2000 UNSW Law Journal 35

THE NEEDLE IN THE HAYSTACK: PRINCIPLE IN THE DUTY

OF CARE IN NEGLIGENCE

PRUE VINES*

I. INTRODUCTION

The question of when a duty of care in the tort of negligence is owed by one
person to another is a question about relationships and responsibility as
recognised by the law. It is important that people should know what the law is
and also that the law be flexible enough to change in the interests of justice. In
negligence, the duty of care is usually the arena in which the battle between
flexibility and predictability is fought, and it is frequently the area where novel
categories or hard cases are decided. This suggests that the choice of test used
for the duty of care is fundamental. In the words of McHugh J, what is needed is
“a conceptual framework that will promote predictability and continuity and at
the same time facilitate change when it is needed”.*1 Recent cases in the High
Court show that developing such a conceptual framework is difficult, and has not
yet been achieved.

II. PRINCIPLES AND CATEGORIES IN NEGLIGENCE

As with all other areas of law, it is imperative in negligence to have ways to

determine liability within an already well-recognised category. This makes it
easy to know what rules apply, assisting in the maintenance of predictability and
certainty of the law. Such categories within negligence are defined by the type of
harm (for example, physical injury, nervous shock, property damage, pure
economic loss), by the type of defendant (for example, employer, or statutory
authority), and by whether the harm is caused by an act or words or an omission,
and sometimes by the type of plaintiff (for example, child yet unborn,
unforeseeable plaintiff). The categories which are now recognised include, for
example, personal injury caused by a negligent act, nervous shock, pure

* Senior Lecturer, Faculty o f Law, University o f New South Wales.

1 Perre v Apand (1999) 164 ALR 606 at 629.
36 Principle in the Duty o f Care in Negligence Volume 23(2)

economic loss caused by a negligent act, pure economic loss caused by negligent
misstatement and liability of public authorities. Within these categories various
tests or criteria are very well recognised. For example, where there is a case of
pure nervous shock we know that we may have to consider whether the plaintiff
is in a close relationship with the victim (although that will not be determinative
in Australia), whether there was a sudden sensory perception of the event, and
whether the plaintiff suffered a recognisable psychiatric illness.2 Where pure
economic loss was caused by a negligent misstatement we consider factors such
as whether the statement was made in a situation in which it was reasonable for
the plaintiff to rely on it, and whether the defendant knew or ought to have
known that the plaintiff (or a person in the class of which the plaintiff was a
member) was likely to rely on it,3 and possibly some other factors. Within these
categories, these criteria are quite well-established, and function well in that they
are clear and predictable.
However, it is also important to be able to consider whether liability should
be extended into new categories, because a fundamental aspect of the common
law has always been its ability to adequately meet change within the society of
which it is a part.4 These novel categories or ‘hard cases’ create particular
difficulties. Negligence law has been a flexible area of law, dealing relatively
well with the tension between change and certainty, predictability and flexibility.
In 1932 Lord Macmillan said “[t]he categories in negligence are never closed”.5
However, that does not mean that the doors into new categories are wide open.
On the contrary, they may be very difficult to open, and frequently appear
locked. In the past many classes of case were not recognised as capable of
sustaining liability in negligence - for example, pure economic loss was
traditionally held to be in the domain of contract and was not generally thought
of as something for which suit could be brought in negligence until Hedley,
Byrne v Heller6 was decided, and public authorities would have been regarded as
immune except in public law.7
The method for extending categories or creating new ones has traditionally
been that of general principle. How ideas about relationships and responsibility

2 Jaensch v Coffey (1983) 155 CLR 549; Alcock v Chief Constable o f South Yorkshire [1992] 1 AC 310;
McLoughlin v O'Brian [1983] AC 410; Mt Isa Mines v Pusey (1971) 125 CLR 383.
3 Hedley, Byrne & Co v Heller & Partners Ltd [1964] AC 465 (Medley, Byrne v Heller”); San Sebastian
Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162
CLR 340 (“San Sebastian ”); Mutual Life & Citizens’ Assurance Co v Evatt [1971] AC 793; Shaddock v
Parramatta City Council (1981) 150 CLR 225; Caparo Industries pic v Dickman [1989] QB 653;
[1990] 2 AC 605 (“ Caparo").
4 See P Vines, “Proximity as Principle or Category; nervous shock in Australia and England” (1993) 16(2)
UNSWLJ 45%.
5 Donoghue v Stevenson [1932] AC 562 at 619.
6 [1964] AC 465.
7 See the discussion o f this in S Kneebone, Tort Liability o f Statutory Authorities, Law Book Company
(1998), esp ch 2. She notes that although tortious liability was accepted for negligent acts in Mersey
Docks and Harbour Board Trustees v Gibbs (1866) LR 1 HL 93, this appears to have been forgotten
until a concerted attempt to consider the issue o f immunity was made in Anns v Merton LBC [1978] AC
728.
2000 UNSW Law Journal 37

