads of pure policy decisions by courts (eg use of vulnerability) in purely economic loss cases, Gibbs J’s principle has, and will continue to provide guidance in resolving such claims.

[i] Donoghue v Stevenson [1932] AC 562 at 580

[ii] Ultramares Corporation v Touche (1931) 174 NE 441; (1931) 255 NY 170

[iii] Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465

[iv] [1976] HCA 65; (1976) 136 CLR 529

[v] Donoghue v Stevenson [1932] AC 562 at 580

[vi] Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” [1976} HCA 65 at para 36

[vii] Ibid at para 37

[viii] Ibid

[ix] Canadian National Railway Co v Norsk Pacific Steamship Co Ltd [1992] 1 SCR 1021

[x] White v Jones [1995] 2 AC 207

[xi] Barclay v Penperthy [2012] HCA 40; (2012) 246 CLR 258

[xii]Smith v Bush [1990] 1 AC 831

*LLB, LLM, PhD (Barrister-at- Law)

3-D images of buildings generated by computers are no longer mere abstractions, but are realistic representations of the actual design. Their use in precontractual promotional materials, while informative to prospective buyers, can present legal risks to sellers if the image is false as to the final design.

Introduction

Can an artist’s impression, namely a computer generated render (3-D design drawing producing a life-like image for the promotion of “off the plan” sales by developers) qualify as misleading or deceptive conduct and/or misrepresentation, if the render misleads as to the final design?

This question was answered in the affirmative in the single judge decision of Anastassiou J in Ripani v Century Legend Pty Ltd [i] in the Federal Court of Australia (hereinafter referred to as Ripani).

A brief outline of Ripani’s case is that Mr and Mrs Ripani paid close to $10 million dollars for an apartment “off the plan”. After entering the contract they were informed the design contained in a promotional render of the apartment they were purchasing, and which was shown to them prior to the contract, was false and not the final design. The particular design concept or feature in the render which the Ripanis especially wanted and relied upon in entering the contract was an uninterrupted free span opening along the entire length between the living areas and the terrace (see Fig 1 below and Annexure 1 in para 5 of the judgment in Ripani).

Fig 1

The Ripanis, upon being informed after the contract that the finished design opening between the living area and terrace would only be a maximum of 3-4 metres, sought successfully rescission of the contract on the grounds of misleading or deceptive conduct and equitable misrepresentation.

[At the time of writing an appeal to the Full Court of the Federal Court is awaiting hearing]

Where the salient features highlighted in Ripani are present, then a false promotional render used to induce pre-construction sales can found an action for misleading or deceptive conduct under the Australian Consumer Law (ACL) and/or equitable misrepresentation. These salient features, which, if present, establish misleading or deceptive conduct are discussed below.

Salient Features

Render: Representational or Abstract

A render, as described earlier, is a 3-D computer generated design drawing, producing a life-like image.

A more detailed description was given in Ripani whereby a render was described as a very high resolution image which could be mistaken as a photograph.[ii] (see Fig 1 above).

The realism depicted in a render may be compared with images or paintings that are not intended to be realistic, such as abstract or impressionistic works. As His Honour indicated in Ripani these latter images ‘do not describe literally the subject portrayed in the painting, but rather grapple with its meaning at another, ethereal level’[iii].

Prior to computer generated graphics, an artist’s impression of a future building was often an abstracted ideal, providing the character for the ultimate design, but was far from depicting a literal image of the finished building and surrounds.

There was thus a significant difference between these abstract images and a computer generated render.

The inherent intent of a 3-D graphic design render used to promote and induce “off the plan” sales, is to show the prospective buyer the design of the finished building and only lacking exact dimensions necessary for a working plan.

Consequently, a 3-D graphic design render is a realistic representation which may be misleading or deceptive (misrepresentation) if it falsely depicts the finished design.

S4 ACL – Misrepresentation as to Future Matter

A promotional render used as a selling tool for a yet to be constructed building is a representation with respect to a future matter for the purpose of s4 of the ACL. Assuming such a promotional render misrepresents the final design, a threshold issue under s4(1) is whether the person (developer) did not have reasonable grounds for making that representation. If the evidence discloses that there were no reasonable grounds for making the representation, then the representation is statutorily deemed to be misleading (s4(1) ACL).

