Update

Policy considerations have always played a part in the law of negligence and its development. Two recent decisions in the New South Wales Court of Appeal have highlighted the significant part public policy has played and continues to play. In CSR Limited v Wren (Court of Appeal 18 December 1997) and CSR Limited v Young (Court of Appeal 25 February 1998), the Court of Appeal considered the role of policy in the context of proximity.

Wren was a worker at Asbestos Products Pty Limited's (AP) factory situated in Alexandria, NSW. CSR was the holding company of AP.

In Young, the injured party lived as a small child at Wittenoom where blue asbestos was mined. Australian Blue Asbestos Limited (ABA) mined the asbestos located in and near Wittenoom. ABA was a wholly owned subsidiary of CSR.

In both cases, the Court of Appeal found CSR owed a duty to the injured plaintiffs. In Wren, the Court considered the part policy has played in the development of negligence and particularly proximity.

In establishing the parameters upon which to base its decision that a duty of care was owed, the Court of Appeal relied upon a summary given by Dawson J in Hill v Van Erp, (1997) 71 ALJR 487 where he said:

"Where a new category [of duty of care] is suggested, regard should be had in the first place to the established categories which may be helpful by way of analogy in determining whether to recognise a duty of care. That is how incremental development takes place. The process is effected by relevant policy considerations, such as the need to avoid indeterminate liability or the place of impediments in the way of ordinary commercial activities ... In the end, policy considerations will set the outer limit of the tort. As Lord Pearce said in Hedley Byrne & Co Limited v Hellar & Partners Limited: "How wide the sphere of duty of care in negligence is to be laid depends ultimately upon the court's assessment of the demands of society for protection from the carelessness of others".

CSR relied upon the fact that Wren was not an employee of CSR as one of the grounds for asserting that no duty of care arose.

The Court of Appeal looked at the nature of the relationship between CSR and AP and noted the following,

• The management staff of AP were CSR employees.
• The manager at AP had control over AP employees but not CSR employees.
• There was no evidence that the AP board directed or controlled a system of work or the working conditions in the factory.

Given that the whole of the management staff responsible for the operational aspects of AP's enterprise and therefore the conditions in which Wren worked were CSR staff, the court of Appeal found that CSR had a duty directly to Wren and that duty was co-extensive with that owed by an employer to an employee.

Further, the Court held that there were no policy considerations which required that duty to be modified or abrogated. Specifically, the Court said to impose a duty of care on CSR in the circumstances was not to expose it to liability "in an indeterminate amount for an indeterminate sum to an indeterminate class." That duty was already owed by CSR to its own employees who worked at AP. The imposition of a duty so formulated will not frustrate or restrict commercial activity. The reason CSR was found to be liable was that it brought itself into a relationship with the employees of AP by placing its staff in the role of management at AP.

In Young the Court of Appeal considered the corporate relationship between CSR and ABA. CSR conceded a duty of care was owed by it to the workers employed by ABA. The Court found that CSR conducted operations at the mine through ABA. There was no reason to distinguish between the operations at the mine and the activities undertaken by ABA in running the town. It was these activities to which Young was exposed as a consequence of living in the town, and thus CSR had breached the duty it owed to Young.

Commentary

For insurers and corporations exposed to liability claims of this nature, the extension of the existence of a duty of care to the holding company in the circumstances in which CSR was placed is significant. The finding was not based upon the "piercing of any corporate veil" but by the extension of the concept of proximity giving rise to a duty of care. The Courts were careful to illustrate that these cases were simply further developments of existing principles and reinforced the part public policy plays in establishing the parameters of a duty of care.