are mediated in the tort of negligence has varied since Donoghue v Stevenson8
was decided. Since that time the tests for the duty of care have oscillated
between greater emphasis on principle and greater emphasis on particular
categories. A constant tension exists between these two approaches which has to
be considered by each judge who decides on the existence or otherwise of a duty
in a novel case. In Donoghue v Stevenson itself, the dissenting judgment of Lord
Buckmaster, demonstrated the previous type of incrementalism when he made
his famous remark about Mullen v Barr & Co, that it was “a case
indistinguishable from the present excepting upon the ground that a mouse is not
a snail”.9 He refused to accept the imposition of a duty of care. Lord Atkin’s
‘neighbour principle’ is clearly a broad general principle which was induced
from a range of previous cases and used to break the privity of contract barrier;
but even after he had established the neighbour principle, Donoghue v Stevenson
itself was at first treated as a case in the category of manufacturer’s liability for
personal injury.10 Later, the pendulum shifted to an approach based on a broad
general principle culminating in England in the Anns1' case with the two-stage
test. That test was a general-principle test. Later, the English courts rejected this
approach. The Australian courts did not embrace the Anns formulation, but
similarly moved towards a general principle approach12 culminating in Justice
Deane’s formulation of proximity (hereafter referred to as “proximity-as-
principle”). This general principle is presently in decline, and an approach
governed by caution and categories has emerged. Even so, in the words of Kirby
J,13 there is still much “disorder and confusion” in the duty of care.
Each of the approaches using a general principle regards the categories as
simply examples of the duty of care in operation. For example, in San Sebastian,
the High Court held
the correct view is that, just as liability for negligent misstatement is but an instance
of liability for acts and omissions generally, so the treatment of the duty of care in
the context of misstatements is but an iijjtance of the application of the principles
governing the duty of care in negligence.1
When cases fit comfortably into a category the general principle is not needed.
But where there is a hard case general principles may alter or create new
categories. An insistence on maintaining the categories may leave the law static
and possibly unjust.15

8 [1932] AC 562.
9 Ibid at 578.
10 See, inter alia, Grant v Australian Knitting Mills [1936] AC 85; Haynes v Harwood [1935] 1 KB 146;
Deyong v Shenburn [1946] KB 227; Farr v Butters Bros [1932] 2 KB 606.
11 Anns v Merton London Borough Council [1978] AC 728 (“Anns”). This approach had been heralded by
Lord Reid in Home Office v Dorset Yacht [1970] AC 1004 at 1027, when he said “the time has come
when we can and should say that [the neighbour principle] ought to apply unless there is some
justification or valid explanation for its exclusion”.
12 Jaensch v Coffey, note 2 supra.
13 Perre v Apand, note 1 supra at 668.
14 San Sebastian , note 3 supra at 354, per Gibbs CJ, Mason, Wilson and Dawson JJ.
15 For one analysis o f problems with what she calls the ‘pockets o f law’ approach see J Stapleton,’’Duty o f
Care and Economic Loss: A Wider Agenda” (1991) 107 Law Quarterly Review 249.
38 Principle in the Duty o f Care in Negligence Volume 23(2)

III. CHOICES FOR DETERMINING THE DUTY OF CARE

Presently in Australia Justice Deane’s formulation of proximity-as-principle

which was dominant throughout the eighties appears to be in decline. Recent
High Court judgments appear to have rejected or weakened proximity as a
conceptual determinant of the duty of care. It is submitted that the court is
divided in its approach to the duty of care, even when judges appear to be using
the same language. References to proximity, for example, do not always refer to
proximity-as-principle, but may involve other approaches to the duty of care.
All the tests currently in use in negligence assume that satisfying the test of
reasonable foreseeability of harm coming to the plaintiff (or a person in the class
to which the plaintiff belongs) is necessary, but not sufficient, to establish that a
duty of care is owed to the plaintiff. Reasonable foreseeability on its own
became a less effective test when the test was diluted to mean “not fanciful or
far-fetched”1617which requires a very low probability in order for the test to be
satisfied. The categorisation of tests which follows assumes that reasonable
foreseeability of harm has been shown.
An examination of the cases since Jaensch v Coffey shows that at present four
different approaches to the duty of care may be discerned. They may be called
(1) proximity-as-principle, (2) rule-based proximity, (3) incrementalism and (4)
policy-based decision-making. The approaches which are outlined here rarely
appear in judgments in their pure form. The following analysis is not intended to
suggest that they are mutually exclusive or that the separation between them is
always clear. Indeed, sometimes several approaches may appear in a single
judgment. However, the classification may still be useful to clarify the attempts
to establish an effective and legitimate test for the duty of care.
In considering the tests for the duty of care it is helpful to distinguish between
the use of a test when it is clear within which category of negligence duty must
be determined, and the use of the test in a ‘hard case’ - that is, when what would
be required in order to establish a duty would be to extend a category or create a
new one.

