Non-delegable duty of care: the reach of Burnie Port Authority re-ignited

Such is my barrister’s brain, that whilst reading The Hobbit to my son the other night, I got to thinking about the similarities between non-delegable duties of care and the magic ring featured in the book. In The Hobbit, the ring grants its wearer invisibility and so comes in very handy as Bilbo Baggins continues his quest to recover the dwarves’ lost treasure from the evil dragon, Smaug. As the story unfolds, the ring is also shown to have quite a personality of its own, at times capricious and Delphic, particularly as the saga of the next book, The Lord of the Rings unfolds.

Those two words also seem apt to describe non-delegable duties of care. In fact, “Delphic” is a word Kirby J used in the High Court decision of Montgomery to describe past efforts of that Court to clarify the underlying rationale for non-delegable duties.  Indeed, any review of the authorities shows that the distinction between when there should and shouldn’t be a non-delegable duty imposed upon a defendant is far from clear.

Take for example, this passage from the judgment of Justice (Joseph) Campbell in Transfield Services (Australia) v Hall (2008) 75 NSWLR 12 at [119] as his Honour sought to encapsulate an aspect of Gaudron’s judgment in Lepore:

“Like the majority in Burnie [Port Authority], her Honour was saying that cases where there was a non-delegable duty exhibited a particular characteristic, but was not saying that all cases that exhibited that characteristic were cases where there was a non-delegable duty.”         

What can be said with some certainty however is that overall, there has been a general reluctance in this country to expand the categories where a non-delegable duty will be found beyond those prescribed by Mason J in Kondis (ie. hospital/patient, school/pupil and employer/employee).

The stated reasons of the judges of the High Court deciding Montgomery for keeping the categories limited come down to the harshness of the consequences upon a defendant of so doing and that any further expansion may have the artificial consequence of outflanking established common law principles surrounding vicarious liability (see Kirby J at [44]); in some instances, the strict liability that attaches to non-delegable duties makes it effectively the same as a finding of vicarious liability. Some High Court judges even maintain that a preferable approach would be to simply adjust the applicable duty of care itself, rather than imposing the non-delegable net over a given case. Take for example, the comments of Justices Wilson and Dawson in Stevens v Brodribb Sawmilling (1986) 160 CLR 16 at 42-43:

“The direction taken in this Court has also been away from strict liability for tortious behaviour. There is a preference for the view which is more in harmony with the ordinary principles governing liability for negligence, namely, that the extent of a duty of care will depend upon the magnitude of the risk and its degree of probability…”

The attraction for plaintiffs of course is that a non-delegable duty lifts the standard of care up so high that it makes it much easier for them to get home; somewhat like the ring in The Hobbit. If not strict, it imposes a liability to see that reasonable care is taken – quite a high standard; though if this makes it an impossible standard to meet, a non-delegable duty will not normally be imposed.

Such was the case in Montgomery where the High Court refused to find a non-delegable duty was owed by a local Council for the negligence of its contractor in creating a hazard during footpath installation works because, given it had had such limited involvement in the works, this was a duty that Council would never have been able to meet.          

Against this background, I consider any judicial finding of a non-delegable duty outside Mason J’s categories in Kondis to be quite significant. This is what took place in a decision handed down late last year by Justice (Stephen) Campbell in the NSW Supreme Court decision of Hossain v Unity Grammar College Ltd [2019] NSWSC 1313.

Interestingly enough, His Honour’s findings were prefaced by the following (at [101]):

“And I appreciate that the decision of the High Court in Leichardt Municipal Council v Montgomery evinces what might be regarded as a strong reluctance to extend the established categories of non-delegable duties. If the door has not been slammed closed, it is barely ajar and guarded by a vigilant, juristic sentinel.”

Hossain was a case in which the Plaintiff was seriously injured when a leak caused LPG gas to settle in the ceiling space of a building. It was then ignited when the Plaintiff switched on a light upon entering the room immediately below.  The contractor which caused the leak in negligently conducting gas connection and installation works was uninsured and so a number of others were sued, including the head building contractor.    

