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Papua & New Guinea v Leahy [1961] HCA 6; (1961) 105 CLR 6 (7 March 1961)

CATCHWORDS

HEARING

DECISION

McTIERNAN J. I think that this appeal should be allowed. It is argued for the appellant that the arrangements into which it entered with the respondent to give treatment to his cattle to cure them of tick was not contractual. It appears from the evidence that for a number of years the respondent conducted his own eradication campaign but owing to its lack of success handed over the task to officers of the Department of Agriculture, Stock and Fisheries after negotiations had taken place with the Department. Under an arrangement made between the respondent and the Department an officer of the Department was to organize the programme of tick eradication and the respondent was to supply a number of his native labourers at six shillings per native per day to work under the direction of the officer. It appears from the evidence that for some time the campaign was conducted by officers of the Department in a very inefficient manner. Subsequently, a number of cattle died from red-water fever, a disease which is normally associated with tick infestation. The respondent claimed damages for breach of contract. He contended that the arrangement made between the Administration and himself amounted to a binding contract under which the Administration undertook to carry out the campaign properly and that it was guilty of breach of contract in not doing so. This contention was upheld by the learned Chief Justice of the Territory. (at p11)

2. The arrangement consisted of agreed promises but that is not enough to make a contract, unless it was the common intention of the parties to enter into legal obligations, mutually communicated, expressly or impliedly. It was not an express or implied term of the arrangement that the respondent should make any payment for the treatment of the cattle. I cannot agree that the Administration through its officers intended to enter into legal relations when, at the request of the respondent, it undertook the organization of the tick eradication campaign with respect to his cattle. The conduct of the parties constituted an administrative arrangement by which the Administration in pursuance of its agricultural policy, gave assistance to an owner of stock to prevent that stock contracting a disease which was prevalent in the Territory. The work done by the Administration was analagous to a social service which generally does not have as its basis a legal relationship of a contractual nature and from which no right of action would arise in favour of the citizen who is receiving the services if the Government acts inefficiently in performing them. (at p11)

3. In Gold v. Essex C.C. (1942) 2 KB 293 Lord Greene M.R. said: "Apart from any express term governing the relationship of the parties, the extent of the obligation which one person assumes towards another is to be inferred from the circumstances of the case. This is true whether the relationship be contractual (as in the case of a nursing home conducted for profit) or non-contractual (as in the case of a hospital which gives free treatment). In the former case there is, of course, a remedy in contract, while in the latter the only remedy is in tort, but in each case the first task is to discover the extent of the obligation assumed by the person whom it is sought to make liable." (1942) 2 KB, at p 301 . As I have said, no remedy in contract exists for the benefit of the respondent in this case and the only remedy to which he might have recourse is one in tort. However, it seems that the well-established principle, an application of which is seen in the case of East Suffolk Rivers Catchment Board v. Kent [1940] UKHL 3; (1941) AC 74 , would preclude an action in tort by the respondent. (at p12)

4. There it was decided that where a statutory authority is entrusted with a power and exercises that power, the only duty which it owes to a member of the public is not to add to the damages which that person would have suffered had the authority done nothing. In that case the appellants, who were vested with statutory powers under the Land Drainage Act, 1930 (Imp.), undertook the repair of a sea wall but carried out the work inefficiently. The consequence was that the respondents' land was flooded for a longer period of time that it would have been if reasonable skill had been exercised. It was held that the appellants were under no liability to the respondents as the damage suffered by the latter was due to natural causes. (at p12)

5. In the present case the loss suffered by Leahy through the death of his cattle from red-water fever was due to tick infestation. The officers of the Administration exercised their powers for a period in a very inefficient manner through not carrying out the treatment properly. However, the cause of the loss was not the default of the Administration but a natural cause - the tick infestation - and therefore the respondent has not proved that the appellant has broken a duty of care leading to loss on his part. (at p12)

KITTO J. This is an appeal by leave against a judgment of the Supreme Court of the Territory of Papua and New Guinea (Mann C.J.). The respondent was the plaintiff and the appellant was one of the defendants in the action in which the judgment was given. There were two other defendants, but against them the action failed. Against the appellant damages were awarded in the amount of 4,055 pounds. (at p12)

2. The action was brought under s. 5 of the Claims By and Against the Administration Ordinance 1951 of the Territory, which provides that any person making a claim against the Administration whether in contract or in tort may, in respect of the claim, bring a suit (which includes an action : s.4) against the Administration in any Court of the Territory in which such a suit may be brought as between subject and subject. By s. 8 it is provided that in any suit in which the Administration is a party, the rights of the parties shall, as much as possible, be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject. The expression "the Administration" means the Administration or Government of the Territory: Ordinances Interpretation Ordinance 1949-1951, s. 6. (at p13)