A. Proximity-as-principle
The leading example of this approach is the judgment of Deane J in Jaensch v
Coffey}1 This approach uses proximity as an underlying conceptual determinant
of whether the relationship between the parties is such that it is legitimate to
make one party legally responsible to the other. It should be emphasised here
that the focus of this approach is to consider the concepts of relationships and
responsibility first, and only later to consider the category of case which is at
issue. In order to use proximity this way, one would still proceed, when the
category is clear, to look to those traditional requirements in the category which

16 Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47. Justice Mason was discussing foreseeability in
the context o f breach and noted that “the concept o f foreseeability in connexion with the existence o f the
duty o f care in v o lv es] a more generalised enquiry”. Thus foreseeability is even weaker in the context o f
the duty o f care.
17 Note 2 at 584.
2000 UNSW Law Journal 39

reflect human notions of relationships of responsibility. Such indicators include

reliance, assumption of responsibility, control and vulnerability. In using this
approach the factors relating to human notions of relations of responsibility are
more significant than the category in which they appear, and so, when dealing
with a hard case, proximity-as-principle involves the identification of those
factors in the relationship between the parties which resonate with human
notions of relationships of responsibility. As Sir Anthony Mason has observed, it
serves a useful purpose in directing attention to the relationship between the parties
and the incidents of that relationship and relevant factors such as assumption of
responsibility, rpjiance and control; at the same time, it does not exclude what is fair
and reasonable.
This approach to the duty of care will be considered further in section IV.

B. Rule-based-proximity
‘Rule-based-proximity’ is an approach to the duty of care which uses the term
‘proximity’ as a catch-all for all the other requirements established in previous
cases in the same category. If this choice is taken, the determination of the
category of case and, in particular, the type of loss become all-important in
establishing a duty of care. An illustration is Alcock v Chief Constable o f South
Yorkshire, where the House of Lords examined the duty of care to prevent
nervous shock. The first step in their reasoning was to see the category of pure
nervous shock as a distinct category. Once they had done this they looked at the
factors of proximity which had previously been determined to exist in nervous
shock cases - namely, a close relationship between plaintiff and victim and
closeness in time and space to the accident. There was no attempt to look at a
broader principle in order to decide whether the law should be changed. Thus,
the category or rule determined the content of proximity. In this approach then,
what constitutes proximity depends upon the category of case.
Another example of a rule-based proximity is the second stage approach of the
House of Lords in Caparo,1 81920 where the requirements for duty of care were (1)
foreseeability of harm, (2) proximity, and (3) fairness, justice and
reasonableness. Again, the meaning of proximity was determined by the category
(in this case, negligent misstatement causing pure economic loss) and the term
was not used as a general principle. The significance of the category was
emphasised by Lord Bridge:
Whilst recognising, of course, the importance of the underlying general principles
common to the whole field of negligence, I think the law has now moved in the
direction of attaching greater significance to the more traditional categorisation of
distinct and recognisable situations as guides to the existence, the scope and the
limits of the varied duties of care which the law imposes.21

18 Sir A Mason, “The Recovery and Calculation o f Economic Loss” in Mullany N (ed), Torts in the
Nineties (1997) 4.
19 N o te ! supra.
20 Caparo , note 3 supra.
21 Ibid at 618.
40 Principle in the Duty o f Care in Negligence Volume 23(2)

Using this approach, the term ‘proximity’ adds little or nothing to the process,
which is merely an application of rules:
[Phrases such as ‘proximity’] are not precise definitions. At best they are but labels
or phrases descriptive of the very different factual situations which can exist in
particular cases and which must be carefully examined in each case before it can be
pragmatically determined whether a duty of care exists...22
And:
‘Proximity’ is, no doubt, a convenient expression so long as it is realised that it is no
more than a label which embraces not a definable concept but merely a description
of circumstances from which, pragmatically, the courts conclude that a duty of care
exists. 3
This type of approach makes it difficult to extend or create new categories of
liability when hard cases appear. Of course, in Caparo the third stage of the test,
“fairness, justice and reasonableness” is intended to ameliorate the narrowness
of the rule, and this is one of the reasons why Kirby J has found the Caparo test
so attractive.24 This element of the Caparo test takes it into the policy domain.