There is no corollary to this; namely, that if the developer did have reasonable grounds for making the representation, that automatically means the representation is not misleading or deceptive. To the contrary, s4(4) of the ACL specifically states that no implication is to be drawn that a representation as to a future matter is not misleading merely from the fact that the person had reasonable grounds for making the representation.

Consequently, a representation (render) that is misleading as to the final design, can form the basis of an action for misleading or deceptive conduct even if at the time the developer had reasonable grounds for believing that it represented the final design. This is supported by established principle on the statutory interpretation of misleading or deceptive conduct whereby intent to mislead or deceive is not a necessary element.[iv] Accordingly, innocent misrepresentation can be misleading or deceptive conduct under the ACL.

S18 ACL – Misleading or Deceptive Conduct

Assuming the threshold issue under s4(1) ACL discloses that the representor (developer) had reasonable grounds for believing the promotional render to be a true indication of the final design, this does not relieve the representor from the consequences of an innocent misrepresentation and misleading or deceptive conduct.

Section 18 of the ACL and its previous equivalent, s52 of the Trade Practices Act 1974, have been exhaustively analysed in precedent[v]. As stated above, an innocent misrepresentation of fact that is misleading or is likely to mislead, can breach s18 of the ACL. Furthermore, if a misrepresentation in a render has induced the buyer into the contract, then not only would statutory remedies be available for a breach of s18 of the ACL, but also remedies for innocent misrepresentation (rescission of the contract).[vi]

In Ripani the remedy of rescission was granted to the buyers of the apartment on both grounds, namely a breach of s18 ACL and for misrepresentation in equity.[vii]

The Effect of Disclaimers and Exclusion clauses

No disclaimer or exclusion clause can limit or exclude provisions of the ACL, including the general prohibition on misleading or deceptive conduct.[viii]

While disclaimers or exclusion clauses have no effect on the ACL can they have the effect of displacing the misrepresentation, such that the conduct is no longer misleading? The answer is yes, but it is a question of fact whether or not the disclaimers or exclusion clauses do displace the misrepresentation.[ix]

In the context of promotional renders used to achieve sales before construction, Ripani’s case indicates that anything less than a specific statement or finished plan clearly informing the prospective buyer that the render is not an image of the finished design and construction, will not be sufficient to displace the misrepresentation.[x] Such a specific denial that the render represents the actual design reduces its worth to mere “puffery”,[xi] or an artist’s ideal rather than an image of the actual building.

The reason behind the requirement of such a specific communication is that the ACL is a statute whose intent is the protection of consumers. As a factual reality, a reasonable buyer would only be disabused of the misrepresentation in a render if they were told or given reasonable notice that the render is not an image of the final construction. This conclusion is supported by the fact that the purpose and intent of the render is to induce sales, and to a reasonable prospective buyer is an image of the final construction.

Standard phrases used as disclaimers or exclusion clauses in the case of renders include: “artist’s impression only”; “indicative only and not to be relied upon”; “subject to change and not to be relied upon”. The intent behind such standard phrases is to absolve the seller from legal responsibility. They are not a statement to the prospective buyer that the render is not the actual design.

Any argument by the seller that such standard phrases are intended to dispel any misrepresentation that the render represents the final design, is to ‘approbate and reprobate’.[xii]In the absence of a specific statement that the render does not represent the finished design, a seller is inducing the buyer to rely on the render (approbate) and then saying in standard disclaimers and exclusion clauses not to rely (reprobate).

Conclusion

The common use of realistic, computer generated 3-D images of future constructions, for the purpose of inducing sales, can found an action for misleading or deceptive conduct where the 3-D image (render) does not represent the final design.

Such a misrepresentation in the render can qualify as misleading or deceptive even if the seller believes that it represents the final design construction (i.e. an innocent misrepresentation).

While the use of disclaimers and exclusion clauses are ineffective against the provisions of the ACL, including misleading or deceptive conduct, they may have the effect of correcting and displacing the misrepresentation in the render. However, such disclaimers or exclusion clauses would only displace and defuse the misrepresentation where they specifically indicate that the render does not represent the final design of the building.

The salient features discussed above and extrapolated from the judgment in Ripani, offer guidance as to the legal responsibilities in the use of computer-generated renders.

Editor’s note:

On 30 November 2022, the FCAFC handed down its decision on the appeal from the decision discussed above in Century Legend Pty Ltd v Ripani [2022] FCAFC 191.

https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2022/2022fcafc0191

This decision allowed the appeal and ordered a new trial on restricted issues.