3. In the statement of claim one cause of action only against the Administration was alleged, and that was in contract. After setting out that the respondent was the lessee and the appellant, the Administration, was the lessor of a property at Zenag in the Territory, on which for a number of years the respondent had been grazing and rearing dairy and beef cattle and carrying on the business of a producer and vendor of dairy products, beef cattle and meat, the statement of claim alleged a contract between the Administration and the respondent by which the former agreed that it would carry on at Zenag a campaign for the eradication of cattle tick from the respondent's cattle, and that the campaign would be carried out thoroughly and skilfully. The consideration alleged was that the respondent would allow the Administration's servants to enter upon his property and spray the cattle thereon, would make available to the Administration the services of six native labourers, and would forbear from interfering with the work of the servants in carrying out the campaign. The breach assigned was that the Administration, although its servants sprayed the respondent's cattle between June 1954 and July 1955, failed to carry out the spraying thoroughly and skilfully. Particulars of resulting damage were given, comprising loss of cattle by death, loss of natural increase, loss of milk production, and deterioration of condition of the herd. (at p13)

4. Shortly before the trial an amended defence was filed denying that the officers who, according to the respondent, had contracted with him on behalf of the Administration, had authority to bind the Administration; and the respondent then by leave joined the officers as additional defendants and made amendments to the statement of claim seeking damages against them for breach of warranty of authority. The learned Chief Justice of the Territory, having heard the evidence, reached the conclusion that the contract alleged by the respondent had been made by the officers on behalf of the Administration on 7th June 1954, and that the Administration was bound thereby. Accordingly the action failed as against the officers. His Honour also concluded that the Administration had committed breaches of the contract, and that the breaches had caused substantial damage to the respondent. (at p13)

5. On the appeal the controversy has been as to whether the proved and admitted facts, when considered in their setting of time and circumstance, establish a contract, or only an arrangement having no legally binding force. The question is whether the parties to the correspondence which passed and the conversations which took place evinced an intention to make a bargain mutually binding between the Administration and the respondent in the sphere of legal rights and obligations. (at p14)

6. The date at which the respondent contends that the contract was made is 7th June 1954. On that date conversations occurred between the respondent and certain officers of the Department of Agriculture of the Territory, and between the respondent and the Administrator, which were the culmination of a protracted correspondence. For several years the respondent had been troubled by an infestation of cattle tick on his property, and efforts to cope with it had failed to give satisfactory results. The Department had supplied him gratis with tickicides and hand-spraying equipment, and had given him some instruction in their use. But towards the end of 1953, the ticks having been by no means eradicated, he entered upon the correspondence which has now to be considered. He wrote the first letter on 9th November 1953. In it he made two requests: first, as he considered that hand-spraying could not succeed in eradicating the ticks he wanted some other means considered; and secondly, as the spraying had got beyond his financial resources he wanted the Department (if spraying was to be continued) to send one of its men to the property on each occasion of spraying to take the job off his hands. It is not unimportant to pause at this point and observe that there was here no suggestion of a contract or of a business transaction. The letter is that of a cattle owner appealing for government assistance. He was not offering anything, or proposing any bargain. He had been receiving a measure of free assistance, and he wanted more. He wrote in the terms and spirit of request. (at p14)

7. The Department replied in a letter of 20th November 1953, declining the request, and giving as the reason that no officer was available who could be sent. The letter stated: "We will do everything in our power to undertake the cleansing of your stock as quickly as possible, and if this is not successful, we will do all we can to undertake the supervision of the eradication in the near future. However, it is anticipated that we will not have a Stock Inspector available for constant supervision until early in the New Year". Obviously, the subject under discussion was regarded as that of providing gratuitous assistance in a technical matter within the scope of the Department's general concern. (at p14)

8. The respondent wrote in reply, on 1st December 1953, that he could get a man to supervise the spraying according to the Department's instructions, supplying labour, transport etc. "This", he said, "would relieve me of the financial burden which I can no longer carry". In other words, he wanted the Department, since it had no officer available for the purpose, to pay for the spraying to be done by an outside person. The implication, or the assumption, was that the nature of the Department's functions made it reasonable for a cattle owner to seek a subvention of the kind indicated. The letter dealt also with other topics, showing unmistakably that the respondent did not conceive himself to be bargaining with the opposite party to a business transaction. One paragraph, for instance, spoke of stock problems other than that of ticks, and said that the respondent would appreciate the Department's interest in these problems. The final paragraph contained the statement: "I still think that if more time and scientific knowledge were devoted to quarantine and disease, and perhaps limited experiments in breeding, and more to the private individual breeder, the stock industry generally would be better off in this country". The author of these words was not writing to a business concern or on a business level: he was addressing a department as to how it might best act as an organ of government, concerned to help a primary industry in the interests of the Territory generally. (at p15)

