ARTICLES THE PROXIMITY OF PAST AND FUTURE: AUSTRALIAN AND BRITISH APPROACHES TO ANALYSING THE DUTY OF CARE

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1 ARTICLES J F Keeler* THE PROXIMITY OF PAST AND FUTURE: AUSTRALIAN AND BRITISH APPROACHES TO ANALYSING THE DUTY OF CARE The history of the duty of care since 1985 can be described as the flight from or the rout of Anns! In Australia and Britain, courts have rejected the two-stage test for determining the existence of a duty of care put forward by Lord Wilberforce in that case: that 'first, one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter, in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of persons to whom it is owed or the damages to which a breach of it may give rise'. 2 In Australia, Deane J rejected the process of legal reasoning so described in Sutherland Shire Council v Heyman 3 and the alternative structure for analysing the duty of care that he proposed has now been formally adopted by the High Court. In Britain, the view expressed by the Privy Council that it is not to be regarded in all circumstances as a suitable guide to the existence of a duty of care (Yuen Kun-Yeu v AG for Hong Kong)4 is now regularly cited. Whatever the general theory lying behind the concept of the duty of care may be, it is clearly not tenable to base it on the two-stage process apparently definitively set out in Anns. Associate Professor of Law, University of Adelaide. This article was prepared for separate Continuing Legal Education programmes offered by Thomson, Simmons and Co and by the University of Adelaide Law School. 1 [1978] AC Ibid, (1985) 157 CLR [1988] AC 175.

2 94 KEELER, DUTY OF CARE This summary leaves two major matters untouched. First, what was it precisely about the Anns test that brought about its rejection? and secondly, what general theory of negligence, if any, has replaced it? The answer to the first question is reasonably, if not wholly, clear. What is rejected is any interpretation of Lord Wilberforce's words that equates the concepts of 'proximity' and 'neighbourhood' with that of reasonable foreseeability of harm, so that a prima facie duty of care can be said to arise whenever the defendant ought reasonably to foresee harm to the plaintiff if due care is not exercised. Deane J, who construed Lord Wilberforce as meaning this, simply disagreed with the analysis. 5 Gibbs CJ in Heyman's case did not understand Lord Wilberforce to have meant this, but rather to have implied that issues of 'proximity' and 'neighbourhood' are not decided simply on the basis of the reasonable foreseeability of harm, and that even a prima facie determination of them involves taking other matters into account. 6 Not surprisingly English courts have been happy to adopt this analysis of Lord Wilberforce's words,7 while taking pains to repeat and emphasise the point that reasonable foreseeability of harm alone is not the determinant of the existence of a duty of care. 8 The precise reason.for rejecting this view is rather less clear. Deane J gives the major clue for Australia in emphasising that the test of reasonable foreseeability alone is particularly unsuitable in cases involving omissions and economic losses;9 although in Jaensch v CoffeylO he emphasised that as a matter of strict theory it is not determinative of the existence of a duty of care. Even in cases where positive actions on the part of the defendant cause personal injury or damage to property he has generally been prepared to accept that in practical terms the two-stage process does adequately deal with them! 1 His primary concern is with the cases of omissions and economic losses. In practice, the same is true in England. The cases in which Anns is specifically rejected are cases where the defendant has failed to protect the plaintiff against physical or economic harm that has been inflicted by a third person or where the only loss suffered by the plaintiff has been economic in character. The concerns are primarily with the extent to which there should be liability in tort for not helping others to avoid harm or loss and to which there should be liability in tort for the economic losses of others. These are, of course, not new concerns for the courts. It is only in the past twenty-five years that it has become unrealistic to state that there is no liability in tort for omissions nor for purely economic losses, and the courts that opened up liability in those cases were at pains to emphasise that the existence ofa duty of care was to be regarded as exceptional and much more restricted than liability for bringing about personal injury or damage to property. Even in Anns, Lord Wilberforce cited Hedley Byrne v Heller 12 and cases of economic loss13 as cases which the prima facie test for 5 (1985) 157 CLR Ibid Yuen Kun Yeu v AG for Hong Kong [1988] AC 175, Peabody v Parkinson [1985] AC 210, ; Candlewood Navigation Corp v Mitsui Osk Ltd [1986] AC 1, 21; Leigh and Sillavan Ltd v Aliakmon Shipping Co [1986] AC 785, 815; Curran v Northern Ireland Housing Association [1987] AC 718, Sutherland Shire Council v Heyman (1985) 157 CLR 424, 542, 503. See too San Sebastian v Minister Administering Environment and Planning Act (1986) 162 CLR 340 at (1984) 155 CLR Ibid [1964] AC [1978] AC 728, 752.

3 (1989) 12 ADEL LR 95 the existence of a duty of care could not resolve. It is an interesting and significant matter that the degree of caution expressed in such statements has now been thought to be insufficient and that the structure of the approach to the existence of a duty of care must be formalised in such a way as to incorporate explicitly a stage between determining the reasonable foreseeability of harm or loss and special exempting factors such as the immunity of the participants in court hearings from liability in respect of matters arising from their conduct in the course of the trial. The reasons for this must be to some extent a matter of speculation. At one level, it is clear that in both Australia and in England there has been some feeling that decisions made in the immediate aftermath of Anns went too far in assisting plaintiffs. In Australia, the major example was the refusal of the High Court in Sutherland Shire Council v Heyman to accept the decision in Anns that imposed duties of care on local authorities entrusted with approving building plans and supervising certain stages of construction. In Britain, the main examples concerned economic loss. The decision of the House of Lords in Junior Books v Veitchi Bros 14 that a nominated specialist sub-contractor owed a duty of care to the building owner with respect to the installation of a defective, but not dangerous, floor has been designated a decision concerning damage to property15 in defiance of the judgements in the case itself and in any event confined firmly to its own facts. In the most recent case, the House of Lords went to the lengths of citing the single dissenting judgment of Lord Brandon as laying down the most important principles to be derived from the case (D and F Estates v Church Commissioners for England)!6 The Privy Council allowed an appeal against a judgment of the Supreme Court of New South Wales in favour of the time-charterer of a ship who lost money while the ship could not be used after a collision resulting from the negligence of the defendants (Candlewick Navigation Corporation v Mitsui OSK);7 and in the course of its opinion declared the decision of the High Court in Caltex Oil v The Dredge 'Willemstadt";8 if comprehensible at all (which it doubted) to have no ratio decidendi and to be of no assistance in stating the law. The House of Lords again overruled a decision that the buyer of goods under a cif contract, to whom property had not yet passed but at whose risk they were, could bring an action directly against a person who carelessly damaged the goods (Leigh and Sillivan v Aliakmon Shipping CO);19 and has gone to considerable lengths to confine the scope of the actual decision in Anns (Peabody v Parkinson).2o More speculatively yet, the cautious attitude of the courts may be a response to increasing community attitudes that individuals are entitled to compensation where the careful performance of obligations imposed on public authorities for the benefit of the community has been found wanting and they have suffered harm or loss. Anns and Heyman are examples of this, but the English courts have faced a much wider range of actions than these. They have rejected claims against the police by the mother of one 14 [1983] 1 AC Tate and Lyle Food and Distribution Ltd v OLe [1983] 2 AC 509, [1989] AC [1986] AC Ibid (1976) 136 CLR [1985] AC 210.

4 96 KEELER, DUTY OF CARE of the last victims of the Yorkshire Ripper (Hill v Chief Constable of Yorkshire) 21 and by the owner of premises damaged by a fire started by vandals in an unoccupied neighbouring building (Smith v Littlewoods Organisation Ltd; Chief Constable, Fife Constabulary, Third Party), 22against authorities registering deposit-taking companies in Hong Kong by depositors who have lost money at the hands of the company (Yuen Kun-yeu v AG for Hong Kong)23 and against quasi-government authorities responsible for providing and supervising the expenditure of housing improvement loans by subsequent purchasers from the improving owner (Curran v Northern Ireland Co-ownership Housing Association).24 In the most recent cases, they have similarly denied the existence of a duty of care between the Bank of England's general supervisory responsibilites over banks in England and concern at the affairs of the particular commercial bank/ 5 and of a duty of care between the Charity Commissioners and the potential beneficiaries of a charity when the Commissioners were exercising their powers to advise the trustees as to the lawfulness of a proposed application of the funds of the charity.26 There are indications of a parallel policy of protecting private bodies in cognate circumstances, though the policy is obscured to some extent since many cases focus on the limits of liability for negligent statements or on the standard of care in particular circumstances. So, for example, the English decisions in Smith v Bush and Harris v Wyre Forest District Council,27 confirm the existence of a duty of care between the valuer for a mortgagee of residential property and the intending mortgagor when it is clear that the mortgagor will rely on the valuation in deciding whether to proceed to a purchase, and the decision in Caparo Industries v Dickman 28 imposes a duty of care on the auditors of a company towards the shareholders. But it is significant that the courts deciding these cases indicated that the duty of the valuer does not extend to subsequent purchasers and the duty of the auditor does not extend to potential investors or lenders unless it is known that accounts are required specifically for that purpose, and that subsequently a judge at first instance has held that no duty of care is owed by an auditor to a bank which has lent money to a company on the basis of the audited annual accounts. 29 More directly in point are other English cases in which a bank which, rather than foreclose on a defaulting mortgagor of a ship, had been party to an agreement whereby an agent managed the ship subject to the bank's power of supervision was held not to owe a duty of care to the shipowner to ensure that the managing agent maintained adequate insurance over the ship,30 and in which engineers who were authorised by the contract between their principals and dredging contractors to increase the remuneration of the contractors if difficulties unforeseen at the time of entry into the contract arose subject to an appeal to arbitrators and were bound to act 21 [1989] AC [1987] AC [1988] AC [1987] AC Minaries Finance Ltd v Arthur Young [1989] 2 All ER Mills v Winchester Diocesan Board of Finance [1989] 2 All ER Reported together at [1989] 2 All ER [1989] 1 All ER Al Saudi Banque and ors v Clarke Pixley (London Daily Telegraph, 14th August 1989). 30 National Bank" of Greece v Pinios Shipping Co [1989] 1 All ER 213.

