Actew Corporation Limited v Mihaljevic & Ors [2004] ACTSC 59 (2 July 2004)

Last Updated: 1 February 2005

ACTEW CORPORATION LIMITED v JOHN IVAN MIHALJEVIC and ORS

[2004] ACTSC 59 (2 July 2004)

PROCEDURE - application to strike out statement of claim as disclosing no cause of action - test to be applied

NEGLIGENCE - duty of care - duty of building certifier to utility service provider - pure economic loss - vulnerability - whether cause of action available

TORT - breach of statutory duty - building certifier - duty to utility service provider - pure economic loss - whether cause of action available

Supreme Court Rules, O 29 r 4; O 61A r 4

Construction Practitioners Registration Act 1998

Building Act 1972, ss 30, 31, 33A, 34, 34A

Building Regulations 1972, regs 6, 15

Utilities Act 2000, ss 13, 14, 123, 124, 125

Scaffolding and Lifts Act 1912 (NSW)

Industrial Relations Act 1988 (Cth)

Strata Titles Act 1973 (NSW)

Dangerous Goods Act 1975 (NSW)

Dangerous Goods Regulation 1978 (NSW)

O'Connor v S P Bray Limited [1937] HCA 18; (1937) 56 CLR 464

Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410

J D Bell (Calool) Pty Limited v Shortland County Council (1991) Aust Torts Reports 81-139

Proprietors - Strata Plan No 30234 v Margiz Pty Limited (Supreme Court of New South Wales, Brownie J, 30 June 1993, unreported)

Girkaid Pty Limited v McDonald (Supreme Court of New South Wales, Adams J, 14 December 201, unreported)

John Pfeiffer Pty Limited v Canny (1981) 55 ALJR 638

X (minors) v Bedfordshire County Council (1995) 2 AC 633

Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Neptune Oil Co Pty Limited v Fowler (1963) SR (NSW) 530

Jones v Clyde Welshpool Pty Limited [2000] TASSC 130; (1999) 9 Tas R 391

Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16; (2004) 78 ALJR 628

Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609

Caltex Oil (Australia) Pty Limited v The Dredge "Willemstad" [1976] HCA 65; (1976) 136 CLR 529

Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180

Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159

No SC 58 of 2004

Coram: Master Harper

Supreme Court of the ACT

Date: 2 July 2004

IN THE SUPREME COURT OF THE )

) No SC 58 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ACTEW CORPORATION LIMITED

Plaintiff

AND: JOHN IVAN MIHALJEVIC

First Defendant

AND: STRONARCH BUILDING GROUP PTY LIMITED

Second Defendant

AND: BARRY RAID STRONARCH

Third Defendant

ORDER

Coram: Master Harper

Date: 2 July 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The first defendant's application pursuant to Notice of Motion dated 10 May 2004 be dismissed.

2. The costs of the application be reserved.

1. This is an application pursuant to Order 29 r 4, or alternatively the inherent power of the Court for an order that the originating application and statement of claim be struck out as against the first defendant, for failing to disclose a cause of action. The rule is in the following terms:

4 Striking out pleadings

The Court may order any pleading to be struck out, on the ground that it discloses no reasonable cause of action or answer, and in any such cause, or in case of the action or defence being shown by the pleadings to be frivolous or vexatious, the Court may order the action to be stayed or dismissed, or judgment to be ordered accordingly, as is just.

Whilst Order 61A r 4 empowers me as Master to exercise the court's inherent jurisdiction in relation to such an application, it is not suggested that the principles governing an application relying on inherent jurisdiction are any different to those applicable under the rule.

The plaintiff's claim

2. The plaintiff's claim is a novel one. It relates to building work in the form of an extension to a house at Campbell. The plaintiff asserts that it is the owner of a sewerage main running through the block of land. It is also asserted that the plaintiff has the benefit of a sewerage easement running 2.5 metres into the block along its western boundary. The assertion is that early in 2001, the owners, or more properly Crown lessees, of the block contracted with the second or third defendant to build some extensions to their house. The plans for the building did not include any reference to the sewerage main or easement. The extensions were built in accordance with the plans. The extensions were built directly over the sewerage main, and so as to encroach on the plaintiff's easement. The second and third defendants are sued in negligence and breach of statutory duty. They are not parties to the present application.

