Caltex Oil (Australia) Pty Ltd & Anor v The Dredge Willemstad & Anor

136 CLR 529
11 ALR 227

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(Judgment by: MURPHY J)

Caltex Oil (Australia) Pty Ltd
Australian Oil Refining Pty Ltd
v. The Dredge Willemstad
Decca Survey Australia Ltd

Court:

Judges: Gibbs J
Stephen J
Mason J
Jacobs J
Murphy J

Subject References:
Negligence
Shipping and Navigation

Judgment date: 9 December 1976

SYDNEY

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Judgment by:
MURPHY J

There is no satisfactory general principle governing recovery of economic loss caused by negligence. The difficulties in this branch of the law arise mainly from the doctrine of foreseeability but also from unresolved questions of public policy.

The general theory of recoverability stated in Donoghue v. Stevenson [1932] AC 562 was useful in opening up avenues of recovery broadly in line with notions of social justice current then, but inevitably it needed refinement or replacement by theories able to be applied more precisely to economic and social requirements.

The tendency now is to pay lip service to The Wagon Mound (No. 1) [1961] AC 388 while using a variety of techniques to avoid its application (see Professor J. G. Fleming, "The Passing of Polemis" Canadian Bar Review, vol. 39 (1961), p. 489 and Professor J. C. Smith, "Requiem for Polemis" University of British Columbia Law Review, vol. 2 (1964-66), p. 160). In some cases, the foreseeability test is only sustainable by altering the meaning of foreseeable to include the unforeseeable.

The theoretical bases for liability and remoteness of damage are being increasingly questioned (see C. Harvey, "Economic Losses and Negligence: The Search for a Just Solution", Canadian Bar Review, vol. 50 (1972), p. 580 and the uncertainty surrounding recovery for physical damage when questions of foreseeability arise are magnified in the area of economic loss.

Social responsibility carries with it a duty of care and liability for damage caused by breach of this duty. Persons causing damage by breach of duty should be liable for all the loss unless there are acceptable reasons of public policy for limiting recovery. One policy reason advanced against allowing recovery of economic loss is the avoidance of multiple actions but procedures can be easily evolved for representative actions (as under Compensation to Relatives Acts and joinder of actions. Another is that payment of huge damages is often beyond the wrongdoer's capacity. If a negligent act results in great damage, there is no reason why the loss should be left with the victim because an individual or corporate wrongdoer is unable to pay fully for it. Where the state (or one of its agencies) is liable, social considerations may require limitation of liability. The state can protect itself by legislation and often has.

I accept the findings of fact by the trial judge.

It is obvious that those who managed the dredge were under a duty to take care not to collide with the pipeline, and breach of this duty caused the damage. I also agree with Stephen J. that Decca was negligent. The plaintiff's loss was economic. I do not accept the contention that economic loss not connected with physical damage to the plaintiff's property is not recoverable. I find no reason for limiting recovery.

The appeal by Caltex in both cases should be allowed. I also agree with Stephen J. that the appeal concerning the entry of judgment against Captain Henneman should be dismissed.