5 (1989) 12 ADEL LR 97 fairly in deciding claims for extra remuneration were held to owe no duty of care to the contractors in making their decisions. 31 In Australia, there has been a considerable increase in the number and range of actions for professional negligence against banks and accountants (recently in connection with the losses of clients who had borrowed money in overseas currencies in order to obtain favourable interest rates and suffered heavy losses as a result of falls in the Australian dollar),32 as well as auditors 33 and lawyers. 34 These have mainly, though not invariably, been dealt with in relation to the requisite standard of care, rather than in terms of duty, but they do seem to indicate a feeling by individuals that they are entitled to be protected against losses by professionals and private sector institutions as well as by public authorities. The courts seem to be cautious at the prospect of large-scale transfer of risks of consumer losses from individuals to the public sector and of business losses from principals to professional advisers. In Australia it is now clear that the High Court (with Brennan J in persistent dissent) has adopted the general theory of the duty of care developed by Deane J in Jaensch v Coffey,35 Sutherland Shire Council v Heyman,36 Hackshaw v Shaw 37 and Papantonakis v Australian Telecommunications Commission. 38 The formal adoption of his analysis came in Cook v COOk 39 and San Sebastian v Minister Administering Environmental and Planning Act. 40 Deane J's analysis is intended to be comprehensive in the sense that it governs the approach to the issue of whether a duty of care exists in all kinds of negligence cases, including cases involving personal injury, property damage, economic loss and omissions; it argues that negligence is a single head of liability with a structure applicable to all the cases that appeal to it for decision. 41 The elements of the duty issue are (in simplified form): (a) reasonable foreseeability of a real risk that harm of the kind suffered by the plaintiff would be sustained either by the plaintiff, as an identified individual, or by a member of a class which included the plaintiff, (b) existence of the requisite element of proximity in the relationship between the parties with respect to the relevant act or omission and the injury sustained, and (c) absence of any statutory provision or other common law rule... which operates to preclude the imposition of such a duty of care in the circumstances of the case. 42 The separate element of proximity is not 31 Pacific Acceptance Inc v Baxter [1989] 2 All ER Lloyds v Citicorp [1988] Australian Torts Reporter 67,345; McEvoy v ANZ Bank [1988] Australian Torts Reporter 67,351. For other actions against accountants, see Hungerford's v Walker (1989) 84 ALR 119; Covacevich v Thompson [1988] 67 Australian Torts Reporter 67,371; Doug Sim Enterprises v Patrick Wane and Co [1988] Australian Torts Reporter 67, BGl Holdings v louche Ross and Co [1989] Australian Torts Reporter 67,357; Alexander v Cambridge Credit (1987) 9 NSWLR Gianarelli v Wraith (1988) 81 ALR 417; Hawkins v Clayton (1988) 164 CLR 539; Barnes v Hay (1988) 12 NSWLR (1984) 155 CLR (1985) 157 CLR (1984) 155 CLR (1985) 156 CLR (1986) 162 CLR (1986) 162 CLR Sutherland Shire Council v Heyman (1985) 157 CLR 424, laensch v Coffey (1984) 155 CLR 549, 586.

6 98 KEELER. DUTY OF CARE usually mentioned in cases of ordinary physical injury to person or property as a result of the direct impact of an act of another because in those cases it rarely adds anything to the requirement of reasonable foreseeability, but in some cases (eg nervous shock cases) it remains relevant. 43 The purpose of the proximity requirement is to identify the categories of case in which a duty of care will be owed, especially in new or developing areas of the law of negligence, and the identification of the factors in a given class of cases that satisfy it is a matter of law. 44 In the cases in which it is needed the guiding principles as to the existence of the requisite degree of proximity are the closeness and directness of the defendant's behaviour on the plaintiff. In Deane 1's view it covers 'physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or professional and client and causal proximity in the sense of the closeness or directness of the causal connection or relationship between the particular act or course of conduct and the loss or injury sustained. It may reflect an assumption by one party of a responsibility to take care to avoid or prevent injury, loss or damage to the person or property of another or reliance by one party upon such care being taken by the other in circumstances where the other party knew or ought to have known of that reliance'. 45 The factors which are determinative of whether a sufficient degree of proximity exists may well vary from one category of case to another, and though they will be identified by the processes of legal reasoning, induction and deduction, notions of what is 'fair and reasonable' and considerations of public policy will also be relevant to them. 46 This framework is intended 'to provide a unifying rationale of particular propositions of law which might otherwise appear to be disparate'47 while constituting 'a general limitation upon the test of reasonable foreseeability'.48 But clearly enough it cannot itself be applied directly to the facts of any given case nor does it of itself identify the particular propositions of law that the proximity test will embody in the different categories of case: in this sense the proximity criterion is empty. These consequences form the basis of the rejection of the criterion of proximity in the analysis of the duty of care by Robert Goff L1 in England 49 and 43 Jaensch v Coffey (1984) 155 CLR 549, ; Hackshaw v Shaw (1984) 155 CLR 614, 665; Sutherland Shire Council v Heyman (1985) 157 CLR 424, 495; Hawkins v Clayton (1988) 164 CLR 539, Jaensch v Coffey (1984) 155 CLR 549, 595, 581; Papatonakis v Australian Telecommunications Commission (1985) 156 CLR 7, 33; Sutherland Shire Council v Heyman (1985) 157 CLR 424, Jaensch v Coffey (1984) 155 CLR 549, ; Sutherland Shire Council v Heyman (1985) 157 CLR 424, Jaensch v Coffey (1984) 155 CLR 549, 585; Sutherland Shire Council v Heyman (1985) 157 CLR 424, Sutherland Shire Council v Heyman (1985) 157 CLR 424, 497; Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Jaensch v Coffey (1984) 155 CLR 549, 580; Sutherland Shire Council v Heyman (1985) 157 CLR 424, [1985] QB 350 at 395.

7 (1989) 12 ADEL LR 99 Brennan J in Australia respectively.50 For Brennan J these consequences mean that 'the wider concept (of proximity) remains... a Delphic criterion, claiming an infallible correspondence between the existence of a 'relationship of proximity' and the existence of a duty of care, but not saying whether both exist in particular circumstances'. 51 He therefore finds it completely unhelpful as a proposition of law. He is equally sceptical of its usefulness as an organising principle for the analysis of the law of negligence, arguing that the particular propositions of law that have been generated by the concept of duty of care in cases of physical loss, economic loss and liability for omissions are so divergent that no common substantive unifying element beyond the notion of reasonable foreseeability is yet identifiable. 52 In his view, 'proximity' and 'neighbourhood' are simply shorthand references to the test of reasonable foreseeability of harm, which is properly applied to cases of personal injury and damage to property. In other cases particular propositions of law must be developed and superimposed on the foreseeability principle to determine the existence of a duty of care. 53 Sometimes the neighbour principle may be useful in developing such rules, even if only by way of providing a remote analogy (as, for example, in negligent misstatement cases);54 in others it is of no possible help and has no conceivable relevance (as in cases involving omissions to act).55 In general, the law should develop new categories of negligence incrementally and by analogy with established categories, and it is preferable and more helpful to focus on them rather than to deal in generalities, 56 though the factors preferred by Deane J may be considered. In the case of liability for omissions the rules will be based on the undertaking of some task which leads another to rely on its being performed, or the ownership, occupation or use of chattels. 57 In the case of negligent misstatement, the duty of care will be founded on whether the representor ought to realise that the representee will trust his special competence to give advice and whether in the circumstances reliance by the representee on the advice is reasonable. 5 8 Given the affirmation of Deane J's analysis by the majority of the High Court, it is not worthwhile in a paper of this kind to devote any extended analysis to the differences between the two views. This is emphasised by the consideration that in the great majority of cases it is not likely that they will lead to different results. The whole debate is reminiscent of the discussion of the possible interpretations of Donoghue v Stevenson 59 in 50 San Sebastian v Minister Administering Environmental and Planning Act (1986) 162 CLR 340, ; Hawkins v Clayton (1988) 164 CLR 539, Hawkins v Clayton (1988) 164 CLR 539, San Sebastian v Minister Ad/ninistering Environmental and Planning Act (1986) 162 CLR 340, San Sebastian v Minister Administering Environmental and Planning ACt (1986) 162 CLR 340, 368; Hawkins v Clayton (1988) 164 CLR 539, San Sebastian v Minister Administering Environmental and Planning Act (1986) 162 CLR 340, Sutherland Shire Council v Hey/nan (1985) 157 CLR 424, Sutherland Shire Council v Heyman (1985) 157 CLR 424, 481; Hawkins v Clayton (1988) 164 CLR 539, Sutherland Shire Council v Heyman (1985) 157 CLR 424, 479, 454, San Sebastian v Minister Administering the Environmental and Planning Act (1986) 162 CLR 340, [1932] AC 562.

8 100 KEELER, DUTY OF CARE Morison's classic article on the duty of care in In that article Morison preferred to interpret Donoghue v Stevenson as entitling, but not compelling, a court to determine that a duty of care exists in a situation in which one has not previously been held to exist if the test of reasonable foreseeability is satisfied and, in the light of all the circumstances it considers relevant, that one should exist. Satisfaction of the test of reasonable foreseeability led of itself to no presumption as to whether in the given situation a duty of care should exist. With the exception of the presumption in favour of the existence of a duty of care in cases where positive acts cause personal injury or property damage, Deane J's position has not moved far from this. Brennan J's view is evidently more conservative and more restrictive, tying the courts more closely to precedent than to general principle, and certainly in the cases in which he and Deane J have differed as to the existence of a duty of care, it has been Deane J who has argued for the imposition of a duty and Brennan J against. The difficulty with this is that the view is so cautious that it is hard to see how the decisions in Donoghue v Stevenson and Hedley Byrne v Heller could have been made compatibly with it. But in any event the differences between the judges who have adhered to Deane J's analysis are at least as remarkable as those between them and Brennan J: in Hawkins v Clayton,61 for instance, they took Brennan J's judgment that the custodian of a will owes a duty to take reasonable steps to bring it to the notice of the executor to provide a majority decision on the issue. Before moving to examine recent cases in which the existence or otherwise of a duty of care has been a matter seriously in issue, the position of the English courts on the general approach to the analysis of the concept should be noticed. In general, they have argued that proximity does mean something different from reasonable foreseeability and that the existence of a duty of care depends on satisfying the criterion of proximity as well as that of reasonable foreseeability. They have not, however, made any extended attempt to elaborate on what it means, other than to use generalities as to whether the imposition of a duty is just and reasonable in given circumstances. 62 Although the House of Lords has more than once endorsed Brennan J's general approach 63 in this respect it has seemed on occasion to fall foul of his most stringent criticisms of seeking to apply an essentially meaningless criterion directly to the facts of a case. When they try to go beyond this they use various versions of theories based on reasonable reliance, and in this, as will become apparent, there is some parallel between their approach and that of some Australian courts and judges. But the proximity concept is used almost exclusively for denying the existence of a duty of care, especially in cases involving economic loss. The House of Lords has sometimes simply asserted the principle that, Hedley Byrne apart, there is no duty to prevent economic loss to others unless it is associated with personal injury or damage to proprietary or possessory rights. 64 This is not likely to be an argument readily accepted in Australia 60 Morison: A Re-examination of the Duty of Care (1948) 11 MLR (1988) 164 CLR eg Peabody v Parkinson [1985] AC 210, 241; Jones v Department of Employment [1989] QB Curran v Northern Ireland Housing Association [1987] AC 718, 726; Yuen Kun Yeu v AG for Hong Kong [1988] AC 175, Candlewood Navigation Corpn v Mitsui ask Ltd [1986] AC 1, 15, 25 (PC); Leigh and Sillavan Ltd v Aliakman Shipping Co [1986] AC 785, 809, 816.

