ON 12 AUGUST 1999, the High Court of Australia delivered Perre v Apand Pty Ltd [1999] HCA 36; 198 CLR 180; 64 ALR 606; 73 ALJR 1190 (12 August 1999).

Negligence – Duty of care – Economic loss – Factors relevant to determination of duty.

Words and phrases – “Duty of care”, “Economic loss”.

Plant Diseases Regulations (WA) Sched 1, Pt B, Item 14(1)(b).

http://www.austlii.edu.au/au/cases/cth/HCA/1999/36.html

Apand was a potato crisp manufacturer who caused a South Australian potato farmer’s potatoes to be infected by supplying him with infected seeds. Neighbouring farms were prohibited from exporting their potatoes to the lucrative Western Australian market for a period of 5 years by reason of being located within 20km of the infected farm.

Perre and his neighbours sued Apand for the pure economic loss resulting from the loss of access to the Western Australian market.

Five of the judges (Gleeson CJ, Gaudron, Gummow, Kirby and Callinan JJ) held that Apand owed a duty of care to all the plaintiffs; the others (McHugh and Hayne JJ) held that only some of the plaintiffs were owed a duty of care.

The court (apart from Kirby J) rejected the idea that proximity is the determinant or “unifying criterion” of the duty of care.

The decision contains seven judgments with four different tests for determining a duty of care for pure economic loss.

Gleeson CJ, Gummow J, Callinan J, Hayne J, in separate judgments, took the view that the duty of care is to be identified by looking at the salient features of the case. They offer a flexible approach that avoids a strict formulation.

Gaudron J found that a duty of care arose in the context of defendant being in a position of control and being able to affect the plaintiff’s legal rights and the plaintiff’s dependence on the defendant.

McHugh J favoured the incremental approach, which identifies the following features as being relevant to a duty of care:

• reasonable foreseeability.
• indeterminacy of liability.
• unreasonable burden on individual autonomy in the market.
• vulnerability of the plaintiff.
• the defendant’s knowledge of the risk to a particular plaintiff.

Kirby J favoured foreseeability, proximity and policy, adopting the three stage English test in Caparo Industries Plc v Dickman [1990] 2 AC 605.

The court affirmed it’s earlier decision in Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” that there is no absolute exclusionary rule for the recovery of damages for pure economic loss and it is therefore possible for a plaintiff to recover for pure economic loss when “the defendant has 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.”

The court rejected the notion that pure economic loss may only be recovered in circumstances of negligent misstatement as in the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd.

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