[i] [2022] FCA 242

[ii] Ibid at para 65

[iii] Ibid at para 157

[iv] See the joint judgment of French CJ, Crennan and Kiefel JJ in Google Inc. v Australian Competition and Consumer Commission [2013] HCA 1 at para 9  and the cases therein cited

[v] See the exhaustive compilation of authorities and relevant principles applying to misleading or deceptive conduct, in the judgment of Gordon J in Australian  Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at para 10 [1-7][vi] Ripani v Century Legend Pty Ltd [2022] FCA 242 at para 254

[vii] Ibid at para 237

[viii] Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd 2018 VSC 246 at paras 113-120 and the cases therein cited

[ix]   Australian Competition and Consumer Commission v GlaxoSmithKline Consumer Healthcare Australia Pty Ltd [2019] FCA 676 at para 33 [1-8] [2019] FCA 676 at para 33 [1-8][x]   Ripani v Century Legend Pty Ltd [2022] FCA 242 at para 89

[xi]  Ibid at para 40

[xii] Ibid at para 50

Dr Norman Katter (LL.B, LL.M, PhD Barrister-at-Law)

Abstract

While there may be policy factors justifying the retention of a non-fault based liability in certain relationships, the development of non delegable duty of care in a matrix of negligence law distorts the latter, thereby undermining the coherency and consistency of the law.

The principle of non delegable duty of care should be abolished and the appropriate doctrinal basis for a non-fault based liability in certain special relationships should be a true vicarious liability.

Introduction

It is proposed below to analyse the principle of non delegable duty of care in the context of negligence law.

Then it is intended to examine the relationship between non delegable duty of care, vicarious liability, and strict liability and ultimately to state the reasons justifying a new approach to those situations where non delegable duty of care has been applied

What Relationships raise a Non Delegable Duty of Care

It is useful initially to identify in case law those relationships where a non delegable duty of care is imposed. Such relationships were conveniently listed in the joint judgment of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ in Burnie Port Authority v General Jones Pty Ltd.[i] They included: “adjoining owners of land in relation to work threatening support of common walls; master and servant in relation to a safe system of work; hospital and patient; school authority and pupil; and occupier and invitee”.[ii]

The particular policy reasons of dependence and vulnerability underpinning these relationships suggest that further categories may be developed in the courts. As Lord Macmillan rightly observed, in his celebrated dictum in Donoghue v Stevenson, “the categories of negligence are never closed”.[iii]

For instance, arguing analogously from the established categories, a justifiable category might, for example, include adventure tour operators in their duty of care towards participants, where the tour operator’s business is taking participants into extremely dangerous situations (eg lion safaris).

What is Non Delegable Duty of Care

It is unfortunate and misleading that the phrase “non delegable duty of care” has gained currency in the law of tort. It is a misleading phrase since tort law casts a duty of care on persons in certain circumstances and once the duty of care is imposed by the principles of tort law, that person cannot delegate the duty to any other party. The question is simply whether the person who bears the duty of care has fulfilled or breached that duty of care.[iv]

In determining whether or not a person has breached their duty of care, a court applies the universal Atkinian standard of reasonable care in all the circumstances. The question is, has the defendant taken reasonable care or fallen below that standard.

The celebrated version of the test to be applied is that expounded by Lord Atkin in his statement: “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour”.[v]

If a person cannot delegate and avoid a duty of care cast upon them by the general law of tort, is it possible for that person to delegate the performance of their duty to take reasonable care? The answer is yes. As part of fulfilling a person’s duty of care they may delegate all or part of the performance required to satisfy the test of reasonable care. This delegation may be to a third party who is an independent contractor. As Lord Blackburn stated in Hughes v Percival[vi] in a case of non delegable duty of care with respect to the defendant’s delegation:

“He was at liberty to employ such a third person to fulfil the duty which the law cast on himself but the defendant still remained subject to that duty, and liable for the consequences if it was not fulfilled”.[vii]

 Assuming a person, in fulfillment of their duty of care, delegates all or part of the performance of that duty to an independent contractor, in circumstances where there is not a non delegable duty of care, and the independent contractor is negligent thereby causing injury to a victim, the fundamental question for the court in an action by the victim against the person who delegated, still remains as to whether the latter person has taken reasonable care in all the circumstances. This is the universal standard applied by the common law. However if the court applies to the relationship between victim and delegator, a non delegable duty of care, then the universal standard is bypassed, whereby the standard is not “to take reasonable care” but “to ensure that reasonable care is taken”.