9 (1989) 12 ADEL LR 101 where the High Court has defended the decision in the Caltex case against the criticism to which it has been subjected in the Privy Council.65 Sometimes specific policy reasons have been given for denying the existence of a duty of care in particular circumstances; and it may be that these will be helpful to the High Court should it have to decide cases on comparable facts. The Court of Appeal has necessarily been more concerned with the approach by way of analogy and precedent as the pronouncements of the House of Lords and Privy Council have become more frequent and vehement. In consequence, the recent English authorities, even when they use the language of proximity, are not easy to use as direct authority in Australia. Only where the policy arguments are explained and clearly in point are the English decisions likely to be useful without a good deal of adaptation and care. This position may be changing so as to make future English decisions more accessible: in Caparo Industries v Dickman66 a majority of the Court of Appeal divided their inquiry into the existence of a duty of care into three stages: foreseeability, proximity and whether the finding of a duty of care would be fair and reasonable in all the circumstances. Decisions made within this structure will be more readily adaptable to Australian use. The translation of the concept of proximity into particular propositions of law is the central problem in those cases where the existence of a duty of care as a question of law is in issue. The difficulty is how to structure any argument that sufficient proximity does or does not exist in a given category of cases. It should not be expected that there will be any single principle that is capable of generating the specific rules that govern different categories of cases, since the whole point of the framework of which proximity forms an essential part is that different kinds of fact situation generate the need for different propositions of law. It is even difficult to see that Deane J's own categories of physical, circumstantial and causal proximity can be of more than the most general assistance. No doubt physical proximity is particularly helpful in cases involving personal injury and damage to property, and Deane J used it in Hackshaw v Shaw 67 in the process of determining that an occupier who shot at a vehicle whose driver had been stealing petrol from him owed a duty of care to a passenger of whose existence he was unaware. But, as Deane J himself recognises, there are many cases in which a duty may be owed in the absence of physical proximity: that was, after all, one of the main points settled by Donoghue v Stevenson. And although Jacobs J tried to define the scope of a duty of care to avoid economic loss in terms of the effect on persons or property in physical propinquity to the place where the act of the defendant had its physical effect in the Caltex 68 case, none of the other members of the High Court in the same case thought it worthwhile to adopt similar reasoning. Circumstantial proximity stemming from such relationships as employer/employee and solicitor/client certainly is the source of a duty of care in many cases, but that fact alone is of limited assistance when the issue is whether a particular relationship should be held 65 San Sebastian v Minister Administering Environmental and Planning Act (1986) 162 CLR 340, [1989] 1 All ER (1984) 155 CLR 614, 665. Deane J did offer an extended (in every sense) interpretation of 'physical proximity' in Hawkins v Clayton (1988) 164 CLR 539, (1976) 136 CLR 529, 599, 604.

10 102 KEELER, DUTY OF CARE to give rise to that kind of proximity for the first time or the scope of a recognised relationship extended to new circumstances. 69 And though in Sutherland Shire Council v Heyman Deane J said that the relationship between the local council which was authorised to supervise the performance of building work and a subsequent purchaser of the house who suffered the consequences of the house being built with defective foundations was too indirect to establish any causal proximity, that stated a conclusion rather than expressed an argument, since he had defined causal proximity in terms of the closeness or directness of the act complained of and the injury sustained. The proximity requirement may be established in appropriate cases by establishing either physical, circumstantial or causal proximity, but this amplifies the general concept rather than offering any tests or propositions of law that may assist in the resolution of new cases. The analysis of the structure of the duty of care is only important in practice in cases in which it is sought to develop or change the law. In the great majority of cases the facts either fall inside a recognised category or no attempt is made to argue that an existing category be extended or a new one developed. A good deal of the theoretical discussion has gone on in cases in which it has been hard to see that it has been central to the decision. The formal transformation of occupier's liability law with respect to lawful entrants into a straightforward application of the tests of reasonable foresight and behaviour 70 was achieved by asserting that 'the touchstone of proximity in an action in negligence against an occupier is that there be reasonable foreseeability of a real risk of injury to the visitor or to the class of person of which the visitor is a member'.71 The criterion of proximity therefore has no independent utility in those cases, though it may be that it still has some in cases involving liability to trespassers. 72 Even in the review of the principles governing the existence of a duty of care in cases of negligent statements that the High Court conducted in San Sebastian v Minister Administering the Environment and Planning Acr 3 it is hard to see that the acceptance of the analysis of proximity added a great deal to the statement of the law, which largely acknowledged that the principles originally laid down by Barwick CJ in MLC v Evatr 4 had been reasserted by a majority of the High Court in Shaddock v Parramatta City Council 75 and provided the basis of the present law. Those principles are that a duty of care arises whenever a person gives information or advice to another on a serious matter in circumstances where the speaker realises, or ought to realise, that he is being trusted to give the best of his information or advice as a basis for action by the other person and it is reasonable in the circumstances for the other to act on the information or advice. There is no fixed requirement that the speaker be carrying on a business or profession involving the possession of special skill or competence, nor that the information or advice be given in response to an 69 Eg Stevens v Brodribb Milling Co (1986) 160 CLR Hackshaw v Shaw (1984) 155 CLR 614, 660; Papatonakis v Australian Telecommunications Commission (1985) 156 CLR 7; Australian Safeway Stores v Zaluzna (1986-7) 162 CLR Hackshaw v Shaw (1984) 155 CLR 614, 663; Australian Safeway Stores v Zaluzna (1987) 162 CLR 479, Hackshaw v Shaw (1984) 155 CLR 614, (1986) 162 CLR (1968) 122 CLR (1981) 150 CLR 225.

11 (1989) 12 ADEL LR 103 enquiry. Whatever the differences between Brennan J and the rest of the Court on matters of general theory there was no significant difference in the authorities they relied on nor the statement of law they arrived at. There was, however, a difference in the reason they gave for ultimately rejecting the plaintiff's claim. The defendants had issued a development plan for Wooloomooloo which had proposed that developers should consolidate existing small blocks of land into larger holdings; holders of the new larger blocks would be entitled to apply to develop them with more favourable floor space ratios than holders of small blocks. The plaintiff had bought blocks in anticipation of being able to develop them with high floor space ratios and suffered losses when the plan was abandoned after the discovery that the public transport system would be unable to cope with the numbers of workers that might have to come to the area if the scheme were fully implemented led the Commonwealth to withdraw its co-operation from it. It was argued for the plaintiff that it was implicit in the issue of the development plan that it would be feasible to implement it fully; and that, since the plan had been made for the purpose of inducing the plaintiff to commit itself. financially on the basis that it could be implemented and the plaintiff had relied on it, the defendants were in breach of a duty to be careful to ensure that the plan was capable of being fully implemented. The majority of the court found that no explicit claim as to the feasibility of implementing the plan had been made and that the character of a development plan, which must be subject to modification, alteration or revocation and be implemented on the basis of what appears to be practical in the light of circumstances from time to time, precluded implying one. Since the representation on which the plaintiff had based its claim had not been made there was no point in looking at issues of inducement and reliance. Brennan J found that the nature of a development plan meant that even if the representation could be implied it would not have been reasonable for the plaintiff to have relied on it, since that would have unduly fettered the defendant in the exercise of its public responsibilities. The view of the majority that the critical representation had never been made precludes any development of the concept of proximity with respect to negligent statements, while Brennan J's reasoning ultimately fits within conventional accounts of the law relating to them. The few cases in which the proximity issue has been critical to the existence of a duty of care have been cases in which the defendant has failed to take positive action to prevent loss to the plaintiff. They have therefore essentially been cases on liability for omissions, and discussion of them must begin with Sutherland Shire Council v Heyman. 76 Despite the unanimous decision that the plaintiff in that case could not recover damages from the local council which had not prevented the house he bought from being constructed with inadequate foundations, it is of some interest and significance that the reason for this being that there was no duty of care relationship between them was reached by a bare majority. Gibbs CJ and Wilson J found that a sufficient relationship of proximity did exist between them, basing it on the conferral by the relevant statute of powers to be exercised in the interests of public health and safety, but decided the case on the basis that the plaintiff's loss had been caused by the exercise of a policy decision by the council that precluded collateral challenge by an action in negligence. Although Deane J acknowledged that 76 (1985) 157 CLR 424.

12 104 KEELER, DUTY OF CARE in cases involving omissions the proximity requirement would reflect reliance by the plaintiff on the exercise of care by the defendant where the defendant had induced or encouraged it or was (or should have been) aware of it the specific reasons for his conclusion that no relationship of proximity existed were that the Council had made no representation to the plaintiff about the building of the house, there was no evidence that the plaintiffs had placed any reliance on the Council and that the purposes of the statutory powers of the Council did not include protecting owners of premises from economic loss arising from defects in their buildings. He specifically warned that his conclusion was not directly applicable to a case where personal injury or damage to other property was caused by the defective building. Mason J began from the premise that councils do not generally owe common law duties to exercise statutory powers, but allowed three exceptions to the general principle: where the council creates a danger, the danger arises from its occupation of premises or ownership or control of a structure in a highway or of a public place, and where others have relied on it to exercise its powers carefully. Mason J allowed for reliance both in cases in which the authority has put itself in a position that others have come to rely on it, as for example by adopting a practice or course of conduct or by issuing a certificate, and in which it is granted powers 'designed to prevent or minimise a risk of personal injury or disability, recognised by the legislature as being of such magnitude and complexity that individuals cannot, or may not, take adequate steps for their own protection'.77 He gave as instances of such powers the control of air traffic, the safety inspection of aircraft and the fighting of a fire in a building by a fire authority. He concluded that the plaintiff had not made a case that the powers in the building regulations constituted such a regime, and that the capacity of the plaintiff to seek a certificate from the council that the regulations had been complied with or have the building inspected before purchase would have argued against his success in establishing one. Brennan J started from the premise that no duty of care is allowed generally in respect of omissions. He, too, allowed three exceptions to the general rule. The first two were the same as the first two allowed by Mason J; the third was confined to cases where an authority had been relied on to perform its functions in a way which the plaintiff had been led to expect, so creating or increasing a risk of damage should the function be discontinued without notice, or to Hedley Byrne situations. Apart from cases of positive action and occupier's liability, therefore, Deane, Mason and Brennan JJ were prepared to admit a duty of care where the plaintiff had specifically relied on the defendant persevering in a known course of conduct and in cases of negligent statements and Gibbs CJ, and Wilson and Deane JJ to contemplate that a statutory scheme may impose an obligation on an authority to act so as to protect the interests of a class of the public, while Mason J's conception of a statutory scheme that will give rise to a reliance stemming from a general dependence on an authority's performance of its functions offers a parallel source for a duty of care. There have been few opportunities for these propositions to be examined and applied. The case in which they have received the most extensive consideration has been Parramatta City Council v Lutz. 78 The plaintiff's 77 Ibid (1988) 12 NSWLR 293.