9. The Department's reply, dated 22nd December 1953, declined the request to employ the outside person. It contained a statement which provides a clear indication that the Department was dealing with the matter on a basis not of contractual dealings, but of grants of government assistance. After stating that the Department was still prepared to supply tickicides and regretted that it could not provide a qualified person to supervise the spraying, the letter proceeded: "it is pointed out that in the Australian States the responsibility and expense of disease eradication rests with the owner of the stock, and that by comparison this Administration is contributing quite a lot of assistance in the matter of disease control in the Territory". (at p15)

10. The respondent was far from content. On 11th January 1954 he wrote again, complaining of the cost of the spraying, saying that he had religiously followed every suggestion of the Department since September 1948, and making a point of the fact that when he asked the Department to send a man to take over tick eradication he was only asking them to implement a part of an offer which had been made when a Miss McPherson was with the Department. This is not the language of offer and acceptance, in the sense in which those terms are used to describe steps in the making of a contract. Apparently Miss McPherson had given the respondent to understand that he could have for the asking the services of a man for tick eradication; at any rate, the respondent's point was, not that the failure to send a man was a breach of contract, but simply that he was morally justified in asking for the man to be sent. Indeed, near the end of the letter he showed unmistakably that what he was insisting upon was his view of the Department's moral responsibilities to the Territory, not anything in the realm of enforceable rights and obligations. He wrote: " . . . can private enterprise still expect assistance from your Department or must we endeavour to figure out the numerous tropical deseases etc. this new cattle country is subject to, taking the heavy losses as they come?". (at p16)

11. After a few weeks the Department was able to send some assistance. On 18th March 1954 the respondent was informed by letter that a Mr. McLaren, a stock inspector, had been instructed to proceed to Wau and Zenag to organize spraying crushes and adequate handling facilities where necessary, and to commence on the eradication of tick in both areas. The respondent acknowledged the letter on 4th April 1954, describing it as meaning that the Department was in a position to take over the tick eradication scheme "as promised by them some years ago", and adding that the scheme had got completely beyond his resources and that he would look forward to handing over to Mr. McLaren in the near future. Mr. McLaren arrived in May 1954, but the labour which he used for the spraying was the respondent's labour, and the cost of it was falling on the respondent. Anxious for relief from this burden, he went to Port Moresby, and there, on 7th June 1954, he had the interview, first with certain departmental officers including Mr. Marley, and then with the Administrator, which he contends produced a binding contract. In his evidence in chief at the trial, he described as follows what occurred: "Mr. Marley said: 'Our policy is to eradicate ticks. We will eradicate ticks, you will supply boys at the rate of 6s. per day per boy. You will also erect fences or yards where requested. We will do a thorough job which will mean you will muster your cattle once per week for spraying'. Marley took me to Mr. Claude Champion and he agreed to all the proposals. Later I saw the Administrator, when I said: 'There is no need for your Honour to worry now. I have had a most successful meeting with your officers. I agreed to do what they say and said I would be pleased to do everything I possibly can to get the ticks off my property.'" In cross-examination he returned to it; "After discussion: Marley said 'Our policy is to eradicate and we would take over the whole scheme and pay your labour instead of bringing it from Lae. You put up fences etc. and we'll do a thorough job. We'll have a man to supervise the spraying and that will relieve your European of responsibility for spraying and it would be better to get labour on the property'." Mr. Marley, who was called as a witness by the respondent, gave similar but more detailed evidence. (at p17)

12. Mr. Marley's insistence that the Department's policy was the eradication of ticks was by way of answer to intimations from the respondent that if he had to continue bearing the expense of dealing with ticks he would dip instead of spraying, but would do it at such intervals that he could afford it, and as a consequence would merely control the tick menace, without aiming at complete eradication. To this the Department was opposed; nothing short of eradication was their settled aim; and since the respondent needed approval to move some of his cattle to an area away from his overstocked property at Zenag he had to accept the Department's policy. (at p17)

