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Construction Law

1. (a)  What is a class action and what relevance do class actions have in engineers planning to avoid claims

(b) Identify the person or groups of people referred to in the case le that could have a claim damages at law against (AusNet  Electricity Services Pty Ltd, formerly SPI Electricity Pty Ltd, and referred to as ‘SPI’ in this judgment), a maintenance contractor charged with carrying out a periodic inspection of the power line (referred to as ‘UAM’

2. What is the basis of attributing any liability for the damage arising from the fire to ( AusNet  Electricity Services Pty Ltd, formerly SPI Electricity Pty Ltd, and referred to as ‘SPI’ in this judgment), and  what part of the libility should fall to the  maintenance contractor charged with carrying out a periodic inspection of the power line (referred to as ‘UAM’

3. In the case where there is a legal liability what are the limits imposed and recovery in respect of the various classes of persons referred to above to whom the damage was caused .

4. Having regard to the problems experienced what procedures would you put into place to limit exposure to claim of negligence. Refer to the principles of law as applied in the case and use the examples mentioned in the cases. Does compliance with current standards bar successful claims for negligence.

Sample Answer

1. Class Action
In the traditional lawsuits, the action is commenced by the plaintiff, whereby the defendant is personally served with a complaint. The parties to such a lawsuit appear before the court of law, which has the requisite jurisdictional power of adjudicating on the matters raised (Picker and Seidman, 2015). On the basis of this physical appearance, the parties are given the opportunity of presenting their arguments and the judgment is ultimately attained (Dickerson, 2016).

The exception to this traditional form of lawsuits is the class action. In a class action, the plaintiff or defendant, as has been named, represents the interest of some other persons, whom they represent in the court of law. Though, such individuals are not physically present in the court and only their representatives go to the court (Quinn, 2011). Due to these very reasons, the adjudication of class action rules mandates upon the courts to monitor the entire case closely. The individuals in a class action are such, who have been commonly harmed by the defendant or defendants (Find Law, 2017). Hence, to avoid several small claims being raised on individual level, the injured parties come together and initiate the claims against the guilty party. This also helps in saving of cost and time, of both individuals and the court (Grave, Adams and Betts, 2012).

Relevance To Engineers
The class actions can prove to be very helpful in avoiding claims, for the engineers. For avoiding the chances of a class action being raised against the engineer, the relationship between them and their consumers have to be reviewed and maintained properly. This can also be used as a source of proving the entire claim wrong. If the engineers are able to prove that they are not liable to a particular group of claimants in the class action, they can decrease the overall claim being made in a class action (McDermott Will & Emery, 2007).

The class actions raised against the others can be used as guidance for avoiding future claims (Johnson, 2013). Furthermore, by using the previous case laws, where the engineers have been able to avoid the negligence claims, due to verdict of the court. To better elucidate upon this, let’s apply this practically. In the matter of Woolcock Street Investments v CDG Pty Ltd [2004] HCA 16, the High Court gave a landmark decision. As per this decision, the builder or the architect of any commercial building would have no liability for defects in construction or designing to a subsequent purchaser. So, if the engineers are faced with a class action where subsequent buyers initiate claims against him, the verdict of Woolcock can be used for safeguarding from such a claim (The Federation Press, 2017).

Individuals Who Can Claim Damages
In the case of Matthews v AusNet Electricity Services Pty Ltd & Ors [2014] VSC 663, the class action was raised against three parties:

SPI: SPI Electricity Pty Ltd, which later came to be known as Electricity Services Pty Ltd.
UAM: the maintenance contractor, who had the obligation of undertaking the examination of the power-line on regular basis.
The State Parties: they included the Different State of Victoria bodies, which had to manage the forest land, fight the fire and deal with emergency situations (Australasian Legal Information Institute, 2014).
The initial class action was brought forward by Leo Keane. Though, she was later on substituted by Carol Ann Matthews (State Government of Victoria, 2014). The case was raised by the parties who were physically injured due to the fire, the ones who lost their homes and their livelihood earnings and the dependants of such people. There were four broad categories of the people in the class actions, and these were:

People who received personal injuries
Death resulting from fire, as per Part 3 of the Wrongs Act 1958
People who suffered an economic loss, not resulting from the damage to property or any injury caused
People who had to bear a damage or loss to their property/properties (Australasian Legal Information Institute, 2014).
2. Base Of Attributing Liability
This case dealt with the decision of fixing the amount of settlement and not for holding the parties liable for their action, in form of criminal liability (Emmerig and Legg, 2015). Hence, the decision undertaken was for the settlement, which was decided to being around Australian $500 million (ABC News, 2014). The rationale behind deciding upon of the settlement was born out of the negligence of the defendants. Hence, the claims arising in this case relate to negligence, and in some cases, it was related to negligent pure economic loss. However, the negligent pure economic loss is more of a defense and hence, would be used in the next segment. This segment predominately deals with the negligence of the defendants.

Negligence is a tort and affixes the liability on the person who fails in discharging their duties efficiently, which results in harm to some other person. When a person undertakes certain activity, which has the possibility of causing an injury to some other person, such an individual is required to take the necessary care, to avoid the occurrence of such an event (Harvey and Marston, 2009). Basically, a duty of care is owed by such an individual. However, when this duty of care is breached by the individual and such breach causes a significant harm or injury to another, a claim of negligence can be raised (Kennedy, 2009).

For establishing negligence, there has to be certain essential elements which have to be present in it. The first one has to be a presence of a duty of care, followed by a breach of this duty, and this has to result in injury or harm (Strong and Williams, 2011). In addition to these three, there has to be foreseeability of the loss, a direct causation between the negligence and resulting harm. The injury cannot be remote and so, has to be substantial in nature (Turner, 2013). In Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] UKPC 2, the damages were not awarded to the plaintiff as the cause of fire was held to be remote (Swarb, 2016a).

Once all these essential elements are present in a particular case, the injured party can initiate claims for negligence (Howarth, 2016). In such a case, the injured party can apply for monetary compensation. Along with monetary compensation for the injury caused, the non-pecuniary damages can be claimed for the emotional distress. In Baltic Shipping v Dillon High Court of Australia (1993) 176 CLR 344, the plaintiff was awarded damages for the mental distress due to the sinking of ship, which resulted in the loss of belongings of the plaintiff (Holmes, 2017).

Each time a claim of negligence is made, the case of Donoghue v Stevenson [1932] UKHL 100 is quoted. This is because this is the leading case where the first element of the negligence was established, i.e., the presence of duty of care. Here, Donoghue consumed a ginger beer from the product which was manufactured by Stevenson. This bottle contained a dead snail, due to which, Donoghue fell sick. She initiated a case against Stevenson for his negligence, as a dead snail was found inside a bottle which he manufactured. Stevenson in turn claimed that, he had no duty of care in this case. The Court in this held that the manufacturer owed a duty of care towards all such individuals who were its consumers. And so, he was asked to compensate Donoghue for his negligence (British and Irish Legal Information Institute, 2017).

In the case of Grant v The Australian Knitting Mills [1935] UKPC 2, a similar view to that of Donoghue v Stevenson was adopted, whereby the manufacturer of the woolen underpants, i.e., The Australian Knitting Mills had to compensate its consumer Grant, who contracted dermatitis after wearing their manufactured underpants (Swarb, 2016b).

In the case of Mathews, the claims were raised for negligence; though, the same was made under the Wrongs Act 1958. Section 48 of this act contains the general principles associated and these are similar to the essential elements of negligence. As per this section, a person cannot be held liable for negligence unless it can be proved that the risk of such harm was foreseeable, not immaterial, and that faced with same circumstances, a reasonable individual would have undertaken such safeguards. To establish if a reasonable individual would have applied the safeguards, the court considers the probability of harm, the seriousness of such harm, the social utility of the undertaken activity and the burden of safeguard for avoiding the risk. Section 49 provides the other principles which are to be undertaken in a proceeding relating to negligence liability (Australasian Legal Information Institute, 2014).