A succinct statement of the higher standard of care imposed by a non delegable duty of care was given in a joint judgment of the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd:[viii]

“It has long been recognized that there are certain categories of case in which a duty to take reasonable care to avoid a foreseeable risk of injury to another will not be discharged merely by the employment of a qualified and ostensibly competent independent contractor. In those categories of case, the nature of the relationship of proximity gives rise to a duty of a special and ‘more stringent’ kind, namely a ‘duty to ensure that reasonable care is taken. [Footnote 69 – See Kondis v State Transport Authority (1984) 154 CLR672 at 686]. Put differently, the requirement of reasonable care in those categories of case extends to seeing that care is taken”.[ix]

For practical purposes, a person subject to a non delegable duty of care, who delegates the performance of that duty to a professional and competent independent contractor and the independent contractor is negligent, then the delegator has breached the duty of care to ensure that reasonable care is taken.

The consequence of the law imposing a non delegable duty of care is that a person can be liable for the negligence of a third party in circumstances where the first person is without fault or blameworthiness. This is not a novel circumstance of tort law having regard to established principles of vicarious liability and strict liability (see below).

For instance, if a hospital, which is subject to a non delegable duty towards patients, engages a competent electrical contractor to do certain wiring in the hospital and the work is performed negligently such that it causes an injury to a patient, it is fanciful to suggest that the hospital, while liable for the negligence, is at fault or blameworthy. As a matter of common sense, the hospital has no expertise in electrical matters and must rely on the services of qualified third parties. The conduct of the hospital is blameless and clearly fulfills the universal standard of reasonable care (but not the higher standard to ensure that reasonable care is taken).

Distorting Negligence Law

The obvious conflict and irony of non delegable duty of care is that it is a doctrine requiring a person to “ensure that reasonable care is taken”.[x] As explained above, such a responsibility imposes no fault liability, yet the historic and underpinning principle of negligence law is fault or delict. This is evident in the universal test of negligence, namely, a failure to take reasonable care.

The principle of non delegable duty of care has been developed in a matrix of negligence law. It has imposed in a fault based tort, a non-fault based standard of care.

If it is justifiable to impose in certain relationships a no-fault liability, it is submitted that to use the vehicle of negligence law and duty of care is to distort and undermine established principles. In special circumstances, where policy justifies a liability in the absence of any fault, it is desirable that the law be both transparent and coherent. Transparency and coherency can be achieved by the law stating that in certain situations, a defendant will be liable for a third party’s negligence, not because the defendant has breached any personal duty of care (such as a non delegable duty), but because the policy of the law is to hold a defendant vicariously liable for the tort of another. Vicarious liability is discussed below.

Vicarious Liability and Non Delegable Duty of Care

Vicarious liability is a policy based principle of the common law imposing on a party, liability for the tort of another. As Lord Sumption (with whom Lords Clarke,Wilson, and Toulson agreed) stated in the United Kingdom Supreme Court:[xi]

“In principle, liability in tort depends upon proof of a personal breach of duty. To that principle, there is at common law only one true exception, namely vicarious liability. Where a defendant is vicariously liable for the tort of another, he commits no tort himself and may not even owe the relevant duty, but is held liable as a matter of public policy for the tort of the other”[xii]

Vicarious liability is different from non delegable duty of care in that it is irrelevant to inquire whether a person or organisation, subject to vicarious liability, has a duty of care or has breached any duty of care. The person or organisation is liable, not for any personal breach of duty, but is liable because someone for whom they are responsible, has committed a tort.

Whereas, non delegable duty of care, developed in a matrix of negligence law, refers to a breach of a personal duty on the part of the person or organisation, to ensure that reasonable care is taken by a third party.

 A true vicarious liability also differs from the theory underpinning agency law that the actions of an agent are deemed the actions of the principal. Again it is not relevant to inquire about the actions of a person or organisation charged with a vicarious liability. The latter are simply liable because of their responsibility for the tort or actions of another.