C. Incrementalism
The retreat from Anns was followed by a move to what the House of Lords
called an incremental approach.25 This label encompasses some different
meanings, but the central point for incrementalism is an insistence on
considering categories (or “pockets”26) first, and extending them, if at all, by
analogy in steady and small steps rather than large leaps. It involves a rejection
of the expansionist or imperialistic march of negligence into new territory. In
one form, incrementalism uses the same techniques as those for ‘rule-based-
proximity’, but may dispense with the label ‘proximity’. That is, within a
category one proceeds by looking at the rules established for the category (such
as negligent misstatement causing pure economic loss) and applies those rules.
For example, in Sutherland Shire Council v Heyman,27 Brennan J held that what
was required to establish the duty of care was reasonable foreseeability and
reliance because this was a case in the category of pure economic loss, omission
or occupiers’ liability. He said in a much-quoted passage:

22 Ibid at 628, per Lord Roskill.

23 Ibid at 655, per Lord Oliver.
24 Perre v Apand, note 1 supra at 676, per Kirby J; Pyrenees Shire Council v Day (1998) 192 CLR 330 at
419, per Kirby J; Romeo v Conservation Commission (1998) 192 CLR 431 at 476, per Kirby J.
25 Caparo , note 3 supra; Murphy v Brentwood DC [1991] 1 AC 398; Yuen Kun Yeu v Attorney-General
fo r Hong Kong [1988] AC 175.
26 ‘Pockets’ is the terminology used by K Stanton in “Incremental Approaches to the Duty o f Care” in N
Mullany (ed), Torts in the Nineties (1997) 34 at 39, and by J Stapleton in “Duty o f Care and Economic
Loss: a Wider Agenda” (1991) 107 Law Quarterly Review 249.
27 (1985) 157 CLR 424 at 481. See, also, his judgment in Jaensch v Coffey, note 2 supra at 567.
2000 UNSWLaw Journal 41

It is preferable, in my view, that the law should develop novel categories of

negligence incrementally and by analogy with established categories, rather than by
a massive extension of a prima facie duty of care restrained only by indefinable
considerations which ought to negative, ^ to reduce or limit the scope of the duty or
the class of persons to whom it is owed. 1
When incrementalism is used for hard cases, then in its best form it will allow
some flexibility in the law of negligence by considering the categories and by
analogy (without any underlying conceptual theme) extend them or make new
categories. Stanton suggests that there are two versions of incrementalism.2829 The
first he calls ‘gradualism’. This has been described above. He refers to it as
“extremely formalist and positivist”. It takes very little account of policy,
wishing to leave major changes to Parliament. For example, he cites the refusal
of the court in F v Wirrall Metropolitan Borough Council30312to extend negligence
to a duty not to impair a parent’s right to custody of a child. The second form is
what he suggests is emerging in England in cases like Marc Rich & Co AG v
Bishop Rock Marine Co Ltd. 1 This form “can take account of issues of fairness
and policy and...is not tied to a mechanical search for close analogies in the
existing case law”. In this form incrementalism can be extremely flexible. For
example, in emphasising that third stage in the Caparo test the court may use the
notion of fairness, justice and reasonableness to transcend the category. Stanton
has argued that in order to have any valu^ncrementalism must be more than just
“gradualism based simply on analogy”. If it is the latter then the law will
simply stagnate.

D. Policy-based decisions
Policy has always been used as an element in judicial reasoning and it exists
in some form in the previous three methods, but there are signs in some
judgments of an increasing emphasis on policy. This can be seen in the third
stage of the Caparo test and the second stage of the Anns test as it is in use in
New Zealand and Canada.3334In recent Australian cases, policy has been discussed
significantly. In Esanda34 and in Hill v van E rp 35 McHugh J made substantial
reference to matters such as the likely impact on solicitors as a profession, and
on whether the category of pure economic loss should be able to expand. The

28 Sutherland Shire Council v Heyman, ibid at 482, quoted , for example, in Caparo , note 3 supra at 618;
Yun Kun Yeu v Attorney General fo r Hong Kong, note 25 supra at 191, per Lord Keith; Murphy v
Brentwood District Council, note 25 supra at 461, per Lord Keith; Crimmins (as executrix o f estate o f
Crimmins, d e c ’d) v Stevedoring Industry Finance Committee (1999) 167 ALR 1 at 72, per Hayne J
(“Crimmins Case”).
29 K Stanton, note 26 supra at 51.
30 [1991] Fam 69, cited by K Stanton, note 26 supra at 47.
31 [1996] 1 AC 211.
32 K Stanton, note 26 supra.
33 See Part IV, “The Rise and Fall o f Proximity-as-principle”.
34 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) (1997) 142 ALR 750 at 781 ff, per
McHugh J (“Esanda ”).
35 Hill v van Erp (1997) 188 CLR 159 at 198 ff, per McHugh J.
42 Principle in the Duty o f Care in Negligence Volume 23(2)