The court held that the risk of harm was known or should have been known to SPI. And a reasonable individual in similar situation would have applied some safeguards which SPI failed to apply. Also, section 51(1) of this act needed the Matthews to establish that the negligence of SPI was a basic fact for the occurrence of harm. And due to section 52, the plaintiff had to prove the same on the basis of balance of probabilities. SPI was also held liable for the negligence regarding the targeted damper, the asset management, the management of electricity infrastructure and the nuisance in legal manner (Australasian Legal Information Institute, 2014).

Liability Over UAM
The liability of UAM stems from his failure in undertaking the requisite care and skill, when he was doing the task of scheduled inspection, a complete full year before the occurrence of such fire, in February 2008 of the Pentadeen Spur. He failed in carrying out the inspection with reasonable diligence (Australasian Legal Information Institute, 2014). Hence, even his part of the fault lies in fulfilling the duty of care, which he owed to the plaintiff.

3. Limits Imposed
The discussion carried on till now highlights the liability of both SPI and UAM in case of negligence, due to their failure in discharging the duty of care, which was expected from them. Though, there is a principle through which, the recovery of damages against SPI and UAM can be restricted. This relates to the negligence resulting in pure economic loss for the parties belonging to the class action. So, the liability which results from the loss, which can be deemed as an economic loss, can be restricted. However, the recovery of loss arising from the physical damages caused, cannot be restricted through any principle.

Negligence pure economic loss, as the name suggests, relates to the economic loss which is suffered by the people, due to the negligence of another (Palmer and Bussani, 2009). However, the same is not related to a physical injury. So, the loss caused, which is purely economic in nature, is covered under this principle. For a negligence pure economic loss, a no recovery rule is applicable. As per this rule, for a negligence which results in purely an economic loss, the aggrieved party cannot recover any damages (Ward, 2010).

This rule was established in the case of Rylands v Fletcher [1868] UKHL 1. In this case, a reservoir was constructed on the land which was owned by the defendant and he was also the owner of the mill. The positioning of the reservoir was such that it was placed over an abandoned mine. The water from the reservoir, through the abandoned mine, was filtered and as a result of this, it spread over a working mine, who’s owner was the plaintiff. This caused heavy damages to the mine of the plaintiff and he sued the defendant for damages. The court held that the defendant was not liable for the purely economic loss and so, the no recovery rule was established (Rush and Ottley, 2006).

Another case where the no recovery rule was upheld was the case of Weller v Foot and Mouth Disease Research Institute [1966] 1 QB 569. In this case, the cattle were infected by the virus which escaped from the premises of the defendant. Due to this infection, the cattle could not be sold out. The plaintiff, being an auctioneer, suffered economic loss due to the negligence of the defendant. Taking an inference from the case mentioned above, the plaintiff Weller was not awarded the claims for the economic loss, as they were deemed as irrecoverable owing to the no recovery rule (Steele, 2014).

Hence, through the use of these two case laws, along with the principle of negligent pure economic loss, a defense can be made by the defendants of this case. And so, the individuals belonging to the third category, i.e., people who suffered an economic loss, not resulting from the damage to property or any injury caused, in addition to the fourth category of individuals who had to bear a damage or loss to their property/properties, could be restricted from claiming a recovery of damages, owing to pure economic loss.