Vicarious liability and non delegable duty of care are alike in that they both impose a strict liability whereby the defendant is liable without personal fault.[xiii]

Legislative Initiative

Civil liability legislation in New South Wales has achieved part of the reform recommended in this article. Section 5Q of the Civil Liability Act 2002 (NSW) is as follows:

5Q  Liability based on non-delegable duty

• The extent of liability in tort of a person (the defendant) for breach of a non-delegable duty to ensure that reasonable care is taken by a person in the carrying out of any work or task delegated or otherwise entrusted to the person by the defendant is to be determined as if the liability were the vicarious liability of the defendant for the negligence of the person in connection with the performance of the work or task.
• This section applies to an action in tort whether or not it is an action in negligence, despite anything to the contrary in section 5A.

Section 5Q is a recognition of the reality underlying non delegable duty of care, namely, that it is vicarious liability masked behind a facade of negligence law. The section has been drafted to achieve clarity, transparency and consistency in legal principle.

The recommendation of this article is that legislative reform should go further than Section 5Q and should abolish the principle of non delegable duty of care, replacing it with a true vicarious liability. This would avoid any further reference to non delegable duty but rather refer only to vicarious liability which is the proper doctrinal basis of a no fault liability for the tort of another.

The reform of the law suggested in this article could also be achieved through judicial pronouncement in the High Court of Australia, but this would have to await an appropriate matter presenting itself for decision in that court.

Conclusion

Not only is the language and terminology of non delegable duty of care misleading, but its development in a matrix of negligence law distorts the latter. It is a non fault duty in a fault based tort.

The transparency and coherency of the law would be served by abolishing non delegable duty of care, and in those special relationships where a defendant, without fault, is to be held responsible for the tort of another, to apply a true vicarious liability.

[i] [1994] HCA para 13

[ii] Ibid at para 36

[iii] [1932] AC 562 at 619

[iv] Woodland v Swimming Teachers Association [2013] UKSC 66 (per Lord Sumption)  

[v] Donoghue v Stevenson [1932] AC 562 at 580

[vi] (1883) 8 App Cas 443

[vii] Ibid at 443

[viii] [1994] HCA 13

[ix] Ibid at para 36

[x] Ibid

[xi] Woodlands v Essex County Council [2013] UKSC 66

[xii] Ibid at para 3

[xiii] Armies v Nottingham Shire County Council [2017] UKSC 60 per Lord Hughes at para 91

*LL.B, LL.M, PhD Barrister-at-Law

The aim of this article is to examine and order the underlying principles of causation and to describe the interrelationship of Civil Liability legislation on causation and the common law. The overarching goal is to provide a set of signposts for the profession to navigate to a resolution of the issue of causation in any given circumstance.

Causation in the law of negligence does not parallel causation in science or philosophy.[i] Tort law or Delict is about the allocation of fault or wrongdoing and consequently causes which science may determine produced a result may be ignored in judicial assessment of fault and blameworthiness

Even with an understanding of this caveat a lawyer seeking clarity of the law of causation in negligence, having waded through judicial analysis and the general provisions in Civil Liability legislation, is unlikely to distil a clear set of guiding principles. Not least because of the varied factual circumstances where multiple causes of harm are present. As Fleming notes in his seminal work on The Law of Torts ‘there is an increasing appreciation of the futility to elevate statements of law, made in relation to the particular facts of an individual case, to principles of general application’.[ii]

The application of overarching general principles, while providing assistance in the majority of causation issues, can and do lead in exceptional circumstances to absurd and unjust results.

A further cause of confusion is the multitude of labels found in case law when discussing causation. This is further complicated where those labels are attaching to the actions of plaintiffs, defendants, third parties, as well as simultaneous acts and consecutive acts. The labels referred to include: “causa sine qua non; causa causans; proximate cause; direct cause; operative cause; real and efficient cause; novus actus interveniens; ‘but for’ test.”[iii]

A more fundamental source of confusion arises with the intermingling of causation in fact with issues of causation in law, the latter encompassing remoteness of damage. It is unfortunate and apt to mislead that a question of whether a defendant could reasonably have foreseen the type of damage that occurred, is labelled under the heading of causation. The reasonable foresight test is applied to determine the scope of liability and to limit the defendant’s responsibility for damage. Put simply, not all damage caused by the defendant’s conduct is recoverable by the plaintiff, but only such damage as is reasonably foreseeable. Reasonable foreseeability is not a test of causation but of legal responsibility.