13 (1989) 12 ADEL LR 105 house had been destroyed by a fire that had originated in a derelict and previously partly burnt out building on the block next to hers and sited only 1.2 metres from the wall of her house. She had complained of the condition of the adjoining building to the local council many times and had informed them that she considered it a fire hazard and a risk to her home. The Council inspected the premises and in November 1980 adopted a recommendation that it exercise its statutory powers to order the owners to demolish or repair them on the basis that they were in such a dilapidated or unsightly condition as to be prejudicial to the property in or inhabitants of its neighbourhood or, in default of compliance with the order, execute it itself. Thereafter the plaintiff continued to complain to the Council, and its officers informed her that a notice had been sent to the owners and that the matter would be taken further if the owner did not comply with the demolition notice. Despite regular complaints from the plaintiff no action had been taken on the demolition order when the fire destroyed her house in August All three members of the New South Wales Court of Appeal found that there was a sufficient element of proximity between the plaintiff and the defendant and that there had been a breach of the duty of care owed to the plaintiff. Kirby P derived from the judgments in Heyman 'a common opinion... that in a relationship of sufficient proximity, reliance by a person, which is both reasonable and foreseeable, may give rise to a positive duty on the part of for example a local authority to act as it is empowered by law to do SO'.79 In the circumstances the plaintiff had reasonably relied on the Council because it possessed statutory powers to protect her from a known danger to the safety of her person and property and because its officers had informed her that it was taking action and knew that she was relying on it to do so. Moreover, a decision on the particular facts that a duty existed was not likely to cause local councils to demolish properties without due consideration of the rights of the owners. Mahoney JA found that the plaintiff had relied on the advice of the Council that it would take any necessary steps to ensure the demolition of the adjoining premises and that she need take no further steps to achieve that result. In reliance on that advice she had taken no further action to place further pressure on the Council to exercise its statutory powers. McHugh J rejected this on the basis that the plaintiff was unable to prove that reliance on the advice had caused her loss; she had no alternative course of action that would have avoided the destruction of her property. He also reluctantly rejected a proposition that a public authority should be under a duty of care when the control of conduct or activities has been ceded to it by common understanding as being inconsistent with the decision in Heyman. But he considered that the court should adopt the concept of general reliance proposed by Mason J in that case despite the fact that he did not consider it to be supported by any other member of the High Court (he rightly perceived that Brennan and Deane JJ had been speaking of Mason J's concept of specific reliance on the conduct of the defendant but did not associate the concept of general reliance with the discussion of other members of the court of the overall purpose of the grant of the statutory powers). And he found the concept of general reliance to cover the power to demolish dilapidated property, partly because any duty of care imposed would be owed to a small and easily ascertainable class of ratepayers 79 Ibid

14 106 KEELER. DUTY OF CARE already in an existing relationship with the Council, partly because alternative private law remedies may well be too slow to meet the urgency of a danger and too expensive for an endangered individual to make use of and the conferral of the demolition power on councils is for the protection of certain members of the municipality and amounts to a statutory recognition that individual owners cannot usually take adequate steps for their own protection, partly because there was evidence that ratepayers in the locality did depend on the council to take action in such matters and partly because he thought it appropriate that damages would be paid out of the general funds of the council to which the beneficiaries of the power have contributed. There is no reason for thinking that the decision in Lutz is anything other than right and that the majority of the Justices who decided Heyman would have agreed that a sufficient relationship of proximity did exist between the parties. Apart from the adoption of the concept of general reliance Gibbs CJ and Wilson J might have found it perfectly easy to construe the statutory powers as having to be exercised in the interests of the public health and safety and Deane J, who clearly did not intend his judgment to cover the case where failure to exercise the statutory powers damaged adjoining property as distinct from the economic interests of the owner of the dilapidated property, might well have been able to do likewise. Nonetheless the judgment of McHugh JA seems more persuasive than those of the other members of the court. Kirby P's summary of the 'common opinion' in Heyman is very general and constitutes a much broader principle than seems to have been intended by most of the Justices. Moreover, McHugh JA's analysis of whether the specific reliance of the plaintiff on the Council was an effective cause of her damage is glossed over by Kirby P and dealt with rather unconvincingly by Mahoney la, who does not consider whether there was any action that could have been taken effectively in the time available to compel the Council to take action. The case that the demolition power falls within the concept of general reliance is supportable on the basis that it provides a more effective protection for the health and safety of the community than slow and potentially expensive private action and is stronger than for the powers to supervise construction, though it barely matches the scale of air traffic control and air safety regulation. Moreover the 'general dependence' concept is perhaps rather easier to confine to cases of personal injury and damage to neighbouring property than a notion of proximity derived from the purposes of the statute. The difficulty with construing either powers to supervise building construction or the demolition power as giving rise to a duty of care based on the protection of health and safety is that the remedy sought may well involve repairs that go to matters of amenity (which the statutory provisions themselves seem to cover) as well as immediate matters of health and safety. The demolition power extended to unsightly as well as dilapidated premises, but it is hard to see any duty of care on the part of the council extending to reductions in the market value of properties adjoining a shabby building. Despite the generalisations that duties to be careful to take positive action to protect another are exceptional, they are still easier to contemplate when failure to do so may cause personal injury or damage to property rather than purely economic loss. Most of the factors that swayed McHugh JA in Lutz were present in an extreme form in the South Australian case of easley-smith v FS Evans and

15 (1989) 12 ADEL LR 107 another. so The plaintiff's home had been destroyed in a major bushfire that originated in a rubbish dump operated by Evans under a licence from the Stirling District Council. The area was one in which the possibility of serious bushfires was a major risk and it had long been a concern of the local council that residents should clear their premises of excess vegetation that might fuel fires and that it and other statutory authorities should keep public areas similarly cleared. The Council had granted the licence to Evans after it had ceased to operate its own dump and had retained very extensive powers of supervision and direction over the operation of the dump. The collection of large quantities of flammable material in one place itself constituted a major fire risk, the more so since it was collected in an area on top of a ridge that was particularly exposed to winds, a site which had been agreed with the Council. The Council encouraged ratepayers to use the dump and itself did so. Despite the danger there was no water available on the site; on days when the dump was closed to ratepayers there vias nobody on duty and there were in any event no telephone or radio facilities at the site. In the days before the fire that destroyed the plaintiff's property broke out, there had been one unexplained fire at the dump and there was evidence that it had not been fully extinguished but was smouldering beneath dirt that had been used to cover it; the Council's fire officer had expressed intense concern at conditions on the site, but without response from his superiors. The day on which the fire broke out was one of extreme fire danger, but there was no-one present at the site since it was a day on which it was regularly closed to ratepayers. Nevertheless Council employees had access to the site and dumped rubbish on it during the morning before the fire broke out. The fire was very fierce and extensive and destroyed or damaged the property of many ratepayers. The damages far exceeded the extent of Evans's insurance cover and the plaintiffs sought to recover their losses from the Council. Olsson J based his findings that the Council owed a duty of care to the ratepayers who suffered losses in the fire on the grounds that the duty arose either from the positive acts of the Council in authorising a particularly dangerous site to be used to collect the material, encouraging ratepayers to use it and itself dumping large quantities of flammable material on it and thereafter failing to provide the stringent degree of supervision that it was entitled to exercise under the licence agreement and was necessary in the light of the dangers arising from its decisions or on the concept of general reliance used by McHugh JA in Lutz. In adopting that concept, however, he went back to the judgement of Mason J in Heyman, and noted both that the function of the statutory powers of the Council and of the powers reserved to it by the licence agreement was to achieve a 'very specific fire reduction condition within the Council's district's 1 which might alone be sufficient to generate public expectation and reasonable reliance that the Council would exercise them in accordance with their protective purposes, that the risk of harm was such that it would have been impractical for individuals to protect themselves and that the duty was owed to a small and easily ascertainable class of persons in an existing relationship with the Council. Given the extent and unpredictability of bushfires the last point is not altogether straightforward, but in this case it makes a good deal of sense to found the duty either on the strength of the protective regime established by the statute or on the notion of 'general dependence' on the 80 [1989] Australian Torts Reporter 68, Ibid 68,381.

16 108 KEELER, DUTY OF CARE Council exercising its powers carefully. In any event the case was quite clearly one in which damage to property was caused; in the circumstances Gibbs, Wilson and Deane JJ might all have been able to decide the case on the point that the statutory powers were intended to be exercised in the interests of public health and safety and to give rise to a duty of care towards the protected class. The Full Court of South Australia had to consider the possible basis on which a proximate test might be satisfied in Parker v Housing Trust,82 in which it refused to follow Cavalier v Pope 83 and allowed a duty of care to exist between the Housing Trust as an owner of premises who had undertaken a duty to keep them in good repair and a child of the tenant who had been burned by a defective stove. The case was therefore again one of personal injury rather than economic loss. Not surprisingly most of the judgments were devoted to reasons why Cavalier v Pope should be rejected in the light of developments in the law of negligence since Donoghue v Stevenson and the increasingly anomalous nature of the absence of a duty of care between the landlord and the family and guests of a tenant in the light of the duties acknowledged to exist between the landlord and people using passages and stairways, neighbouring occupiers and passers-by, between owners of property and the guests of those who hire rather than lease them, and between landlords and the guests of a tenant if the landlord had also been the builder of the premises. Nevertheless, since the duty is one to take positive action and both King CJ and Prior J explicitly adopted the High Court's framework of analysing duty issues a proximity issue was clearly raised. The obvious relationship is between the landlord as the owner and the person responsible for the repair of the premises and any visitor on them and the clearest analogy is with cases of occupier's liability; the landlord's responsibility for and control over the repair of the premises should be sufficient to meet the proximity requirement. Perhaps for this reason Prior J did not examine the elements which satisfied it in depth, though at different times he referred to 'all the circumstances that throw light on the nature of the relation between the parties', reliance by the plaintiff on the defendant taking action with respect to a danger that had been drawn to its attention and his conclusion that the relationship between the parties was closer than the particular relationships which had been held to give rise to a duty in Voli v Inglewood Shire Counci/84 and Hackshaw v Shaw. 85 King CJ seemed more uneasy about the precise analysis of how the proximity element was satisfied, though he was clear that its source was the effect of the undertaking to repair on the safety of those on the premises. But thereafter he thought that the likelihood that the occupier, who is normally primarily responsible for the repair of premises, leaving it to the landlord to effect repairs would increase the risk to other entrants, so that the duty could be founded on an antecedent act increasing the likelihood of harm to them. This analysis avoids the difficulties that the proximity criterion cannot be satisfied by the landlord's occupation of the premises or sheeted home to any positive act and that there was an element of artificiality in arguing that the seven year old girl who was injured had specifically relied on the landlord to effect the 82 (1985) 41 SASR [1906] AC (1963) 110 CLR (1984) 155 CLR 614.