The head contractor’s insurer argued that its delegation of the gas connection works to an ostensibly skilled contractor discharged its duty of care to the Plaintiff. However, his Honour found that more was required of the head contractor. Pointing to one of the key indicia of the existence of a non-delegable duty, “control,” Campbell J found:

“There is no doubt that [the head contractor] has taken advantage of its control of the premises to introduce a dangerous substance namely LPGas and to carry on a dangerous activity in terms of facilitating [its use].”

In his judgment at [103], His Honour then quoted from Burnie Port Authority (atp. 554), a case in which the High Court found an occupier liable for the damage caused by a fire that escaped from its land, even though it was ignited by someone else:         

“In the case of such [dangerous] substances or activities, however, a reasonably prudent person would exercise a higher degree of care. Indeed, depending upon the magnitude of the danger, the standard of ‘reasonable care’ may involve ‘a degree of diligence so stringent as to amount practically to a guarantee of safety.’ ”      

In the end, Campbell J found that the non-delegable duty in Hossain involved the principal contractor “seeing that reasonable care is [or had been] taken,” which for reasons given in preceding paragraphs, his Honour found it had not.       

An interesting side note to this decision is that in Transfield, the decision of Justice (Joseph) Campbell to which I made mention above, Justice (Stephen) Campbell in his capacity as senior counsel for the Plaintiff/Respondent argued that Burnie Port Authority justified a finding that a non-delegable duty should be owed by a head contractor in circumstances where similar factors were at play as those in Burnie.

In Transfield, the head contractor was tasked with maintaining plant and equipment on the HMAS Stirling which it then subcontracted to another. The plaintiff suffered serious injury when a rope he was using to abseil gave way. The rope was supposed to have been properly inspected by the contractor.

The broader argument on the appeal in Transfield was effectively whether a non-delegable duty should be found in circumstances where an inherently dangerous activity (such as abseiling) was taking place in respect of which the head contractor had some “proximity” and/or “control” in relation to the Plaintiff. Faced with an argument put by Campbell SC as he then was, Campbell JA rejected outright that such a generalised notion could form the basis for finding a non-delegable duty existed. In this context, His Honour also expressed the view that Burnie Port Authority ought to be limited to its facts.

Justice Stephen Campbell however relied on Burnie Port Authority as one of the principal foundations for his decision in favour of a finding that the head contractor did owe a non-delegable duty to the Plaintiff, Mr Hossain who had been the subject of negligence where a dangerous substance/activity had been involved.

It will be interesting to see whether this aspect of the decision is appealed but for now the door through which a principal contractor can be found to owe a non-delegable duty of care to an injured third party in certain circumstances remains very much ajar. So too, the non-delegable duty of care ring now glows a little brighter.                       

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Judicial Candour at its finest in US v Manafort

The transcript of oral argument in Paul Manafort’s application to have his indictment dismissed in United States v. Paul J. Manafort, Jr. Criminal Case 1:18-cr-83 (available for download at www.scribd.com) makes for illuminating and at times, entertaining reading. Some of the remarks his Honour Judge TS Ellis III of the Eastern District Court of Virginia made from the bench were too good to resist recounting. Following are three of the best:-

On the doctrine of the separation of powers (at T12/15):

“What we don’t want in this country is we don’t want anyone with unfettered power. We don’t want federal judges with unfettered power. We don’t want elected officials with unfettered power. We don’t want anybody, including the president of the United States, nobody to have unfettered power. So it’s unlikely you’re going to persuade me that the special prosecutor has unlimited powers to do anything he or she wants.”

On court room etiquette (at T34/8):

“By the way, don’t nod or shake your head out here because it interrupts the speaker. It’s rude, and it has often the opposite effect you may — I was never able to do that by the way. When I was sitting where you are, I nodded and shook my head all the time. Despite the fact that it aggravated judges, I did it, and I regret that. My perspective is a little different now. I expect you to do what I was unable to do. Don’t worry about it. It’s not a big deal.”

And the pros and cons of written submissions (T18/19):

“I reminisce a lot. The world has changed. I was a student in England in the late ’60s, and I went to many oral arguments. They didn’t use briefs at all in the cases I went to. In the House of Lords, the judges appeared in suits, and the lawyers appeared and the barristers appeared in wigs and robes. They together bent down, pulled books off the shelf and read cases together and argued about them. I thought that was a charming but ineffective way to do things. Writing briefs is much more effective, but then it kind of renders oral argument a little more uninteresting.”