Who Bears the Burden of Proof

The question of who bears the onus of proof in establishing causation is put beyond doubt by Civil Liability legislation in Australia. “The plaintiff always bears the onus of proving on the balance of probabilities any fact relevant to the issue of causation”.[iv]

The “But For” test or “Causa Sine Qua Non”

This test is expressed by answering the question “but for” the negligence would the harm or damage have occurred. Or translated from the latin, causa sine qua non, is the negligence a cause without which the harm would not have happened. Or further, to use the language of Civil Liability legislation; “was the breach of duty a necessary condition of the occurrence of the harm”.[v]

At base, it is a test of factual causation only and while its shortcomings have been acknowledged judicially,[vi] it serves as a starting point[vii] for the analysis of the ultimate question of causation at law.

Nor can it be described as even a prima facie test or necessary precondition to a finding of legal causation since it is recognised and acknowledged in Civil Liability legislation that a court can find as a legal cause negligent conduct which was not a necessary condition of the occurrence of the harm.[viii] Underlying this legislative exception is recognition of the overarching duty of the court to address the tort issue of blameworthiness and fault in the assessment of legal causation. While a party’s negligence may not, in a factual analysis, have been necessary to cause the ultimate result, given that the same result would have occurred anyway, the degree of fault may justify a finding that the negligent conduct was a legal cause.

If the “but for” test is applied and a negative answer is given to the question “would the harm have occurred but for the negligence of that party”, this does not mean that, either automatically or even prima facie, the negligence will qualify as a legal cause. The only reliable conclusion from satisfying the “but for” test is that factual causation only is established.

Alternatively, if the “but for” test is applied and a positive answer is given to the question “would the same harm have occurred but for the negligence of that party” this again does not automatically disqualify the conduct from being held as a legal cause of the harm.[ix]

Finding legal causation where the “but for’ test satisfied

Negligent conduct may be the sole cause of damage and satisfy both the elements of factual causation (“but for” test) and legal causation (blameworthy conduct with no mitigating factors and the damage not too remote). The assessment of legal causation involves in addition to issues of culpability, the question of remoteness of damage. A tortfeasor will only be legally responsible where the damage caused was of a type that was reasonably foreseeable as flowing from the negligence.[x]

A trite example is where the driver of vehicle A ignores a Give Way sign at an intersection and thereby collides with vehicle B. There was no Give Way sign facing vehicle B as it entered the intersection. The elements satisfying both factual causation and legal causation are present. The damage would not have occurred to the plaintiff driver of vehicle B “but for” the defendant’s negligence, there being no other cause operating. The defendant driver’s conduct in failing to give way and ignoring the sign, is blameworthy with no mitigating circumstance. Nor is the damage too remote in that the defendant driver could reasonably foresee the type of damage that occurred, namely a collision with potential property damage and personal injury.

No Finding of legal causation where “but for” test satisfied

Civil Liability legislation in Australia refers to the elements involved in a finding that a breach of duty (negligence) caused particular harm.[xi]

The first element is simply factual causation established by examining the “but for” question, or to use the language of the Civil Liability Acts, whether the negligence “was a necessary condition of the occurrence of the harm”.[xii] The second element referred to in the legislation is the question whether the “scope of liability of the person in breach should extend to the harm so caused”.[xiii]

While factual causation may be established with respect to the negligence of a party, the examination of “the scope of liability” involving issues of culpability and reasonable foreseeability of harm, may, on balance, not be sufficient for the court to conclude that the negligence of that party should be found as a legal cause of the harm.

The following example indicates circumstances where factual causation is present but a court ultimately concludes that the negligence of a party (defendant in the example) should not be found as a legal cause:-

An intoxicated pedestrian walks onto a carriageway from between parked cars, into the path of an oncoming vehicle and is hit, thereby suffering severe personal injuries. The driver of the vehicle, while not speeding, failed to take evasive action soon enough, as expected of a competent driver which action would have avoided the collision.

The “but for’ test is satisfied both with respect to the victim’s gross negligence and the negligence of the driver, who, if he had taken reasonable evasive action could have avoided the collision with the pedestrian. A court in these circumstances, moving beyond factual causation to an examination of culpability and reasonable foresight of likely risk, may justifiably conclude that the contributory negligence of the plaintiff victim is so gross and culpable as to carry 100% of the blame for his own injuries. Such a finding is recognised in the Civil Liability Acts whereby “in deciding the extent of a reduction in damages by reason of contributory negligence, a court may decide a reduction of 100% if the court considers it just and equitable to do so, with the result that the claim for damages is defeated”[xiv]

Such a finding in the above scenario involves a conclusion that the degree of blameworthiness of the driver should be ignored as an operative cause. This finding may be justified on the grounds that one should not look too closely, nor set expectations too high when examining the conduct of a person presented with an unexpected emergency situation created solely by the negligence of another.