17 (1989) 12 ADEL LR 109 repairs. This seems unduly complex: the duty must arise from the effective control of the landlord for the repair of the premises irrespective of any hypothetical reliance on the undertaking to repair increasing the danger. In their post-anns vein, the English courts have given much shorter shrift to plaintiffs suing public authorities than Australian ones. Anns itself has been very thoroughly confined to its own facts: an action by a subsequent purchaser of premises that have become a threat to health and safety as the result of a concealed defect. The action has been denied to the original building owner, on the ground that the builder is bound to see that building regulations are complied with and that it would not be fair or reasonable to expect the public authority to protect people against their own wrongdoing. 86 This applies even if any fault is that of specialist advisers and there is no question of personal or moral fault on the part of the building owner. 87 It has been said that the duty is only owed to an owner/occupier, on the basis that there is no danger to the health or safety of an owner out of occupation and that damages are limited to the cost of putting the building in a state in which the health and safety of the occupants is no longer endangered. 88 An attempt to extend the scope of the Anns duty to a public authority which had provided an improvement grant to fund extensions to a house that were constructed so defectively that a subsequent owner had to demolish them and replace them was almost summarily rejected in Curran v Northern Ireland Housing Co-Ownership Association. 89 The House of Lords noted that the authority had no powers to supervise the construction of any improvements, but only a power to withhold payment of the grant if work had not been carried out to its satisfaction. It could not see that sanction as intended to protect the health and safety of either the owner of the building or subsequent purchasers; its only purpose was to protect the revenue. For these reasons it decided that 'the dictates of good sense and the consideration of what is fair and reasonable point clearly against the imposition of any duty of care owed by the executive to the plaintiffs and it would be contrary to the fitness of things to hold it to be under any such duty'.9o Against this background, the advice of the Privy Council in Yuen Kunyeu v AG for Hong Kong 91 that the Commissioner of Deposit-taking Companies with the authority to register or refuse to register such companies was not in a sufficiently proximate relationship to the plaintiffs, who had lost money on the liquidation of a company with which they had made deposits, came as no surprise. The Privy Council noted that the powers of the Commissioner were to register and deregister the company and that it lacked any powers of detailed supervision or regulation. The decision to deregister would have a disastrous effect on existing depositors and could not be exercised wholly in the interests of future ones. There was no specific relationship between the Commissioner and the plaintiffs, who 'were simply a few among the many inhabitants of Hong Kong'.92 An 86 Peabody v Parkinson [1985] AC Investors in Industry Commercial Properties v South Bedfordshire District Council [1986] QB Ibid. See too Simaan General Contracting Co v Pilkington Glass (No 2) [1988] QB 758; D and F Estates v Church Commissioners [1989] AC [1987] AC Ibid 729 per Lord Bridge. 91 [1988] AC Ibid 195.

18 110 KEELER, DUTY OF CARE argument that the registration of a company gave official recognition of its fitness to carryon its business was held insufficient to establish either a special relationship between the parties or a special responsibility on the Commissioner towards individual members of the public rather than one to be exercised in the general public interest. Reliance on registration as an indication of the soundness of a company was therefore unreasonable. The knowledge of the Commissioner of matters which raised very serious doubts as to the stability of the company did not affect these considerations. Perhaps the tersest dismissal of a claim against a public authority came in Minories Finance Ltd v Arthur Young. 93 The case arose following the collapse of a commercial banking firm, JMB. The bank brought an action in negligence against its auditors, and the auditors in turn issued third party proceedings against the Bank of England. The auditors claimed that the supervisory role of the Bank of England over commercial banks generally and the particular concern it had had for JMB gave rise to a duty of care towards JMB. Saville J dismissed this case on the ground that so far from conforming with principles of 'common sense and reason' a claim which sought to allow a commercial concern to look to the Bank to make good losses arising from its own carelessness and imprudence was offensive to them. It could be neither just nor reasonable that private banks operating as commercial enterprises should be protected from their own imprudence by the Bank of England. The decision in Yuen Kun-yeu was clearly one in which the plaintiff was claiming for economic loss. But similar reasoning was adopted by the House of Lords in Chief Constable of West Yorkshire v Hill,94 where the plaintiff claimed damages against the police for negligence in the conduct of a major criminal investigation as the executrix of the estate of her daughter, who had been the last victim murdered by a man who committed altogether thirteen murders and eight attempted murders over six years before he was found and arrested. The House of Lords found that the fact that the police did not have custody of the murderer before the murder and that the police were in no special relationship with either him or the victim meant that there was no sufficient element of proximity between them. It distinguished the case of Dorset Yacht Club v Home Office 95 on the ground that in that case the Borstal escapees who damaged the plaintiff's yacht as they sought to use it to escape from an island were in the custody of warders from whom they escaped and that the duty was confined to damage caused in the course of the escape and did not extend to any future victim of the escapees' crimes. The tone of the English decisions is more dismissive than that of the Australian and they tend to rely more on arguments summarised in terms of fairness and justice than the Australian. But the fact situations with which they have dealt have by and large been more extreme than those in Australia and, especially in Yuen Kun-yeu, the themes parallel the Australian concern with special and general reliance by the plaintiff on the defendant. One strand which emerges from Curran 96 and Yuen Kun-yeu 97 is 93 [1989] 2 All ER [1989] AC [1970] AC [1987] AC [1988] AC 175.

19 (1989) 12 ADEL LR 111 that the intensity of the supervisory and regulatory powers given to an authority are relevant to issues of proximity, whether the arguments are couched in terms of the purposes of the statute or the establishment of a scheme that justifies general reliance. It is significant that in Minories Finance Ltd v Arthur Young 98 Saville 1 declined to dismiss a third party claim against the Bank of England by the auditors of 1MB in relation to an action brought by a depositor purely on the authority of Yuen Kun-yeu without examining the particular supervisory regime established by the relevant legislation. From this perspective the power of the council in Lutz 99 to go so far as to perform the necessary work itself suggests that it may have been a strong case. Another factor emerging from Yuen Kun-yeu and Hill is that it will be difficult for individuals to satisfy the proximity requirement when powers that exist for the benefit of the whole community are not used. It would be hard to see Australian courts reaching different decisions on the particular facts considered in the English cases, even those of Hill, and it is possible to adapt the factors used to determine the proximity issue in the English cases for use within the current Australian framework for dealing with it. Nevertheless the tenor of the English cases is less open than that of the Australian, and their concern for the wide variety of regulatory agencies in financial, commercial, industrial and social areas of activity may be rather more extreme. The High Court's most recent discussion and application of the proximity requirement has been in Hawkins v Clayton!OO The issue in that case was whether a firm of solicitors which had custody of a will owed a duty to take reasonable steps to locate and inform the executor of the will of their possession of it after the death of the testatrix. The case therefore again involved finding a relationship of sufficient proximity between the solicitors and the executor as to impose a duty on the solicitors to take positive action to find him. The solicitors had taken no steps to locate the executor for several years after the death of the testatrix, despite the fact that nothing more than a search of the telephone directory was necessary to find him, and as a result of the delay the estate had suffered some losses and been exposed to penalties for lodging death duty returns out of time. A bare majority of the court decided that the solicitors were under a duty to take reasonable steps to apprise the executor of the existence of the will. One method of approaching the case might have been to ask whether or not an obligation to make the will known to the executor should be regarded as an implied term of the contract for the preparation and custody of the will made by the solicitors with the testatrix. The 1ustices who formed the minority of the court (Mason C1 and Wilson 1) approached it on that basis, and decided that no such term should be implied. The implication of one was not necessary for the reasonable or effective operation of the contract, nor so obvious that it should go without saying. The obvious way for the testatrix to inform the executor of his appointment was to tell him herself. This finding was in turn significant for the existence of an independent duty of care in tort. The principles on which any duty of care had to be founded were an assumption of responsibility by the solicitors and reliance thereon by the testatrix, and in the absence of any contractual assumption of responsibility for finding the executor there was 98 [1989] 2 All ER (1988) 12 NSWLR (1988) 164 CLR 539.

20 112 KEELER, DUTY OF CARE no other circumstance arising from the relationship between the parties that could independently be the basis of an assumption of responsibility for finding him. The solicitors could only be held responsible for negligence in the work they had undertaken to perform and they had not undertaken to inform the executor of the existence of the will after the death of the testatrix. Even if such an undertaking should be implied there was no evidence that the testatrix had in any way relied on it in her own omission to inform the executor of his appointment. (On the facts the most probable reason was that the testatrix had intended to change her will in a way which would probably have involved the revocation of the appointment.) The minority Justices also referred to practical difficulties that might arise from the imposition of the duty. But so far as the issue of the existence of a duty of care was concerned, the basis of their decision was that although the action against the solicitors might properly be brought in tort as well as contract the contract was critical in defining the tasks that they had undertaken and that the law of tort should not increase or vary them. The other three Justices did not adopt this approach in their separate judgments. Brennan J declined to do so on the basis that no relevant contractual obligation had been pleaded, so that the issue of what should be implied in the contract between the solicitors and the testatrix did not arise, while Gaudron J simply ignored the point and proceeded directly to consider whether a duty of care did exist between them. Deane J, however, began by arguing that any relevant contractual term could not be derived from the evidence of the intention of the parties and would have to be imputed rather than implied. The criterion for determining whether or not it should be imputed was whether it was necessary for the reasonable or effective operation of the contract in the circumstances, and that the existence and content of any general duty of care under the law of negligence was relevant to that issue. Once he had determined that a duty of care in tort did exist he returned to the contractual issue, and argued first, that where any imputed term in the contract was identical with the duty in tort, it was not necessary to impute it and second, that no term different from the tortious one should be imputed, since then the common law would be offering different and conflicting answers to the determination of the reasonable and desirable obligation of the defendant, and that this would render the common law incoherent. It follows from this argument that so far from the contract determining 'the task entered upon' by the solicitor so as to define the sphere in which there is an obligation to exercise due care, the law of tort defines the obligations which are not expressly agreed by the parties or cannot properly be said to have been intended by them. Deane J appeared not to shrink from the conclusion that all actions against professional people for failure to exercise due care in the performance of their obligations ought to be brought in tort unless the contract expressly imposes a concurrent or supplementary contractual duty of care. In making this argument Deane J appeared to have in mind that any issues of limitation of action that stem from the existence of alternative causes of action in contract and tort should be resolved in favour of a rule that time should begin to run from the time that damage is apparent rather than from the date of the breach and only noted the existence of possible differences in the principles governing the award of damages in contract and tort. Those principles may be coming closer together, but it is far from clear that they have yet been assimilated. Even after Hungerford's v