3. The first defendant is said to be a principal building surveyor registered under the Construction Practitioners Registration Act 1998 and the regulations under that Act. It is alleged that in March 2001, the owners retained the first defendant to act as certifier of the plans and proposed building works for the purposes of the Building Act 1972; and that on 23 March 2001, the first defendant approved the plans. Following completion of the building work, it is said that the first defendant certified the work as having being constructed pursuant to the plans.

4. The plaintiff claims damages from the first defendant for negligence and breach of statutory duty, the duty arising under ss 33A, 34 and 34A of the Building Act 1972. In summary, the negligence is said to consist in approving the plans without ensuring that the sewerage main would not be encroached upon, and permitting the work to be carried out notwithstanding notification by the plaintiff that it disapproved of the plans because of the encroachment. The breaches of statutory duty may be summarised as approving the plans before consulting with the plaintiff; approving the plans without ensuring that the work would not interfere with the sewerage main; and approving plans which did not show the sewerage easement or any point of connection to the sewerage system. The claim is for damages including the cost of rerouting the sewer main.

5. Each of the three defendants has appeared but no defence has yet been delivered.

The applicable legislation

6. Section 33A of the Building Act 1972 provides that the owner of a parcel of land may apply to a certifier for a building approval in relation to building work to be carried out on the land. The section confers no duties or powers on the certifier. Section 34 deals with the granting of approval and I set out its relevant portions:

34 Issue of building approvals

(1) Subject to s 34A, the certifier to whom application for a building approval is made shall issue the approval if he or she is satisfied that -

(a) the application comes within s 33A(3); and

. . .

(c) the plans that accompany the application comply with the prescribed requirements; and

(d) the prescribed requirements relating to consultation with, or obtaining the consent or approval of, any person, body or authority, have been satisfied;

. . .

(i) the building as proposed to be erected or altered will be structurally sufficient, safe and stable. . .

Subsection 34A(1) is also relevant:

34A External design and siting considerations

(1) An application for a building approval shall not be granted if the certifier is satisfied that, because of the external design of siting of a proposed building, or of a building as proposed to be altered, the carrying out of the building work to which the application relates would result in the contravention of this Act or any other law.

7. Regulation 15 of the Building Regulations 1972 sets out the prescribed requirements as to consultation. The relevant portions of Regulation 15 are as follows:

15 Consultation and consent

(1) The requirements for the purposes of the Act, section 34(1)(d), are that the following consultations take place or consents or approvals be obtained;

. . .

(f) consultation with ACTEW Corporation Limited in relation to -

. . .

(ii) any encroachment of the proposed building or proposed new part of the building, as the case requires, onto an easement;

. . .

(2) It is sufficient compliance with the obligation to consult under subregulation 1(f) . . . if -

(a) notification of the details of an application for a building approval is given to the person with whom consultation is to take place; and

(b) ten working days have elapsed since it has been given.

8. Until 1998, building work required approval by building inspectors employed by the ACT Government. In 1998, the function was privatised. The Construction Practitioners Registration Act 1998, and regulations under that Act, establish a regime for registration of appropriately qualified persons as certifiers. Section 30 of the Building Act 1972, read with regulation 6 of the Building Regulations 1972, confers on a principal building surveyor eligibility for appointment as a certifier in relation to building work generally, and s 31 of the same Act provides for the owner of a parcel of land to appoint an eligible person to act as certifier in relation to proposed building work.

9. One of the statutory duties which is alleged to have applied to the first defendant is a duty to determine whether the carrying out of the building work would result in any contravention of the Utilities Act 2000. It is said that the erection of the extension over the sewer main resulted in a breach of s 124 of the Utilities Act 2000. That section is a penal one, and is as follows:

124 Interference with networks

(1) A person must not interfere with a network, or a network facility, unless authorised to do so by a responsible utility.

Maximum penalty: 50 penalty units, imprisonment for 6 months or both.

(2) In a prosecution for an offence against subsection (1), for the purpose of establishing whether an action interfered with a network or a network facility -

(a) it is sufficient to prove that, when the action occurred, there were reasonable grounds for believing it was likely to interfere with the network or facility; and

(b) the offence may be found to be proved even if, at that time, the defendant did not believe the action would be likely to interfere with the network or facility.

Interference with a network or network facility is defined in s 123 to include an action that interferes with the safe or efficient operation of the network or facility, or inhibits or obstructs lawful access to the network or facility, or is likely to have that effect.