13. Mann C.J. summed up the outcome of the discussion as follows: ". . . he fell in with the Department's views and agreed that they should carry out a complete tick eradication programme under the supervision of their own qualified officer. He also agreed to supply six native labourers to the Administration at a charge of 6s. per native per day to work under the direction of the Department's officer and agreed that he would undertake the responsibility for mustering all his stock and having them available for spraying at the time indicated by the Department. For mustering purposes the plaintiff was to provide his own native labour and European supervision. Mr. Leahy emphasized that he would have nothing to do with the campaign itself and according to Mr. Marley who was called as a witness the plaintiff said: 'Once you people start paying this native labour I'll hand the whole lot over to you, I am more than sick and tired of it'. Mr. Marley said that he replied: 'We are not to be responsible for your cattle and it is quite clearly your responsibility for the handling and mustering of them'." (at p17)

14. Mention must be made of one further piece of material in the evidence. It is a memorandum, dated 8th June 1954, which the Director of the Department addressed to the Government Secretary for the purpose of obtaining the Administrator's approval to the expenditure involved in that part of the arrangement with the respondent which called for payment by the Administration of the respondent's labourers for the time they should be engaged in the spraying of the cattle. Like the statement of Mr. Marley which the learned judge quoted, it was couched in terms of responsibility. Mr. Marley had said that the respondent was to be "responsible" for the handling and mustering of the cattle. The memorandum mentioned that the Administrator had approved that the Administration should be "responsible" for tick eradication in the Territory. The use of such expressions as these has little bearing on the question to be decided. They refer only to the contemplated allocation of burden as between the respondent and the Administration, without suggesting in the least that the burdens are matters of contractual obligation. It may be worth while to quote parts of the memorandum: "The Senior Stock Inspector at Lae, Mr. R. K. McLaren, has been instructed to work in the Zenag and Wau areas until the eradication of the tick has been completed, and has commenced duty in these areas. Normally Mr. McLaren would require 5 or 6 natives to assist him in spraying and in yard work, and this would mean that Mr. McLaren would have to convey the natives to and from Lae on each spraying day. Mr. Leahy is prepared to permit us to hire 6 native labourers from him for the purpose of spraying on his property, at the rate of 6s. per native per day. These will be for spraying and yard work only, and Mr. Leahy will still be required to provide his own labour for mustering the stock. Such an arrangement will work out at approximately 470 day labour units per year, which will cost 141 pounds. It is considered that since Mr. Leahy has borne the cost of this to date, this Department should take over forthwith, and your approval is requested, please, for the employment of Mr. Leahy's native labour as day labour for the purpose of spraying. Actually the Administration will save money on this, because otherwise it would have to maintain the native labour at the 3 Mile Station at Lae and would have the added expense of transporting this labour from Lae to Zenag for spraying cattle." (at p18)

15. There is not in this document the slightest indication that the Administration was entering into a contract with the respondent. The whole thing relates to the carrying out of the Administration's policy of relieving private individuals from the burden of the steps considered necessary for tick eradication and ensuring, in the interests of the Territory as a whole, that those steps are properly t taken. (at p18)

16. In the judgment of the learned Chief Justice there occurs the following passage: "Considering the position of the plaintiff it is clear that he was assuming some liabilities and responsibilities and agreed to depart from his own proposals to the extent of cooperating with the Administration to carry out its campaign. I think that it is clear that the plaintiff expected the Department to honour its promises and to see that the campaign was carried out properly. He was prepared to leave the entire conduct of the campaign to the Department and in fact he was insisting that they should take complete charge of it. I think that the proper conclusion is that Mr. Leahy was entering into a transaction which as between individuals would amount to a contract and which was intended to impose obligations of a legal character on both parties. There remains of course the question whether in relation to this transaction the Administration should be considered as being upon a different footing from that of an ordinary individual." It must be remembered, however, that there are not two questions, whether the interviews were such as would have produced a contract if they had taken place between private individuals, and if so whether it makes a difference that they took place between a private individual on the one hand and government officers acting in their official capacities on the other hand. There is only one inquiry: whether, taking into account all the circumstances, it is right to conclude that the respondent and the Administration were dealing with one another on a contractual basis, or were merely arranging the manner and extent of gratuitous assistance to the respondent which the Department was willing to render in execution of the Administration's policy concerning the eradication of cattle tick in the Territory. (at p19)