emphasis on the latter issue is also apparent in all the judgments in Perre v
Apand.36
Meaningful discussion of policy requires some classification.37 Policy can
draw on ideas of judicial administration. Typical policy arguments about judicial
administration are, for example, that we need a strict rule or that we need to be
flexible in order to achieve certainty/justice. Many arguments about the need to
use proximity-as-principle or rule-based-proximity are based on this kind of
argument. Policy arguments about institutional competence are typically seen as
arguments about whether or not arguments are justiciable or that parliament
should decide a matter.38 The vast range of possible policy arguments include
those about moral authority (eg, individual freedom, security); and utility
arguments (eg, such a rule would be not be economically viable or would act as a
deterrent); and, of course, there can be precedents about what policies are
acceptable (eg, the ‘bright line rule’ that pure economic loss is not in the domain
of negligence law is itself based on policy recognition of commercial reality39
and it developed into a legal rule which requires special factors in order to
overturn it). Stapleton has argued that with the demise of a general principle,
judges increasingly go through ‘checklists’ of policy factors. They then run the
risk of making their decisions because of their own personal synthesis of the
importance of particular policy factors, and risk arbitrariness.40
Policy is a double edged sword. Overt discussion of policy may attract the
charge of judicial activism41, while covert policy discussion attracts the charge of
hypocrisy42. This is why policy has traditionally been used as a second order
justification for decisions which have been made on the basis of precedent.
Policy matters can affect a judge’s decision about whether to make an
incremental change to the law, as they did for McHugh J in Hill v van Erp43 and
Perre v Apand.44

36 Perre v Apand, note 1 supra.

37 Possible classifications can be found in, for example, CR Symmons, “The Duty o f Care in Negligence:
Recently Expressed Policy Elements” (1971) 34 Modern Law Review 394 and J Boyle, “Anatomy o f a
Torts Class” (1985) 3 The American University Law Review 1003.
38 For example, Mason J in State Government Insurance Commission v Trigwell (1979) 142 CLR 617 at
633.
39 Cattle v Stockton Waterworks (1875) LR 10 QB 453; see the discussion o f this by Gummow J in Perre v
Apand , note 1 supra at 649 ff.
40 J Stapleton “Duty o f Care Factors: a selection from the Judicial Menus” in P Cane and J Stapleton (eds),
The Law o f Obligations; essays in celebration o f John Fleming (1998) 59.
41 For example, see criticism o f Lord Justice Denning’s creation o f the ‘deserted w ife’s equity’ in Pettit v
Pettit [1970] AC 777; and some media treatment o f Mabo v Qld (No 2) (1992) 175 CLR 1.
42 Indeed the entire Critical Legal Studies movement is based on a view that law is a disguise for political
policy. See, for example, M Kelman, A Guide to Critical Legal Studies, Harvard University Press (1987);
M Tushnet, “Critical Legal Studies and Constitutional Law: An Essay in Deconstruction” (1984) 36
Stanford Law Review 623; and, J Boyle, note 37 supra', A Hunt “The Theory o f Critical Legal Studies”
(1986) 6 Oxford Journal o f Legal Studies 1.
43 Note 35 supra at 210 ff.
44 Note 1 supra at 631 ff.
2000 UNSW Law Journal 43

IV. THE RISE AND FALL OF PROXIMITY-AS-PRINCIPLE

By the 1980s it was clear that the test of reasonable foreseeability that it be
merely “not fanciful or farfetched”45 was too undemanding a test for the duty of
care. The High Court’s response to this was the concept of proximity-as-
principle.
Justice Deane formulated proximity-as-principle first in Jaensch v Coffey,46 It
will be remembered that he regarded it as “a continuing general limitation or
control of the test of reasonable foreseeability as the determinant of a duty of
care”. He said it differed from reasonable foreseeability because it “involved
both an evaluation of the closeness of the relationship and a judgment of the
legal consequences of that evaluation”, and he emphasised that proximity could
not be confined to physical proximity, but could include ‘circumstantial’ and
‘causal’ proximity. Unfortunately this statement was picked up and used as a
‘triumvirate’ and the list “physical, circumstantial or causal” was frequently seen
by critics as exclusive rather than inclusive and descriptive.47 Justice Deane’s
formulation of proximity-as-principle as a major determinant of the duty of care
in negligence was in the ascendant until he left the court. It was accepted in a
large range of cases,48 culminating in Burnie Port Authority v General Jones49
and Bryan v Maloney.50 It remained dominant for some time although resisted all
the while by Brennan J51 and latterly by McHugh J52 and others.53
Proximity-as-principle was used by Deane J to develop a general principle of
negligence which could operate either within or outside recognised categories of
liability. Proximity-as-principle was used to overcome or extend various
categories of liability including Rylands v Fletcher54, occupiers’ liability55, pure
economic loss56, and nervous shock.57 For example, occupiers liability had