21 (1989) 12 ADEL LR 113 WalkerI 1 it may be that the defendant may be liable in contract for the lost profit that should have been attributable to the transaction in which advice was given but in tort for the profit which can properly be attributable to the alternative uses to which money that has been lost or kept out of the hands of the plaintiff might have been put (which may be measured in a variety of ways, depending on whether the plaintiff can demonstrate the existence of an alternative use for the money that was rejected in favour of that embarked upon, the likelihood of the money being used to obtain at the least a specific measure of financial advantage or, if all else fails, simply by a commercial rate of interest). Adoption of Deane J's general analysis would obviously raise a range of issues for resolution that are beyond the scope of any paper on developments in the duty of care. But clearly the adoption of that analysis would widen the range of situations in which the existence of a duty of care is a central issue and to that extent make the content of the proximity requirement more important; and it would make the elaboration of the interplay between the express and implied terms of the contract and the content of the duty of care very significant, not merely in determining the obligations of the parties but in determining the content of any obligations arising from the contract to third parties who might be affected by the way the various obligations are performed in such a way as to allow them an action against one of the contracting parties. The specific proximity issues were also dealt with rather differently by the different Justices. Deane J began his discussion by identifying the critical factors of the relationship between the firm and the testatrix as those of assumption of responsibility and reliance, which are the standard factors for establishing proximity between a professional person and a client. That relationship at least justified the imposition of a duty of care that extended to a case in which only economic loss had been suffered. In establishing a sufficient degree of proximity to justify the imposition of a duty to take care in making positive steps to inform the executor of the will, the factors relevant to issues of assumption of responsibility and reliance were the professional relationship between the firm and the testatrix and the nature of the task that had been undertaken. In accepting responsibility for the custody of the will after the death of the testatrix, the firm 'effectively assumed the custodianship of the testatrix's testamentary intentions'!02 Since those intentions could only be carried out if they were known to the executor and would be likely to be frustrated if they were not, the nature of the task undertaken required that reasonable steps might have to be taken to locate the executor. Thus the nature of the task combined with the professional relationship to satisfy the proximity requirement that was founded, in principle, on an assumption of responsibility to take positive action and reliance upon it. Neither Brennan J nor Gaudron J founded the existence of a duty of care (in the case of Brennan J) nor the satisfaction of the proximity requirement (in the case of Gaudron J) on principles of assumption of responsibility and reliance; indeed Gaudron J went to some lengths to explain that they were not always the appropriate factors on which to seek to satisfy the proximity principle. Brennan J identified the nature of a will as the critical factor in determining whether or not anyone who accepted 101 (1989) 84 ALR (1988) 164 CLR 539, 580.

22 114 KEELER, DUTY OF CARE custody of one came under a duty to take reasonable steps to bring it to the notice of the executor. After the death of the testatrix the will had become 'a muniment to the title of property'103 and knowledge of its existence and contents by the executor is necessary to make the will effectual, and the purpose of giving and accepting custody is to make it so. There is no need to infer a contract or find a specific undertaking to disclose the will and reliance upon it: the duty arises because the nature of a will demands that anyone who accepts custody of it should disclose its existence to the executor after the death of the testator or testatrix. Having reached this conclusion he then obeyed his precept that the law should develop from established categories, and, admitting that there were few of any assistance, found one in the obligation of a trustee of a deed of settlement to inform a beneficiary who had reached twenty-one that he had an interest in the capital and income of the trust. This reasoning, however, was clearly supplementary to the main ground on which he held a duty of care to have arisen. Apparently in defiance of his preference for particular rules rather than broad general principles to be used to open up new duties of care, he went on to speculate that there may be a broad principle, founded on general standards of honesty and fair dealing, that some duty of disclosure is imposed on one who holds the property of another or an instrument of title to the property of another as a bare custodian or trustee when the other does not know of his entitlement to the property and the holder has reason to believe that the other does not know of his entitlement. Presumably this general principle would only affect people who had agreed to become the custodian or trustee of the relevant property, for otherwise it is capable of radically amending the law of bailments and finders. But he did not have to consider any such duty on the facts of the case. Gaudron J seemed concerned as to whether it could be said that the executor had in any real sense relied on the solicitors, of whom he had no knowledge. That seemed to be behind her insistence that the proximity requirement did not depend exclusively on undertakings or reliance. In finding an alternative basis for meeting it, she nevertheless began by analysing the duty requirement in negligent misstatement cases as it had been explained in San Sebastian v Minister Administering the Environment and Planning Act!04 Looking at the criteria adopted by the majority of the High Court in that case from the point of view of the representee, she considered that the critical element was the reasonableness of the reliance on the adviser having exercised due care as the basis for coming to an informed decision. She then restated this proposition in the rather broader terms that the proximity relationship may be constituted by the reasonable expectation of the representee that the adviser would exercise due care in providing information or advice that could be relied upon. She thought the concept of reasonable expectation a more appropriate basis for satisfying the proximity requirement in cases of omission to provide information or advice, but without adopting that as a general rule she used it to formulate a rather more specific proposition: that where information is necessary for the exercise or enjoyment of a legal right and the person against whom the duty is asserted knows or ought to know of the right and the necessity for the information before the right can be exercised or enjoyed, the person 103 Ibid 550 citing Walter J in In re Aebly's Will [1941] NYS 2nd 929, (1986) 162 CLR 340.

23 (1989) 12 ADEL LR 115 entitled to the right may reasonably expect that the other will take reasonable steps to convey the relevant information to him. The fact that the defendant is the exclusive possessor of the information is very important, though it may not be absolutely necessary. Since the solicitors had possession of the will, were the only people to know of the appointment of the plaintiff as executor, and they knew or ought to have known that his ability to exercise his legal rights as executor was impaired by his ignorance of the appointment, the proximity requirement was satisfied. This ground is, if anything, broader than the principle of good faith speculated on by Brennan J, and since Gaudron J expressly contemplated that the duty might arise from the possession of a physical object as well as of information presumably, may be applicable to cases of finding and bailment. Brennan J contemplated that his principle might be applied to cases of custodians and guardians of property, which at least imports a formal acceptance of some obligations in respect of the property. But in her exposition of the reasonable expectations of a person whose ignorance prevents or hinders the exercise of legal rights Gaudron J made no similar qualification. Despite the breadth of the general issues raised by Deane J and of the principles adopted by Gaudron J and contemplated by Brennan J, the decision itself is relatively narrow in its scope: the duty is owed to the executor in that capacity and the action is for harm to the estate. Deane J did countenance the possibility of a claim by an executor and sole beneficiary if, in a particular case, it might be thought that a distribution to next-of-kin was irreversible and no action properly lay to the estate, and perhaps Gaudron J's principle is wide enough to cover such cases. In considering the various views of the factors relevant to the proximity requirement it is clear enough that the concepts of undertaking and specific reliance were not sufficient to meet it: it was because Mason CJ and Wilson J confined themselves to those criteria that they were unable to find it satisfied. Despite Deane J's attempt to fix the duty within the framework of professional responsibility and the concepts of undertaking and reliance on which it is based he did not examine the sense in which either the testatrix or the executor had relied on the defendants and the critical point in his reasoning is the need for publicity to make the will effective. However much Brennan J may differ from Deane J on the sense and utility of the proximity requirement his reasoning turns on the same point, though he gives some weight to whatever formal relationships are implied in the notions of custody and guardianship of the will. Gaudron J's reasoning is based partly on the need to protect legally recognised rights and the reasonable expectations of the people who unknowingly possess them. Its scope is potentially much wider than that of the other Justices: the extent of the protection of contractual rights against negligent interference is, for example, a highly controverted matter and, taken outside the sphere of negligent misstatement, the concept of reasonable reliance seems to be broader than that of general reliance, since it does not depend on a scheme of protection by a duly constituted public authority but on an inability to exercise private rights. Like Parramatta City Council v Lutz 105 the case indicates that there are cases which will require a broader basis than the undertaking or imposition of specific obligations and proof of actual reliance on them, and that attempts to use them as universally required 105 (1988) 12 NSWLR 293.

24 116 KEELER, DUTY OF CARE elements are doomed to failure. But despite the tendency in some judgments in each case to propose very open-ended criteria to establish it the cases have turned on whether an acknowledged responsibility of the defendant both protects the plaintiff and extends so far as to offer an action in negligence where it is not fulfilled. In cases where it is claimed that the defendant is under a duty to take positive steps to protect the plaintiff the factors which go to satisfying the proximity requirement remain restrictive. Apart from those that have already been discussed few of the English cases raise issues which are directly comparable with matters that have concerned Australian courts. In Caparo Industries v Dickman 106 the Court of Appeal considered whether or not an auditor owed a duty of care to a shareholder in a company which had received its audited annual accounts and made a successful takeover of it in reliance on them. A majority of the court found that the scheme established by the Companies Act whereby the auditor is appointed by and reports to the company in general meeting and a copy of their report must be sent together with a copy of the annual accounts to all the shareholders individually, was designed for the protection of shareholders in their investment decisions (whether to retain or dispose of their shares, or acquire more) and that this was sufficient to satisfy the proximity requirement. It was argued for the auditors that proximity could only be established by demonstrating a voluntary undertaking by the auditors to exercise care on behalf of the shareholders as well as the company, but the majority judges went to some pains to point out that this was not and could not be an exclusive criterion by which to meet it. As in the case of the duty owed by a solicitor to a beneficiary with respect to the due execution of a will 107 the auditors know of the existence of the shareholders and that they will be directly affected by the audit of the accounts; together with the statutory scheme for their protection that was sufficient. But there are no similar factors governing the relationship between the auditors and persons outside the company who chose to invest in it on the basis of the accounts; hence the proximity requirement would not be satisfied as between them in the absence of special circumstances, usually involving cases in which the audit was made in order to be used to attract an investor or class of investors!08 O'Connor LJ thought that this went too far: the duty of the auditors was owed to the shareholders as a body and did not extend to providing reliable information for the investment activities of individuals. Another line of English decisions on the existence of a duty of care largely stems from the concern of the courts to neutralise the effect of the decision in Junior Books v Veitchi Bros!09 In that case a developer had employed contractors to build a factory and its architects nominated the defendants as specialist sub-contractors to lay the flooring. The flooring work was performed badly, but there was no danger arising from it to persons or property: the plaintiffs complaint was that the floor was so 106 [1989] 1 All ER Ross v Caunters [1980] Ch 297; Watts v Public Trustee [1980] WAR 97. Contra: Seale v Perry [1982] VR In AI Saudi Banque and ors v Clarke Pixley (London Daily Telegraph, 14 August 1989) Millet J took Caparo as authority excluding the claim of a bank which. had lost money lent to a company on the basis of the audited annual accounts. 109 [1983] 1 AC 520.