A rejection by the court of the defendant driver’s negligence as an operative cause, is facilitated in the Civil Liability legislation wherein:-

 “For the purpose of deciding the scope of liability, the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the party who was in breach of the duty”.[xv]

Novus Actus Interveniens

A party’s negligence may be deemed “spent” as a causative factor in the harm done, due to the intervention of an overriding and unforeseen circumstance. This novus actus interveniens (new intervening cause) may be such as the court will find the operative cause of the harm despite the earlier negligence. A court may find the chain of causation, from the earlier negligence to the harm done, is broken by the novus actus interveniens even where the harm would not have occurred without the first negligence.

The finding that the later intervening circumstance is a novus actus interveniens is not an arbitrary choice by the court, but is based on an assessment of whether the first wrongdoer should have foreseen as likely to happen, the new intervening circumstance.[xvi] If the first wrongdoer should have foreseen the later intervening circumstance as very likely to happen, there is no room for a finding of novus actus interveniens breaking the chain of causation from the first wrongdoer’s negligence. This is so, since the risk created by the first wrongdoer’s negligence encompasses the foreseeable likelihood of the very intervening circumstance which occurred.[xvii] The chain of causation from the wrongdoer’s negligence to the ultimate harm is not broken when the wrongdoer can foresee that the situation created by the original negligence is likely to be followed by an intervening circumstance that will result in the very kind of damage actually occurring.

Having foreseen the intervention as very likely to happen, it would also be necessary that the damage actually caused by the intervention was of a type which the first wrongdoer could reasonably foresee as resulting from the intervention[xviii] (eg personal injury and property damage from skidding on bald tyres on a wet road, the intervention of rain being very likely in the high rainfall locality).

A mere foreseeable possibility by the first wrongdoer of such an intervening circumstance (eg an earthquake) is not sufficient to negate a finding of a novus actus interveniens.[xix] It must be an intervention that was very likely to happen.[xx]

The following hypothetical scenario may be useful in exemplifying a novus actus interveniens.

A workman at a factory site negligently fails to replace a safety cover over a deep hole in the grounds of the factory. The factory perimeter is surrounded by a high fence with barbed wire at the top and the entrance gates are locked each evening. Two ten year old boys, break the lock and enter the grounds of the factory at night. Both boys are injured as a result of falling into the unguarded hole.

The first negligence of the workman satisfies the “but for” test of causation. A court, however, may find a novus actus interveniens with respect to the later circumstance of the young boys entering the site. A court would be justified in finding that the intervening circumstance of the boys’ entry at night, was not something which the workman should foresee as a likely happening. The risk created by the workman did not encompass, as a likely event, the further risk of the illegal entry by the boys. Consequently, the workman’s negligence, while a necessary condition for the occurrence of the harm, is not a legal cause in the face of the novus actus interveniens. Or to use the language of the Civil Liability Acts, “it is [not] appropriate for the scope of the liability of the person in breach [the workman] to extend to the harm so caused.”[xxi] The workman’s negligence, both in science and fact was a cause of the boys’ injuries but the law is deeming the workman’s negligence not to be a cause based on what he ought to have foreseen as likely to happen.

Finding legal causation where “but for” test not satisfied

It is unlikely in the absence of factual causation (“but for” test not satisfied) that a court will find legal causation established. The following example will suffice, where, for instance, a party moors by anchor a boat, dangerously close to a rocky shoreline and an earthquake intervenes causing a tidal surge which pushes the boat onto the rocks. This novus actus interveniens would have pushed the boat onto the rocks even if the party had moored the boat at a safe distance.