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What might now be: Lost opportunity damages and the decision in Mal Owen

In my experience, lost opportunity damages claims are often fraught and the recent NSW Court of Appeal decision in Mal Owen Consulting Pty Limited v Ashcroft [2018] NSWCA 135 is no exception; though the appellant did get there in the end.

Mal Owen retained a solicitor to chase down some unpaid monies under a sale of business arrangement who did little or nothing about the case for about 3 years. They then retained new lawyers who eventually obtained a judgment and then bankrupted the debtor, a guarantor of the sale monies.

Mal Owen then sued the first solicitor on the basis that had he pursued the claim in a timely manner, the monies would have been recovered. Crucial to the claim was the allegation that the debtor’s financial circumstances had worsened considerably over time, ie. had he been sued earlier, the guarantor would more than likely have had the money to pay.

The claim against the solicitor was brought in both tort and contract (breach of retainer) and breaches in both were ultimately admitted. Sounds simple so far, right?

Each of the three Appeal Court judges then took largely different approaches to the case with Basten JA and Barrett AJA ultimately reaching the same result.

Basten JA reviewed the law on loss of an opportunity and concluded that the tortious standard for causation in lost opportunity cases was different to that applicable to a claim in contract, the latter being that which is applicable under trade practices statutes.

The tortious standard, his Honour opined, following the High Court in Badenach v Calvert (involving another negligence action against a solicitor), required the plaintiff to prove that it was “more probable than not that they would have received a valuable opportunity.”

This is the standard the trial judge had applied in finding that that on the evidence the plaintiff had not shown that the position would have been any different had the first solicitor acted expeditiously in seeking to recover the debt.

Justice Basten then went on to find that whilst the lost opportunity needed to be identifed with precision, the claim in contract only required that there be a “possibility of recovery of some damages”. Then the well-known principles set down by the High Court in Sellars were to be applied in applying a percentage reduction to the likely full value of the chance to account for the relevant contingencies. For various reasons, his Honour thought full recovery unlikely, even if the first proceedings had been pursued expeditiously. He therefore applied a 50% reduction.

Macfarlan JA, in dissent, found that the Court was bound by the High Court’s decision in Badenach, which required the causation issue, being a fact, to be proven on the civil standard just like any other. In reviewing the evidence, his Honour found that he couldn’t be satisfied that the debtor’s financial position would have been better at the time when the first solicitor was meant to be pursuing him for the money. His Honour didn’t deal with the contract and tort claims separately.

Nor did Barrett AJA, who applied Badenach and in particular the judgment of French CJ, Kiefel and Keene JJ describing the plaintiff’s onus as being proof on balance that there was a “substantial prospect of a beneficial outcome”, a test which itself seems fairly ambiguous. Be that as it may, his Honour Justice Barrett was satisfied that the test for causation had been met because he characterised the evidence regarding the debtor’s financial circumstances differently to the manner in which Macfarlan JA had done. But it was the way that his Honour characterised the relevant test for causation that is most interesting, stating (at [101]):

“At the first stage concerned with causation, the task is no more than to confirm the value is not in the realms of the merely theoretical or negligible – in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity.”

Once the causation gateway had been opened, the second stage of the process, ie. assessment was his Honour found necessarily “a process of estimating extending even to guesswork.”

This led his Honour to the same conclusion (including with regard to the applicable percentage reduction of 50%) as that which was reached by Basten JA and so the appeal succeeded.

Those negligence cases with a claim in contract in the alternative that involve an allegation of a lost opportunity will no doubt find Basten JA’s decision helpful. It seems as though as long as the opportunity can be identified with a fair degree of specificity, some damages will flow. It also appears to take a considerable degree of pressure off with regard to the evidence required to make out the claim, which is often the hardest part. Justice Barrett’s decision would also appear helpful even if there is only a claim in tort available.

Maybe the prospects for the poor old lost opportunity damages claim are now looking a little brighter.

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