45 Wyong Shire Council v Shirt, note 16 supra; see note 17 supra and the statement by Deane J in Jaensch
v Coffey, note 2 supra at 583.
46 Note 2 supra.
47 See, for example, the discussion o f Gala v Preston (1991) 172 CLR 243 by HLuntz, “Torts” in R Baxt
and AP Moore (eds), An Annual Surveyo f Australian Law 1991 (1992) 47. H Luntz appearsto regard
the physical closeness o f the parties as decisive o f whether or not proximity existed in the sense that
either one is close or not. However, arguably the Court’s view was that what was involved was a
characterisation o f the relationship in turns o f whether the defendant should be held responsible.
48 Sutherland Shire Council v Heyman, note 27 supra; San Sebastian , note 3 supra; Gala v Preston , note
47 supra; Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; 63 ALR 513; Cook v Cook
(1986) 162 CLR 376; 68 ALR 353.
49 (1994) 179 CLR 520.
50 (1995) 182 CLR 609.
51 See, for example, Jaensch v Coffey, note 2 supra at 572, per Brennan J; Sutherland Shire Council v
Heyman, note 27 supra at 481, per Brennan J; Gala v Preston , note 47 supra at 259-61, per Brennan J;
Hawkins v Clayton (1988) 164 CLR 539 at 555.
52 J McHugh, “Neighbourhood, Proximity and Reliance” in PD Finn (ed), Essays on Torts (1989) 5.
53 For example, Lord Cooke, “An Impossible Distinction” (1991) 107 LQR 46; the Canadian Supreme
Court in Canadian National Railway Co Ltd v Norsk Pacific Steamship Co Ltd [1992] 1 SCR 1021 at
1114; J Keeler “The Proximity o f Past and Future” (1989) 12 Adel L Rev 93.
54 (1866) LR 1 Ex 265; affd (1868) LR 3 HL 330 as cited in Burnie Port Authority v General Jones , note
49 supra.
55 Australian Safeway Stores v Zaluzna (1987) 162 CLR 479.
56 Sutherland Shire council v Heyman, note 27 supra; Bryan v Maloney , note 50 supra.
44 Principle in the Duty o f Care in Negligence Volume 23(2)

previously been dependent on a series of rules based on particular categories of

occupier and entrant onto property.5758 The question had to be asked, for example,
is the plaintiff an invitee or a licensee? and whether the duty existed and its
scope was determined by the answer to that very specific question. In Australian
Safeway Stores Pty Ltd v Zaluzna5960proximity was used to soften the categories
of occupiers liability - they lost their determinative nature, and became merely
guides. In that case the majority rejected the categorical approach, referring to
the statement of Deane J in Hackshaw v Shaw.
All that is necessary is to determine whether, in all the relevant circumstances,
including the fact of the defendant’s occupation of the premises and the manner of
the plaintiffs entry upon them, the defendant owed a duty of care under the
ordinary principles of negligence to the plaintiff. A prerequisite of any such duty is
that there be a necessary degree of proximity of relationship.
In Hackshaw v Shaw, Deane J referred to the notion from Southern Portland
Cement v Cooper61 that a trespasser has caused the neighbourhood relationship
to be forced on an occupier by his or her trespassing. This fact transformed the
relationship of proximity into one which reduced the scope of the duty
requirement. Justice Deane said that more would be required in such a situation
to establish a duty of care than the mere status as an entrant. In Hackshaw v
Shaw the usual relationship between trespasser and occupier was altered by the
occupier’s shooting into the car in which the appellant trespasser was huddled as
a passenger. This created a level of risk (reasonably foreseeable) which operated
to transform the relationship from what it would have been within the pure
category of occupier’s liability.
Similarly, using proximity-as-principle, negligence overtook the Rylands v
Fletcher category in Burnie Port Authority v General Jones Ltd,61623 and the
judgment of Mason CJ, Deane and Gaudron JJ in Bryan v Maloney63 expanded
the duty of care into a new category. In that case the court held that a builder
could owe a duty of care to a subsequent purchaser of a house. The court did
that, not by analogy between builders and purchaser’s contracts, but by use of
proximity-as-principle - that is, they looked to see if there were in the
relationship elements resonating with moral ideas of responsibility - assumptions
of responsibility, reliance and vulnerability. Chief Justice Mason, Deane and
Gaudron JJ said:

57 Jaensch v Coffey, note 2 supra.

58 See, among myriad examples, Indermauer v Dames (1866) LR 1 CP 274 (duty to invitee), Lipman v
Clendinnen (1932) 46 CLR 550 (duty to licensee). There were up to five other possible categories o f
entrant and the duty would differ according to each category.
59 Note 55 supra.
60 (1984) 155 CLR 614 at 662.
61 [1974] AC 728.
62 Note 49 supra.
63 Note 50 supra.
2000 UNSW Law Journal 45