However, exceptionally, as recognised in judicial analysis[xxii] and Civil Liability legislation,[xxiii] there are circumstances where negligence which does not satisfy the “but for” test as a necessary condition for the occurrence of the harm, will be held as a legal cause of the harm:-

  “In deciding in an exceptional case, in accordance with established principles,  whether a breach of duty — being a breach of duty that is established but which can not be established [as a necessary condition of the occurrence of the harm]- should be accepted as satisfying subsection (1)(a), the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the party in breach”[xxiv]

An exceptional situation is the “well-known difficulty in cases where there are two or more acts or events which would each be sufficient to bring about the plaintiff’s injury. The application of the “but for” test ‘gives the result, contrary to common sense, that neither is a cause’”.[xxv]

Such an example may involve two drivers A and B simultaneously racing each other along a carriageway who collide, at an intersection, with a third vehicle driven by C. C’s vehicle entered the intersection on a green light. A and B were unable to stop at the red light due to their excessive speed. Evidence indicates that the same collision and harm would have happened solely from A’s vehicle or solely from B’s vehicle. If the “but for” test in these circumstances was the sole criterion for determining legal causation, an absurd result would follow whereby neither A nor B’s negligence was a cause of C’s damage, since the same harm would have happened in the absence of A’s negligence, and similarly in the absence of B’s negligence. Of course the outcome in this scenario is that blame would be apportioned between A and B on the basis that their respective negligence was each a legal cause of the harm. On the question of remoteness of damage, the collision and subsequent damage was the very type of damage that could reasonably be foreseen from the speeding.

Conclusion

The “but for” test provides a focal point for the analysis of the ultimate issue of whether a party’s negligence is a legal cause of the harm. But satisfying the “but for” test, per se, is neither a necessary precondition nor a sole determinant of a legal cause. The weighing of factors of culpability, foreseeable risk, novus actus interveniens, or remoteness of damage may ultimately lead to a finding that particular negligence is not a legal cause despite that negligence being a necessary condition of the occurrence of the harm. The corollary is that in exceptional circumstances, negligence that was not a necessary condition of the occurrence of the harm may be found as a legal cause.

The marshalling and ordering of factual circumstances into the matrix of the legal elements of causation presents a significant challenge for legal advisers. It is hoped that the above writings may assist in this task.

[i] March v E & MH Stramare Pty Ltd [1991] HCA 12 at para 5 per Mason CJ

[ii] J Fleming The Law of Torts ( 3rd Ed, Law Book Co, Sydney, 1965) p 231

[iii] March v E & MH Stramare Pty Ltd [1991] HCA 12 at para 15 per McHugh J for a similar list

[iv] Civil Liability Act 2003 (Qld) s12; Civil Liability Act 2002 (NSW) s5E; Civil Liability Act 1936 (SA) s35; Civil Liability Act 2002 (Tas) s14; Wrongs Act 1958 (Vic) s52; Civil Liability Act 2002 (WA) s5D

[v] Civil Liability Act 2003 (Qld) s11(1)(a) and its other States’ equivalents

[vi] March v E & MH Stramare Pty Ltd [1991] HCA 12; Amaca Pty Ltd v Ellis [2010] HCA 5

[vii] Ibid.

[viii] Civil Liability Act 2003 (Qld) s11(2) and its other States’ equivalents

[ix] Ibid

[x] Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] AC 388; Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty [1967] 1 AC 617; March v E & MH Stramare Pty Ltd [1991] HCA 12 at paras. 6,7 and 8 per Mason CJ

[xi] Civil Liability Act 2003 (Qld) s11(1)(a) and (b) and its other States’ equivalents

[xii] Civil Liability Act 2003 (Qld) s11(1)(a) and its other States’ equivalents

[xiii] Civil Liability Act 2003 (Qld) s11(1)(b) and its other States’ equivalents

[xiv] Civil Liability Act 2003 (Qld) s24 and its other States’ equivalents

[xv] Civil Liability Act 2003 (Qld) s11(4) and its other States’ equivalents

[xvi] March v E & MH Stramare Pty Ltd [1991] HCA 12 at paras. 23-27 per Mason CJ; Thorpe Nominees Pty Ltd v Henderson [1988] 2 Qld R 216

[xvii] Ibid.

[xviii] Ibid.

[xix] Ibid.

[xx] Ibid.

[xxi] Civil Liability Act 2003 (Qld) s11(1)(b) and its other States’ equivalents;( the parentheses are mine)

[xxii]March v E & MH Stramare Pty Ltd [1991] HCA 12 at para 22 per Mason CJ

[xxiii] Civil Liability Act 2003 (Qld) s11(2) and its other States’ equivalents

[xxiv] Ibid.

[xxv] March v E & MH Stramare Pty Ltd [1991] HCA 12 at para 22 per Mason CJ