17. The view of the learned Chief Justice of the Territory was that the Department, setting itself to give effect to the policy which the Administrator had approved, aand having at that time no compulsive powers in regard to the treatment of cattle for tick, must have intended that the respondent should be legally bound to perform what fell to him to do under the arrangement that was reached on 7th June 1954, and therefore must be taken to have intended to assume contractual obligations itself. If this were not so, his Honour pointed out, the respondent, already thoroughly dissatisfied with the tick eradication campaign, could have withdrawn from it at any time. His view, which has been strongly supported in argument before us, was that the Administration's officers could not possibly have meant that the Department should go to the trouble and expense of endeavouring to perform the arrangement on its part, if the respondent were at liberty to back out at will and thereby turn the whole business into a waste of time and money. To this his Honour added that the arrangement necessarily involved an effect on property by the creation of a licence in favour of the Administration to enter upon the respondent's land and treat his cattle, and that if a licence be given for valuable consideration there is a contract. These considerations seemed to his Honour to require the conclusion that if the arrangement had been between private persons it would have been contractual in character; and seeing no reason to treat the Administration as in a different position from an ordinary individual in regard to the matter, he held that a contract was made which bound the Administration to carry out a thorough tick eradication campaign, involving the thorough spraying of all the cattle on the respondent's property once a week, under the direct supervision of the stock inspector, until all the ticks on the property should have been entirely eliminated. The Administration was bound, his Honour thought, to exercise reasonable care, at a proper level of skill and competence, towards the elimination of the ticks, as well as to provide the spray equipment, the tickicides and the transport of the stock inspector, and to pay for the labour employed in administering the spray and performing incidental duties in the cattle yard. The respondent, he held, was bound to provide the necessary labour for mustering, to see that all cattle were mustered regularly every week according to details agreed upon, to provide water at the cattle yards for mixing with the tickicides, to construct fences and pens as required by the stock inspector, and to make available at the property for the use of the stock inspector six native labourers at the rate of 6s. per native per day. (at p20)

18. Both the respondent and the Department set about performing the arrangements that had been agreed upon, but although some of the Department's officers performed their duties well two of them, to whom the conduct of the eradication campaign was mainly entrusted, failed substantially in their duty. Through deficiencies of character and over-indulgence in alcohol, they neglected their work, and as a result the respondent's cattle became even more seriously affected by ticks than before. For the ill effects thus produced, the learned Chief Justice held the Administration liable to the respondent in damages for breach of the contract which he had found was entered into on 7th June 1954. (at p20)

19. Enough has been said, in the course of examining the material upon which his Honour held that a binding contract was made, to show why that conclusion cannot be supported. From first to last the Department showed itself to be doing no more than giving effect to a general policy of dispensing aid to individual cattle owners as a means of coping with a recognized menace to an important part of the Territory's economy. And the respondent's attitude throughout was that of a private person appealing for government assistance on the ground that the Department, by doing for him what it insisted ought to be done on his property, would be performing a function of government in accordance with its settled policy. The whole atmosphere of the correspondence and discussions that took place was different from that which exists between contracting parties. True it is that the Department relied upon the continuing co-operation of the respondent in performing his part of what was arranged between them. The officers concerned were no doubt quite fully aware that if the respondent should make substantial failure at any time in affording the co-operation he was promising, all that had been put into the campaign up to that time would go for nought. But they knew too that he had every incentive to make the campaign a success. The loss, if it should be abandoned, would be far more serious for him than for the Administration, and he had already shown that he felt he was in a cleft stick: he could not afford to carry out a thorough spraying campaign himself, but unless it were carried out he could not get permission to move his cattle from his eaten-out pastures to new country. In the circumstances, the fact that in the absence of a contract he might draw out at any time has no real weight in considering whether a contract was entered into. (at p21)

20. For the reasons given, the case falls into the class of which illustrations may be found in Australian Wolleen Mills Pty. Ltd. v. The Commonwealth [1954] HCA 20; (1954) 92 CLR 424; (1955) 93 CLR 546 , and Milne v. Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460, at pp 472,473 . The arrangements made on 7th June 1954 were not contractual, and the judgment giving damages for the failure of the Administration, through the two defaulting officers, to give effect to them on its part cannot be sustained.

21. The pleadings which went to trial alleged no other cause of action than breach of contract. In an earlier form they had contained a claim for damages for tort, alleging negligence on the part of the Administration in carrying out the tick eradication campaign. The learned Chief Justice held on demurrer that the respondent had no case in negligence, because the failure of the Administration's officers to do more than they did towards eradicating the ticks was not the cause of the damage complained of: it was caused by the ticks. His Honour referred to the case of East Suffolk Rivers Catchment Board v. Kent [1940] UKHL 3; (1941) AC 74 , and his decision on this part of the case was fully justified by that authority. (at p21)

22. The appeal must be allowed. The judgment appealed from must be set aside and judgment entered for the defendant. (at p22)

ORDER