Upon analysis, the relationship between builder and subsequent owner...is marked
by the kind of assumption of responsibility and known reliance which is commonly
present in the categories of c^se in which a relationship of proximity exists with
respect to pure economic loss.64
Here, the assumption of responsibility and reliance was based on the level of
control the builder had over the situation (the foundations of the house)
compared to the control of a subsequent purchaser (who could not inspect the
foundations because they had been built over). The judges referred to the
categories of case, but what they were looking for was an underlying conceptual
determinant of liability which transcended the categories.
Of course, transcending the categories brings with it the prospect of an ever-
expanding negligence law. For example, in Northern Territory v Mengel,65 the
majority (Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ, in a joint
judgment, with Deane J in a separate judgment), using proximity-as-principle
thought negligence could cover the area of misfeasance in public office, but
Brennan J disagreed, strongly distinguishing the two torts.66 Throughout the
period of proximity-as-principle’s ascendancy, Brennan J continued to resist it.67
His approach was incremental, using reasonable foreseeability and analogy.68
The House of Lords has consistently preferred the approach taken by Brennan
CJ.69 Though the Law Lords referred to this approach as ‘incrementalism’, they
have largely used incrementalism in relation to a three-stage test, which appears
to be somewhat different from Justice Brennan’s practice in incrementalism. The
three-stage test involves
(a) reasonable foreseeability
(b) proximity (in the sense that there should be the required type of
relationship between the parties in particular categories of duty) and
(c) that it should be “fair, just and reasonable” to impose a duty in the
situation.70
Thus, the House of Lord’s incrementalism and rule-based proximity are very
similar. Incrementalism may be contrasted with the approach of the Canadian
Supreme Court, which continues to use a test derived from Lord Wilberforce’s
two-stage test in Anns71 - that is: (1) relationship of neighbourhood between the

64 Ibid at 627; 128 ALR 163 at 171-2.

65 (1995) 185 CLR 307.
66 Ibid at 359, per Brennan J.
67 See, for example, Hawkins v Clayton , note 51 supra at 555; Gala v Preston , note 47 supra at 259.
68 Sutherland Shire Council v Heyman, note 27 supra at 482 and accompanying text which sets out the
quotation.
69 Caparo, note 3 supra ; Murphy v Brentwood District Council, note 25 supra', Yuen Kun Yeu v Attorney
General Hong Kong, note 25 supra at 191.
70 Caparo, note 3 supra at 617, per Lord Bridge.
71 Anns, note 11 supra at 751; in Canada: Nielsen v City o f Kamloops (1984) 10 DLR (4th) 641; Diversfield
Holdings Ltd v The Queens in right o f the Province o f British Columbia (1982) 143 DLR (3rd) 529;
Canadian National Railway Co v Norsk Pacific Steamship Co Ltd, note 53 supra', Winnipeg
Condominium Corporation No 36 v Bird Construction Co [1995] 1 SC R 85.
46 Principle in the Duty o f Care in Negligence Volume 23(2)

parties leads prima facie to a recognition of duty unless72 (2) policy factors
prevent liability. New Zealand has also continued to use the two-stage test,73 the
Court of Appeal defending the New Zealand approach as an indigenous form of
the Anns test.7475
All these judges resisted the notion of proximity as it was posited by Deane J
and the majority of the High Court in the 1980s. It is submitted that proximity
was much misunderstood, and that there was an unfortunate failure of
communication from the Bench when using it. For example in Burnie Port
Authority v General Jones Ltd, Mason CJ, Deane, Dawson, Toohey and Gaudron
JJsaidofproximity-as-principle:
[I]ts practical utility lies essentially in understanding and identifying the categories
of case in which a duty of care arises under the common law of negligence, rather
than as a test for determining whether the circum.stances.pf a particular case bring it
within such a category, either established or developing.
It is submitted that this is an example of failure to communicate what proximity-
as-principle means rather than a failure of the concept. Implicit in the statement
is that one understands and identifies any categories of case where a duty might
exist by reference to human notions of responsibility and relationships, which
include reliance, vulnerability and control. But the statement should have been
explicit in order for people to see it as substantive rather than a vague allusion to
morality. The reference to categories in the statement draws the reader away
from the ideas of social responsibility and focuses them on the categories, when
the concept of proximity-as-principle was intended to be directed at the ideas of
responsibility first, and then only secondarily to the categories of negligence
law.76 The context in which this statement was made refers us to reliance,
vulnerability, control and responsibility within the context of human
relationships. To say proximity is not a test for determining whether the case is
within the category is simply another way of saying that within the category the
doctrine of precedent will govern the category in the ordinary way. The major
role for proximity-as-principle was therefore in examining new categories.
Proximity-as-principle was an attempt to provide criteria outside established
categories on the basis of underlying conceptual determinants which would be
acceptable to the legal and general community. The use of a principle is often
attractive to lawyers, because it appears to promise coherence. However,
principles operate at a relatively high level of abstraction or generality when
compared with rules. This can give them flexibility, but they may then not work
adequately in application to particular cases. If it had been possible to articulate