25 (1989) 12 ADEL LR 117 expensive to maintain that it was cheaper to remove it and lay a fresh floor. A majority of the House of Lords found a sufficient degree of proximity between the nominated specialist contractors who were and knew they were being relied on by the plaintiffs to use their skill and experience in laying the floor and the developer to justify imposition of a duty of care. The majority considered the relationship between the parties to be as close as it could be short of actual privity of contract. There was an impassioned dissent from Lord Brandon, who argued that the law of tort should not be used to deal with problems which were essentially those of providing products of inadequate quality and that the law of torts should not be used to enable chains of contractual relationships to be avoided, since that would either lead to the general duty of care overriding the specific obligations that had been made between the parties to particular contracts in the chain or to insoluble technical problems in avoiding that result. The more recent English cases have involved either plaintiffs seeking to bring actions in negligence in respect of defective products which constitute no danger to person or other property, actions against sub-contractors with whom they are not in direct contractual relations or actions which contain both elements. The outcome of the decisions was initially that the plaintiffs in Junior Books should be treated as having suffered property damage: 1o and that where the plaintiff had received a defective product it could not apply. So where a glass manufacturer supplied glass units of the wrong colour no action lay against it in negligence for extra costs incurred in the completion of a building contract. (Simaan General Contracting Co v Pilkington Glass (No 2)!11 The principle that an action in negligence does not lie for the provision of defective products was endorsed by a unanimous House of Lords in D & F Estates v Church Commissioners: 12 where the plaintiffs, who were the lessees of a flat, brought an action against the builders and plastering contractors of the flats for the cost of replacing plaster that had become loose as a result of negligence in its application. The House of Lords held that the economic loss suffered by a buyer or hirer of defective real or personal property who was not entitled to the benefit of contractual conditions or warranties was not recoverable in tort. Only where personal injury or damage to property other than that which is defective is involved does the possibility of a duty of care arise. 'The most recent application of this principle has been in Department of the Environment v Thomas Bates and Sons l13 in which the plaintiffs, who were underlessees of an office building, had discovered in the course of carrying out other repairs that the concrete pillars supporting the floors in the eleven story block were of low strength and incapable of supporting the design load of the building, though sufficient to support the load that the plaintiffs were imposing on it. The plaintiffs strengthened the pillars so that they would support the design load and sought to recover the costs of doing so from the builders. They lost their case on the basis that there was no imminent danger to person or property, and on that basis D and F Estates v Church Commissioners denied the existence of a duty of care. The other aspect of the general approach to Junior Books has been simply to find that where the plaintiff is suing a defendant further along a chain of contracts that the relationship between the parties is 110 Tate and Lyle Food and Distribution Ltd v GLe [1983] 2 AC 509, [1988] QB [1989] AC [1989] 1 All ER 1075.

26 118 KEELER, DUTY OF CARE insufficiently proximate to give rise to a duty of care. So the English purchaser of an electric pump made in France was not permitted a claim for economic losses suffered when the pump would not perform the purposes for which it was required and made because it was not usable on English voltages!l4 Robert Goff LJ confined Junior Books to cases in which the defendant has in effect assumed a direct responsibility to the plaintiff and found no proximity between the manufacturer and the purchaser (there were two intermediate stages in the marketing chain before the pumps reached the retailer from whom they had been bought and no communication between the plaintiff and the defendant). The action in the Simaan ll5 case was by the head contractor of a building project against the manufacturer and supplier of glass with whom it had no direct contractual relationship: the make and type of glass had been specified by the building owners and the court could find no 'meaningful sense in which it could be said to have relied on the glass manufacturers'!l6 Dillon LJ opined that the subsequent treatment of Junior Books had been such that he found it difficult to see that future citation of it could ever serve any useful purpose!l7 Then in Greater Nottingham Co-operative Society v Cementation Piling Ltd ll8 the plaintiff building owners did nominate and deal with specialist piling contractors to perform work in relation to the construction of a building. Although the piling contractors' primary contract was with the head contractor they had a collateral contract with the building owner that they would exercise reasonable care and skill in the design of the works and the selection of the materials. The building owners suffered loss when delays were caused in the completion of the work when the method of driving piles used by the defendants caused extensive damage to neighbouring premises. The Court of Appeal acknowledged that the relationship between the building owner and the sub-contractor was at least as close as that in Junior Books;l9 but this time distinguished the case on the basis that there was a direct contractual relationship between the parties and that the collateral contract should be taken as exhaustively defining the undertakings between them. In the D & F Estates case Lords Bridge and Oliver, who delivered the only speeches, treated the dissenting judgment of Lord Brandon as laying down the general principles established in Junior Books and described the decision of the majority as based on the 'unique' relationship between the parties!20 The utility of the majority judgment is clearly at an end. Although Australian courts have not been faced with all the issues raised in this series of cases and may well ultimately concur in their denial of a duty of care in comparable circumstances they will not readily accept all the reasoning in them. First, to the extent that it is based on classifying the harm suffered by the plaintiff as economic and denying that the duty of care extends to cases of economic loss except in case of negligent advice, it is inconsistent with the Caltex l2l decision, which, if not applied, has been 114 Muirhead v Industrial Tank Services [1986] QB [1988] QB Ibid 731 per Bingham LJ. 117 Ibid [1989] QB [1989] AC Ibid (1976) 136 CLR 529.

27 (1989) 12 ADE L LR 119 defended in both Heyman 122 and San Sebastian! 23 They are not likely to disagree with the classification of the loss as economic (both Brennan and Deane JJ classified the loss to the plaintiff in Heyman as such);24 but so long as they support Cattex that cannot be the conclusive consideration. Moreover, Mason J argued in Heyman that whether the damage was classified as being to property or as purely economic should not affect the outcome of the decision as to the existence of a duty of care, and this must surely be right. The English courts are already facing difficulties in determining whether damage to the walls of a building caused by defective foundations should be regarded as physical damage to different property and whether a defective part that damages other parts of a machine should be regarded as a separate entity causing property damage while one that simply renders the whole machine useless should not!25 In Muirhead, for example, the defendants were held liable for the deaths of lobsters stored in the tanks that the defective pumps were supposed to oxygenate on principles of reasonable foreseeability! 26 And in Aswan Engineering v Lupdine 127 different members of the Court of Appeal agonised over whether the plaintiff's loss of waterproofing compound supplied in plastic buckets manufactured by the defendant which collapsed when stacked in large piles in very hot conditions should be regarded as economic loss or as harm to separate property. Viewed purely as a matter of classification the damage must be to other property, but it seems scarcely sensible to allow this to determine whether a duty of care will depend purely on reasonable foreseeability or on satisfying a considerably more restrictive proximity criterion. The High Court was right to make the acerbic comment that the critics of the Cattex judgments have not themselves been able to offer a solution to the problems of establishing and limiting liability where negligent acts cause economic loss!28 Another issue which may cause controversy in Australian courts is the reasoning in the Greater Nottingham 129 case that the existence of the collateral contract determined the obligations between the parties. This is an example of the general, though not universal, tendency of the English courts to be slow to imply terms into commercial contracts between the parties and, on occasion, to use the absence of a contract where one was possible as a reason to refuse to find a duty of care between particular parties. In Tai Hing Ltd v Liu Chong Hing Bank 130 the bank argued that its customers owed it a duty to be careful in conducting their business so as to identify any irregular drawings on the account promptly. It thereby 122 (1985) 157 CLR (1986) 162 CLR (1985) 157 CLR 424, 503 (Deane J); 440 (Brennan J); see too the doubts of Wilson J at The doubts are expressed in the speech of Lord Bridge in D and F Estates v Church Commissioners [1989] AC 177. They are, of course, not new and the subsequent problems were perfectly predictable. A very random sample of the relevant literature includes: Cavanagh and Phegan: Products Liability in Australia (1982) ; Miller and Lovell: Product Liability (1977) ; Waddams: Products LIability (2nd ed 1980) 29-41; Cartwright and Phillips: Products Liability (1986) Vol 1, There is also an extensive periodical literature. 126 [1986] QB [1987] 1 All ER San Sebastian v Minister Administering Environment and Planning Act (1986) 162 CLR 340, [1989] QB [1986] AC 80.

28 120 KEELER, DUTY OF CARE sought to establish a duty on its customers going beyond that previously established by the House of Lords that the duty of the customer to inform the bank extends only to irregular drawings once it becomes aware of them. The Privy Council declined to imply a term imposing the more extensive duty of care in the banking contract on the ground that the test for implying a term in a contract is whether it is necessary to imply the term and that test was not satisfied. Having done so it declined to look for a duty based on tort principles, asserted that it saw no advantage in the law's development in searching for one when the parties are in a contractual relationship, especially in a commercial context and refused to accept that the parties' mutual obligations in tort could be greater than their obligations in contract. In doing so it expressly preferred to give primacy to the contractual relationship because within it the parties have, subject to a few exceptions, the right to determine their obligations to each other. These principles have been accepted and applied by the English courts. So in National Bank of Greece v Pinios Shipping C0 131 the Court of Appeal refused to imply a term into a tripartite contract between the shipowner, which had defaulted on a mortgage repayment secured on the ship, a firm appointed as managing agents of the ship subject to certain powers of direction by the bank, and the bank, that the bank would be careful to ensure that the managing agent maintained the specified level of insurance cover over the ship for the protection of the shipowner. The Court applied the test as to whether it was necessary to imply the term and, consistently with the Tai Hing case, refused to contemplate the imposition of a wider duty based on tortious principles. All this is consistent with the approach of the minority Justices in Hawkins v Clayton~32 but is inconsistent with the much wider role for the law of tort advocated by Deane J. It is equally inconsistent with the approach of Marks J in the Supreme Court of Victoria in BGJ Holdings Ltd v Touche Ross and CO!33 In that case the plaintiffs claimed that the defendant, their auditor, owed them a duty to take reasonable steps to inform them of imprudent and speculative transactions which were suspected to be in breach of company policy, and that they had suffered loss through the breach of such a duty. Marks J held that it was established that there was no such duty imposed on the auditor in contract, but that there was one based on tort, so that the duties arising in tort were potentially clearly more extensive than those in contract. The apparent incoherence of this would plainly offend Deane J, who would see such inconsistency as a reproach to the law, but this case and the banking cases give some indication of the breadth of even the immediate consequences of his approach to cases in which it is sought to imply terms in contracts by using the principles of liability for negligence. More controversially the English Court of Appeal has used the pattern of contracts between several parties to determine whether it is 'just and reasonable' to impose a duty of care. In Pacific Associates Inc v Baxter [1989] 1 All ER (1988) 164 CLR [1988] Australian Torts Reporter 67, [1989] 2 All ER 159. For a case which applied the same reasoning on this point to a case of damage to property, see Norwich City Council v Harvey [1989] 1 WLR 828; presumably overruling Lee Cooper v Jeakins [1967] 2 QB 1 and preferring the views of Lord Roskill in Junior Books v Veitchi Bros [1983] 1 AC 520, 546 to the doubts of Lord Brandon in Leigh and Sillavan Ltd v Aliakman Ltd [1986] AC 785.