10. A utility is defined in the dictionary to the Utilities Act as a person licensed to provide a utility service. A utility service, by virtue of s 13, includes a sewerage service; a sewerage connection service; and making a sewerage network available for the provision of sewerage connection services. Licensing of utilities is dealt with under Part 3 of the Utilities Act: I assume for the purposes of the application that the plaintiff was licensed at relevant times. A sewage main is part of a sewerage network for the purposes of the Utilities Act: s 14. The dictionary provides that a network includes a sewerage network, and a network facility is any part of the infrastructure of a network. It appears to me that to build an extension to a house directly over a sewage main is likely to have the effect of inhibiting or obstructing access to the main, and thus amounts to interference for the purposes of s 123 and s 124 of the Utilities Act.

11. As well as creating the offence of interfering with a network, the Utilities Act gives the utility the right to give to a landholder a network protection notice under s 125. I set out the relevant portions of that section:

125 Network protection notices

(1) This section applies if a responsible utility is satisfied that a structure or activity on, under or over land or water interferes, or is reasonably likely to interfere, with the network or a network facility.

(2) The utility may give the land-holder written notice to take whatever action is necessary to stop the interference with the network or facility, or to remove the likelihood of that interference.

(3) The notice must-

(a) indicate the structure or activity; and

(b) require the land-holder to take stated action to stop the interference, or remove the likelihood of the interference, within a stated period; and

(c) contain a statement about the effect of subsection (5).

(4) The stated period must be no less that 14 days starting on the date the notice is given to the land-holder.

(5) If the land-holder does not comply with the notice -

(a) the utility may do whatever is necessary to stop the interference or remove the likelihood of the interference; and

(b) the reasonable expenses thus incurred by the utility are a debt due to the utility by the land-holder.

. . .

Breach of statutory duty

12. The first defendant submits that the statement of claim does not disclose a cause of action for breach of statutory duty, nor does it disclose a cause of action in negligence. The statutory duty is said to arise from s 33A, 34 and 34A of the Building Act. It does not seem to me that s 33A imposes any obligations on a certifier. No statutory duty attaching to the first defendant could arise from that section.

13. Section 34 imposes a duty on a certifier to issue a building approval if satisfied of a number of matters, relevantly including that the prescribed requirements relating to consultation have been met. One such requirement, imposed by regulation 15(1)(f), is that there be consultation with the plaintiff in relation to any encroachment of a proposed new part of a building onto an easement. The plaintiff's case is that no such consultation took place.

14. Section 34A prohibits the certifier from granting a building approval if the certifier is satisfied that, because of the siting of a building as proposed to be altered, the carrying out of the building work would result in the contravention of the Building Act or any other law. The plaintiff's case is that the building work resulted in a contravention of s 124 of the Utilities Act, by causing interference with the sewerage network.

15. The primary submission of the first defendant is that ss 34 and 34A of the Building Act are not provisions intended to give rise to a private cause of action. The long title of the Building Act is "An Act relating to the erection, alteration and demolition of buildings". The intention of the Act, it is submitted, is not to protect individual members of the public: it is not an Act with the principal purpose of ensuring the safety of individuals, though as a matter of common sense, safety is undoubtedly one of its indirect objects.

16. The 1998 amendments were introduced with an explanatory memorandum which stated that the Bill allowed people not employed by the government, as private certifiers, to approve plans and to carry out inspections of building work. This, the first defendant submits, does not suggest any intention on the part of the legislature to create a private cause of action.

17. Traditionally, legislation as to some subject matters has been construed so as to give rise to a civil cause of action for breach of statutory duty. The prime example is legislation concerned with industrial safety. As long ago as 1937 the High Court held that a person injured in a lift as a result of a breach of a safety provision in the Scaffolding and Lifts Act 1912 of New South Wales had a cause of action against the person responsible for the control of the lift: O'Connor v S P Bray Limited [1937] HCA 18; (1937) 56 CLR 464. Dixon J at 477 said:

It is a question of some difficulty whether a civil remedy is given to a person injured in consequence of the breach of that clause. Such a person may, of course, maintain an action of negligence and rely upon the failure to comply with the statutory regulations as evidence of negligence. But it is a different question whether the enactment itself confers a distinct cause of action. The received doctrine is that when a statute prescribes in the interests of the safety of members of the public or a class of them a course of conduct and does no more than penalise a breach of its provisions, the question whether a private right of action also arises must be determined as a matter of construction. The difficulty is that in such a case the legislature has in fact expressed no intention upon the subject, and an interpretation of the statute, according to ordinary canons of construction, will rarely yield a necessary implication positively giving a civil remedy. . . In the absence of a contrary legislative intention, a duty imposed by statute to take measures for the safety of others seems to be regarded as involving a correlative private right, although the sanction is penal, because it protects an interest recognised by the general principles of the common law. . . Whatever wider rule may ultimately be deduced, I think it may be said that a provision prescribing a specific precaution for the safety of others in a matter where the person upon whom the duty laid is, under the general law of negligence, bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision or from the scope of the legislation of which it forms a part a contrary intention appears.

18. More recently, the High Court decided that provisions of the Industrial Relations Act 1988 of the Commonwealth, which imposed a penalty for breach of an award, did not create a cause of action for damages for beach of statutory duty: Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410. Brennan CJ, Dawson and Toohey JJ said at 424:

A cause of action for damages for breach of statutory duty arises where a statute which imposes an obligation for the protection or benefit of a particular class of persons is, upon its proper construction, intended to provide a ground of civil liability when the breach of the obligation causes injury or damage of a kind against which the statute was designed to afford protection. The question is one of the construction of the statute, although as Dickson J pointed out in O'Connor v S P Bray Limited, an examination of the statute "will rarely yield a necessary implication positively giving a civil remedy." One generalisation that can be made is that where the persons upon whom the statutory obligation is imposed are under an existing common law duty of care towards the persons whom the statute is intended to benefit or protect, the statutory prescription of a higher or more specific standard of care may, in the absence of any indication of a contrary intention, properly be construed as creating a private right. Thus it is that Factories and Shops Acts and other legislation designed to protect the health and safety of employees in the workplace have been held to impose duties the breach of which gives rise to a right to sue for damages.

19. Their Honours examined the Industrial Relations Act, noting that its principal object was expressed to be the promotion of industrial harmony and cooperation among the parties involved in industrial relations in Australia. They went on to say:

Having regard to the public aims of the legislation, its scope and purpose is not such as to disclose any intention to benefit or protect employees or any other class of persons by conferring on them a right of action at common law for breach of an award obligation. . . The Act discloses no such intention. . . On the other hand, the Act can and does disclose a contrary intention in providing a means for the enforcement of awards which does not contemplate the existence of private rights enforceable by way of an action for damages.

20. Counsel for the defendant referred to some decisions outside the workplace safety category, where legislation had been held to create a private cause of action. In J D Bell (Calool) Pty Limited v Shortland County Council (1991) Aust Torts Reports 81-139, Cole J considered a regulation requiring trees to be trimmed if likely to come into contact with an aerial conductor on an electricity line. The plaintiffs had suffered damage to property caused by fire. Cole J found that the fire was caused by contact between the conductor and a tree. He regarded the regulation in question as prescribing a specific precaution for the safety of persons and their property in a matter where the defendant was, under the general law of negligence, bound to exercise due care. This gave rise to a "correlative private right" to sue for breach of the statutory duty.

21. In Proprietors - Strata Plan No 30234 v Margiz Pty Limited (Supreme Court of New South Wales, 30 June 1993, unreported) Brownie J held that it was arguable that a breach of a section of the Strata Titles Act 1973 of New South Wales in relation to the repair and maintenance of common property air-conditioning gave rise to a cause of action in a unit-holder where damage could be established. His Honour thought it relevant that the unit-holder was one of the class of persons for whose benefit the duty had been created. The Act gave the Strata Titles Commissioner the power to order the body corporate to repair and maintain the air-conditioning unit, and in default, to appoint another company to perform the duty, and, presumably, to recover the expense from the body corporate. The Act contained a provision that nothing in it derogated from any rights or remedies available to a proprietor or a body corporate apart from the Act. Brownie J rejected a submission that the provisions conferring the powers mentioned on the Commissioner constituted a code or were otherwise inconsistent with an implied intention to create a private cause of action.