4. Limit Exposure
The given case study of the fire caused, due to the negligence of defendants, can be taken as a crucial example for managing the claims which are made against an organization. Through the use of such examples, along with the other leading cases, the exposure to such claims can be restricted. The organizations can use the precedents to their advantage and can use them for avoiding a case being made, or taking them as guidance in case a case is made. Precedents are the verdicts, judgment or the decision which is undertaken by a judge belonging to a court, in some case (Queenby, 2013). The precedents apply on such court, which are below the hierarchy level of the court which gave the decision. So, the verdict of Supreme Court of Australia, applies on the High Court of Australia (Katter, 2011). And as has been stated earlier, the landmark or leading case laws can also be used for avoiding the claims. This can be elucidated better by some case laws which favor the case of Matthews and the other which do not.

In Caltex Oil v The Dredge "Willemstadt" (1976) 136 CLR 529, Dredge was the defendant and he damaged a pipeline, while he was dredging. This pipeline was being used by Caltex, who was the plaintiff, for transferring oil, even though he was not the owner of the same. Due to the economic loss suffered by Caltex, he sued Dredge for the economic loss. In this case, the recovery of the damages was allowed as the defendant was aware about the plaintiff and so, the loss was foreseeable (Sappideen et al. 2009)

In Perre v Apand (1999) 198 CLR 180, Perre was the plaintiff who had a contract in WA, for the sale of potatoes. Apand was the defendant, who supplied bad products to Perre, and this resulted in an infection being caused to the neighbor of the plaintiff. Due to the regulations applicable in WA, the potatoes were grown close to an infected land, and hence they could not be sold off. And as a result, Perre sued for economic loss. In this case also, due to the knowledge of Apand about the seeds, Apand was held liable for negligence and the claims were allowed (Swarb, 2016c).

These two cases support that a claim can be made even when there is a presence of economic loss. And so, these points can be used by the plaintiff side in the class action for the case of Matthews. However, the defendants also have certain cases, which can be used by them for giving away with their liability for the economic loss. Apart from the two cases highlighted above, the case of Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27 can also be used as a defense for the economic loss.

In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd, due to Esso being reckless in maintaining of the plant, an explosion was caused. The claim against Esso was raised in the Supreme Court of Victoria and the claims were mostly associated to economic loss. Citing the landmark cases of Grant and Donoghue, the Court stated that Esso had to take care of its customers as they owed a duty of care towards them. And so, Esso should have taken measures to avoid the stopping of gas, which ultimately led to property damages. And so, the court stated that Esso did not owe damages arising from economic loss caused, as the statutory framework could not inflict a duty for pure economic loss (Australasian Legal Information Institute, 2017).

Compliance With Current Standards
The Engineers Australia Code of Ethics (Code) is the current standard which is applicable over the engineers in Australia and which has to be complied with in a strict manner. This code is related to the field of knowledge and experience of the engineers in the nation. The Code has been broadly divided into four key areas and these are:

The engineers are required to demonstrate integrity;
They have to exercise leadership;
Practice in a competent manner; and
Promote sustainability (Engineers Australia, 2015).
A strict adherence and to the code of ethics drawn here helps the engineers is avoiding any claims of negligence being made against them. The key reason for the same lies in the areas in which it is divided. The code requires the engineers to work in a manner which is not only well-informed but also updated. Along with this, their work has to be honest and trustworthy, and also has to maintain and respect the dignity of each and every individual. The engineers are required to keep themselves aware of the latest reforms and keep on learning more, so as to be updated with the latest changes in the rules or norms. While undertaking any work, the engineers are required to keep the requirements and needs of the various stakeholders in mind. And these stakeholders are not confined to the present generation, but to the future generations as well (Engineers Australia, 2015). This helps the engineers in taking their work in a cautious manner so as to be protected from a case of negligence being made against them.

Though, if the engineers choose to ignore or breach the code, the claims of negligence could easily be made. This is because the code requires the engineers to work in a diligent and careful manner, which could not only prevent a liability of negligence, but also deliver a quality work. So, only when the Code is breached, the claim of negligence can be raised. In other words, a compliance with the existing standards bars successful claims for negligence.

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