29 (1989) 12 ADEL LR 121 the plaintiffs were contractors who had entered into contracts with the ruler of Dubai to perform certain dredging and reclamation work. The plaintiffs had tendered on the basis of specifications supplied by the ruler on the advice of the defendant engineers, who were empowered under the contract between the ruler and the contractors to certify that additional payments might be made where unforeseeable conditions made the work more expensive than had been contemplated. The contract provided that the engineer should make such decisions independently of and unfettered by the employer, that any dispute arising from decisions of the engineer should proceed to arbitration and that the engineer should not be personally responsible for acts or obligations under the contract. During the performance of the contract the contractors made several claims for additional payments on the basis of having encountered unforeseeable conditions but the engineer rejected them. The contractors proceeded to arbitration, but the arbitration proceedings were settled on the basis that the settlement fully discharged the liabilities of the employer. The contractors then sought to recover very large additional sums from the engineers in an action in which they claimed that the engineers had been negligent in rejecting the claims they had made for extra payments. The Court of Appeal refused to find a duty of care between the engineer and the contractor for a variety of reasons, two of which were the absence of any contractual relationship between them and the pattern of contractual obligations which excluded personal liability on the part of the engineer. These precluded either the voluntary assumption of responsibility by the engineers or reasonable reliance by the contractors on the exercise of care by them. This reasoning is not altogether convincing. It leaves the engineers, though independent, subject to a contractual obligation to exercise due care in their professional work for the employer and the contractor has no choice but to rely on the engineers performing their duties carefully. As members of the court noticed, the problems of cash flow for a contractor in dispute with a certifying engineer may be very great, and arbitration may itself be expensive and time-consuming. The suggestion that the engineer might enter into a tripartite contract with the contractor and the employer in relation to the certifying function is interesting but does not seem altogether realistic. There are some respects in which the engineer is in a more direct relation with the contractor than a valuer for a mortgagee with the intending purchaser and mortgagor of residential property, but the House of Lords found no difficulty in finding a duty of care between them even in the absence of a contract 135 and in declaring a clause exempting the valuer from liability as ineffective because it did not satisfy the criteria of fairness and reasonableness required by the UK Unfair Contracts Act. The absence of a contract between the contractors and the engineers, and the exemption clause in the contract between the employer and the engineers do not appear as compelling the conclusion that it would not be just or reasonable to impose a duty of care on the engineers, and other reasons such as the existence of the arbitration clause may be a stronger foundation for the decision. Nevertheless the concerns of the English courts that contractual obligations should not be unreasonably circumvented is a matter of real significance if the duty of care is to be extended into areas of economic loss, and must be among the most important issues to be 135 Smith v Bush, Harris v Wyre Forest District Council [1989] 2 All ER 514.

30 122 KEELER, DUTY OF CARE squarely addressed if the basic classifications of the common law are to be subjected to the fundamental reconsideration contemplated by Deane J. It is at least plausible to contemplate that some cases may be better resolved by modification of the rule against third parties suing on contracts rather than extending the scope of negligence liability with its attendant problems of prejudicing the terms of existing contracts!36 Two other lines of English cases have received some acceptance in Australia. The Court of Appeal decided in Jones v Department of Employment l37 that a public servant adjudicating claims for unemployment benefit owed no duty of care to members of the public making claims: their proper remedy was through the processes of appeal provided for in the relevant legislation. This decision was used to support the decision in Mills v Winchester Diocesan Board of Finance l38 that the Charity Commissioners owed no duty of care to potential beneficiaries of a cy-pres scheme in advising the trustees that the proposed use of the funds was outside the terms of the trust altogether, since an effective appeal on the substantive point lay to the High Court, any action in negligence could be pursued concurrently with the appeal provided for and the court could only see the possibility of both actions being available operating to the detriment of charity funds. It was also used by members of the court in Pacific Acceptances Ltd v Baxter l39 to support the view that the existence of an appeal to arbitration against the decision of the engineers negatived any duty of care being owed by the engineers to the contractors. Although much of the reasoning is based on concepts of what is just and reasonable rather than on any clearly developed view of the concept of proximity these decisions have been followed in New South Wales in Coshott v Wollahra MCl40 to deny the existence of a duty of care on the part of a local authority in processing a development application. The complaint was that the authority had been unduly dilatory in dealing with the application; the relevant legislation provided that if no decision had been made within forty days of the receipt of the application it should be deemed to have been refused, leaving the applicant with recourse to an appeal to the Land and Environment Court. Wood J found none of the possible avenues for finding a duty of care on the part of a local authority suggested in Heyman helpful to the plaintiff and the reasoning in Jones's case compelling. Lastly there is some acceptance of the principle affirmed in Leigh and Sillivan v Aliakmon Shipping C0 141 that only a person with a proprietary or possessory interest in property can bring an action in negligence when it is damaged. In RG and TJ Anderson Pty Ltd v Chamberlain John Deere Pty Ltd 142 machinery owned under complex financing arrangements by 136 Cf the vain attempt of Robert Goff LJ to build a doctrine of 'transferred loss': Leigh and Sillavan and Aliakman Shipping Co [1985] QB 350, 399, rejected by the House of Lords at [1986] AC 785, See too Fleming: The Comparative Law of Torts (1984) 4 Oxford J Legal Studies 235, , 240-1; Muir: Contract and Equity: Striking A Balance (1986) 10 Adelaide LR 153 and for other views, Reynolds: Tort Actions in Contractual Situations (1985) 11 NZULR 215; Partlett: Economic Loss and the Limits of Negligence (1986) 60 ALl [1989] QB [1989] 2 All ER [1989] 2 All ER (1988) 14 NSWLR [1986] AC [1989] Austr~lian Torts Reporter 68, 561.

31 (1989) 12 ADEL LR 123 Crusader was damaged by carriers. Under the contract existing between them Crusader was able to return the damaged machinery to CJD and be credited with the full price. The trial judge had awarded damages in tort to CJD, but the New South Wales Court of Appeal overturned this decision on the basis that it had no relevant interest in the machinery when it was damaged and awarded damages in full to Crusader instead. The Court held that the carriers knew nothing of CJD's contractual arrangements with Crusader and that they therefore had neither knowledge nor means of knowledge of CJD individually, so that it could gain no assistance from the Caltex case. The case is unusual and not on all fours with the cases of purchasers to whom risk but not property had passed or time charterers of vessels who suffer economic loss when it is damaged that were discussed in the judgments in the Caltex case, but the unanimous judgment shows little interest in developing any of the broader concepts canvassed in the High Court. Cases involving liability for economic loss cover many kinds of fact situation. It may be a matter of important general principle as to whether the law of negligence should be concerned with the consequences of poor bargains, or as to whether hirers of property should be able to sue people who damage or destroy it if the loss of the use of property causes them economic loss. But they are different questions, and the reasons that will support answers to them cannot plausibly be expressed in terms of generalisations about economic loss, proximity or undertaking and reliance. On the other hand many of the recent cases have been concerned with the issue as to how far public authorities, professional advisers, landlords or bodies with different commercial interests in a common project should either protect or have regard to the economic interests of consumers and those related to them or other bodies interested in the project in what they do. The morality of the market place is more concerned with ensuring that participants obtain good bargains for themselves rather than that they provide good bargains for others, and the presumption must be against bodies in ordinary arms length commercial relationships being bound to be careful for the welfare of each other's economic interests. The situation is different where public authorities with responsibilities for ensuring that markets do not operate so that consumers are at hazard from unscrupulous or incompetent participants or for protecting property, or the functions of a person who is assisting in the process whereby participants can protect their own interests, are concerned. The question then is whether the protective regime that has been established is so strong that people in the protected class can assume that their individual economic interests are the concern of its operators or whether there is an independent ground (usually derived from undertaking and specific reliance) for making their interests the focus of protection. It is not surprising that the courts insist on general regimes offering a very high degree of protection with relatively strong and detailed powers of supervision or control before they will make their operators pay for losses that they have not themselves inflicted on the victims. But the contexts in which claims for protection arise are so many and various that there can be no single clear cut test that determines whether a particular regime has reached that point. Even within the framework of negligence adopted by the High Court there is room for a consideration as to whether, in a case in which the proximity requirement is satisfied, there are any considerations which ought to negative, reduce or limit the scope of the duty. It has only found that

32 124 KEELER, DUTY OF CARE such considerations existed once, when in Giannarelli v Wraith l43 a majority of the court found that an advocate, whether barrister or solicitor, does not owe a duty of care to a client with respect to the presentation of a case or matters of preparation that are intimately connected with its presentation. The considerations which negatived the imposition of a duty were primarily the need to avoid the relitigation of decided cases, especially criminal cases, under the guise of a civil negligence action and the dependence of the judicial system of economy on the part of the advocate in the presentation of a case. There is little that is new in this; in effect the High Court has adopted the same position as the House of Lords in Saif Ali v Sidney Mitchell l44 and the Court of Appeal of New Zealand in Rees v Sinclair!45 Deane J was not prepared to accept the cogency of these considerations. In England the House of Lords held as an alternative ground of decision in Chief Constable of West Yorkshire v Hilf1 46 that no duty of care should be cast on the police with respect to the general conduct of a criminal investigation; their Lordships did not believe that the imposition of a duty would fulfil its normal function of providing an extra incentive to carrying out a task carefully, and that any litigation arising from the existence of such a duty would divert the police from their primary function of fighting crime. The slight tendency at protectiveness of public bodies evidenced in this was emphasised in Takaro Properties v Rowling: 47 an action brought by an investor who had lost money when a Minister refused consent to overseas participation in a failing venture on grounds not authorised by the relevant statute and without taking legal advice as to his powers. Among its reasons for doubting the existence of a duty of care in the circumstances was what the Privy Council called 'the overkill factor': that, far from encouraging the Minister to act with due care, the imposition of a duty would encourage him to take extra defensive steps that would delay and increase the cost of taking decisions. The Privy Council expressly mentioned Anns as a case in which that kind of consequence may have occurred, and in the Greater Nottingham 148 case Purchas LJ expressed the view that the problems arising from medical negligence suits in the United States justified policy restrictions on liability based on foreseeability considerations. In Parramatta City Council v Lutz 149 Kirby P said that he had 'much sympathy' with the remarks of the Privy Council, which provided reasons for the caution visible in recent authorities concerned with the liability of public authorities. The existence and extent of the 'chill factor' has long been an issue in discussions of professional negligence, but despite the attention thus paid to it its influence has more often been visible in decisions on the standard of care rather than the existence of a duty. Derrington J concluded a recent paper on the duty of care with the comparison that 'the law moves like a crab. It faces the facts and advances backwards into a sea of principle, the currents of which will depend upon the particular point of entry'!50 Another zoological comparison used in a 143 (1988) 81 ALR [1980] AC (1974) 1 NZLR 18, [1989] AC [1988] AC 473 (PC). 148 [1989] QB (1988) 12 NSWLR The Limits.of Awards for Economic Loss (Queensland, 1988).