22. Girkaid Pty Limited v McDonald (Supreme Court of New South Wales, 14 December 201, unreported) was a decision of Adams J in relation to a claim for damage to a factory by fire. The fire had begun with the combustion of materials which were dangerous goods under the Dangerous Goods Act 1975 and the Dangerous Goods Regulation 1978 of New South Wales. The defendant was in breach of a regulation which required him to take all practicable precautions to prevent fire. Adams J cited the dictum of Mason J in John Pfeiffer Pty Limited v Canny (1981) 55 ALJR 638 at 689 where his Honour said:

Ordinarily a duty imposed by statute to take measures for the safety of others involves a correlative private right unless from the nature of the provision or from the scope of the legislation a contrary intention appears. . .

His Honour was satisfied that the principal purpose of the dangerous goods legislation was the protection of life and property, and that a civil cause of action for breach of the regulation was available.

23. Counsel for the plaintiff also relied upon a passage from a decision of the House of Lords, X (minors) v Bedfordshire County Council (1995) 2 AC 633. Lord Browne-Wilkinson said at 731 that breach of statutory duty:

. . . comprises those cases where the statement of claim alleges simply (a) the statutory duty, (b) a breach of that duty, causing (c) damage to the plaintiff. The cause of action depends neither on proof of any breach of the plaintiffs' common law rights nor on any allegation of carelessness by the defendant.

The principles applicable in determining whether such statutory cause of action exists are now well established, though the application of those principles in any particular case remains difficult. The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty. There is no general rule by which it can be decided whether a statute does create such a right of action but there are a number of indicators. If the statute provides no other remedy for its breach and the parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer. If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action. . . However the mere existence of some other statutory remedy is not necessarily decisive. It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy. Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach . . .

Although the question is one of statutory construction and therefore each case turns on the provisions in the relevant statute, it is significant that your Lordships were not referred to any case where it had been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large had been held to give rise to a private right of action for damages for breach of statutory duty.

24. Counsel for the first defendant submits that there are a number of aspects of the present action which militate against construing ss 34 and 34A of the Building Act as intended to confer a right of action. Counsel points to the purposes and objects of the legislation; its legislative history; the generality of the statutory language; the lack of any reference to a duty of care; the provision of a remedy in s 125 of the Utilities Act; and finally, the fact that the claim is for pure economic loss rather than damage to property.

25. It was argued for the first defendant that the statement of claim is defective because it contains no specific allegation that the first defendant owed a duty to the plaintiff to comply with ss 34 and 34A of the Building Act. If the submission were accepted, the defect could readily be rectified by amendment to the pleading. Where that can be done it seems to me inappropriate to strike the entire pleading out, but I am not satisfied that the specific allegation is essential, in any event. Counsel for the plaintiff relied on Neptune Oil Co Pty Limited v Fowler (1963) SR (NSW) 530 and Jones v Clyde Welshpool Pty Limited [2000] TASSC 130; (1999) 9 Tas R 391 as authority for the proposition that the pleading need contain only the facts relied upon, and need not state the legal effect of the facts; and further, that whether or not the existence of certain facts gives rise to a duty is a question of law which need not be pleaded. The proposition seems to be to be correct.

26. The test for striking out a pleading as disclosing no reasonable cause of action is a high one. Dickson J said in Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62:

A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court. . . Once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action. . .

27. This stringent test was met by the defendants in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 in which Barwick CJ struck out the plaintiff's statement of claim and dismissed the action. His Honour noted that the jurisdiction to terminate an action summarily was to be sparingly employed, quoting from earlier decisions words which had been used to describe the test to be applied: "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow [the pleadings] to stand would involve useless expense". Great care, his Honour said, must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal.

28. Counsel for the first defendant has not persuaded me that it is inevitable that the sections of the Building Act in question must be constructed as conferring no private right of action for breach of statutory duty. There are strong arguments for that proposition, but at the same time there are respectable arguments available to the plaintiff, and it seems to me that that aspect of the application does not meet the stringent test in Dey and General Steel Industries.

Negligence

29. The first defendant submits that the plaintiff cannot succeed in negligence, by reason of the fact that the claim is for pure economic loss, the plaintiff having suffered no physical damage. The law as to recovery of damages for pure economic loss in tort is still in the course of development. A claim was denied by majority in the High Court as recently as 1 April 2004: Woolcock Street Investments Pty Limited v CDG Pty Limited [2004] HCA 16, now reported at [2004] HCA 16; (2004) 78 ALJR 628. The claim was one by a subsequent purchaser of a commercial property against a firm of consulting engineers engaged by the original developer. Some time after the sale it became apparent that the building was suffering from substantial structural distresses due to the settlement of the foundations of the buildings or the material below the foundations.

30. The plaintiff relied upon the earlier decision of the Court in Bryan v Maloney [1995] HCA 17; (1995) 182 CLR 609, in which a subsequent purchaser of a house had succeeded against the builder despite the lack of any direct relationship between them. The cause of the loss was similar; the footings of the house were inadequate and the fabric of the building cracked, causing diminution in value. It is now generally accepted that in a case of that kind, the claim is for pure economic loss, calculated by reference to diminution in value, rather than for damage to property: Woolcock Street Investments at paras 21, 200 (though see the doubts expressed by Kirby J in dissent at paras 153-156).

31. The authors of the majority joint judgment in Woolcock Street Investments, Gleeson CJ, Gummow, Hayne and Heydon JJ, reviewed Bryan v Maloney (paras 10-18), noting that it had been subject to some academic and judicial criticism. It had been decided at a time when proximity represented the conceptual determinant as to the existence of a duty of care. Later decisions of the court had moved away from the proximity approach. There was now some doubt whether there was a sharp distinction between cases involving residential properties and those involving other buildings. Their Honours noted that since Caltex Oil (Australia) Pty Limited v The Dredge "Willemstad" [1976] HCA 65; (1976) 136 CLR 529, and most notably in Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180, the vulnerability of the plaintiff had emerged as an important requirement in cases involving a duty of care to avoid economic loss. Vulnerability was to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care. In Perre, the plaintiffs could do nothing to protect themselves from the economic consequences of the defendant's negligence in sowing a crop which caused the plaintiffs' land to be quarantined. Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 was another case where a plaintiff could do nothing to protect himself, in that case from the negligence of a solicitor drawing a will for a relative (Woolcock paras 22-23).

32. The court said that other pure economic loss cases such as those involving negligent misstatement might be capable of explanation by reference to notions of vulnerability. It was not necessary in the instant case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability, as the case could be decided without doing so (para 24). Their Honours held that on the facts, the appellant was not, in any relevant sense, vulnerable to the economic consequences of any negligence of the engineers in their design of the foundations for the building. For example, the appellant could have sought to include a warranty of freedom from defect in the contract at the time of its purchase and could have asked for assignment of any rights the vendor may have had against third parties in respect of defects. It may be that other investigations of the building could have been undertaken before purchase. There was no evidence as to whether the building represented a particularly significant investment for the appellant, something which was regarded as significant in Bryan v Maloney (paras 31-33).

33. Their Honours conceded that the principles applicable in cases of negligently inflicted pure economic loss had evolved since Bryan v Maloney was decided, though the principles did not support a duty of care in the instant appeal. They suggested that Bryan v Maloney might fall for reconsideration on some future occasion (para 35).

34. Counsel for the first defendant argues that the plaintiff must plead facts establishing that it could not have protected itself against the economic loss it claims in order to establish vulnerability, and that it has not done so. The first defendant further submits that the plaintiff is not vulnerable because it is protected by s 125 of the Utilities Act and can make good or recover any loss by following that procedure.

35. A threshold question to be determined on the hearing of the action, if it proceeds, will be whether the first defendant as certifier owed a duty of care to a utility such as the plaintiff. This will require a consideration of whether it was reasonably foreseeable that negligence by the first defendant might result in economic loss to the plaintiff. But it will also require a decision as to whether the law should permit recovery of damages for pure economic loss by such a plaintiff against such a defendant and in such circumstances. This may involve a consideration of questions of policy as to the development of this area of the law. Nothing in Woolcock Street Investments, or any earlier decisions of the High Court, requires me to conclude that the plaintiff's action for negligence is doomed to failure. The claim may be described as at the leading edge of the development of this area of the law, but it is open to argument that the plaintiff in these circumstances should be permitted to recover. Applying the test explained by Barwick CJ in General Steel Industries, it seems to me that it would be inappropriate to deprive the plaintiff of its opportunity for the trial of its case by the Court.

36. The application must be dismissed. The costs of the application should be reserved for determination by the trial judge in the light of the eventual decision.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Decision herein of Master Harper.

Associate:

Date: 2 July 2004

Counsel for the plaintiff Mr R. L. Crowe SC

Solicitor for the plaintiff Minter Ellison

Counsel for the first defendant Dr K. M. Spry

Solicitor for the first defendant Howes Kaye Halpin

Date of hearing 14 May 2004

Date of decision 2 July 2004