72 The Canadian version emphasises the relationship where Lord Wilberforce emphasised reasonable
foreseeability.
73 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2
NZLR 282; Invercargill City Council v Hamlin [1996] AC 624; Scott Group v McFarlane [1978] 1
NZLR 553; First City Corporation Ltd v Downsview Nominees Ltd [1990] 3 NZLR 265; Takaro
Properties Ltd v Rowling [1978] 2 NZLR 314.
74 Brown v Heathcote County Council [1986] 1 NZLR 76 at 79, per Cooke P; Invercargill City Council v
Hamlin [1994] 3 NZLR 513.
75 Note 49 supra at 543.
76 See P Vines, note 4 supra.
2000 UNSWLaw Journal 47

that notion of human responsibility more clearly - with more concrete examples,
for instance - proximity-as-principle might have been accepted and worked in a
predictable way. All the factors which were seen as important to proximity-as-
principle were about power - where power was unbalanced between two parties,
a duty of care was more likely to be found. Reliance, vulnerability and control
are all aspects of power relationships. Ultimately the court might have developed
a law of negligence which operated to redress power imbalance. This would
have been a substantive issue, not merely a label and it would also be more
predictable in that the highly abstracted nature of the general principle would be
more readily applied to particular situations.

V. RECENT CASES IN THE HIGH COURT - MOVING FROM

PRINCIPLE TO RULE?

Recent cases in the High Court have shown that the use of proximity-as-
principle as outlined above has been eroded. It seems that the court is retreating
to a rule- or category-based (rather than principle-based) approach to the law of
negligence. The following cases illustrate the shift away from principle and
towards rule-oriented analogy. However, this has not led to certainty. Each case
is complex, and it is relatively difficult to establish a ratio decidendi because of
the differences amongst the judgments in each case.

A. Recent decisions
In Hill v van Erp,11 a solicitor failed to prevent the witness-beneficiary rule
from invalidating a gift under a will. Hill v van Erp illustrates the fragmenting of
the treatment of proximity in the High Court. Five judges held that the appeal
should be dismissed, but their reasons differed. Justice McHugh dissented. Chief
Justice Brennan, as one would expect, dealt with the case by an incremental
approach, much of it based on the House of Lords judgment in White v Jones.778
Chief Justice Brennan’s reliance on White v Jones is significant because the
majority of the House of Lords in that case emphasised the small category or
‘pocket’ of solicitor’s liability.7980 He thus treated the case as a case in the
category of solicitor’s liability for negligence and applied the test of the
specifically foreseeable plaintiff from Caltex Oil.*0 He did not mention proximity
at all, but he did discuss some of the policy problems raised by pure economic
loss, such as indeterminate liability. He said they did not apply in this case.
Justice Dawson discussed proximity extensively. He said in effect that
proximity is the label given to the “something extra” needed in addition to
reasonable foreseeability to justify the duty of care. He said the first question is

77 Note 35 supra. See M Vrankin, “Negligent Solicitors and Compensation for Economic Loss: Hill v van
Erp ” (1997) 5 (1) Torts Law Journal 1.
78 [1995] 2 AC 207.
79 But note that Lord Mustill, in dissent, specifically refused to create such a category: White v Jones , ibid
at 291.
80 Caltex Oil(Aust) Pty Ltd v the Dredge ‘Willemstadt’ (1976) 136 CLR 529 (“ Caltex 0/7”).
48 Principle in the Duty o f Care in Negligence Volume 23(2)

to decide what category of case is being dealt with and that “proximity expresses
the result of a process of reasoning rather than the process itself, but it remains a
useful term because it signifies that the process of reasoning must be
undertaken”.81 In his judgment, the content of proximity is determined by the use
of decided cases and analogy. He suggested that Justice Deane’s proximity and
Justice Brennan’s incrementalism are very similar “in that the reasoning
employed to formulate the particular requirements of proximity do not reflect a
unifying theme”.82 This reflects a frequent mistake which conflates rule-based
proximity with proximity-as-principle. He also decided the case as a case in the
category of solicitor’s liability on the basis that the proximate relationship arises
from the fact that the solicitor is a professional person of specialised skill and
knowledge who has control over the situation - and indeed, that is the very
purpose for which the solicitor was engaged.
Justice Toohey generally agreed with Dawson J but he made a special
statement on proximity in which he said that proximity is concerned with
categories of cases rather than whether proximity exists in the particular case.83
At the same time he was concerned to maintain the view of proximity as a
general conceptual determinant of the duty of care. He appeared to be attempting
to maintain proximity-as-principle, but his emphasis on the categories as the first
consideration suggests he was actually using a form of incrementalism.
Justice Gaudron championed proximity-as-principle, and argued that the
charge of imprecision applied just as much to incrementalism as to proximity.
Her view of the test for the duty of care was that a special relationship of
proximity was required and she referred to Burnie Port Authority v General
Jones Ltd*4 and Hawkins v Clayton85 as cases where control was central to the
duty of care. Justice Gummow agreed with Dawson and McHugh JJ that
proximity is the expression of a result rather than a principle, but said that it was
going too far to say that no principles emerge from it. He took a categorical
(rule-based) approach to proximity, and then appeared to deal with the case by
deciding whether there was a gap in the law which negligence should fill. He
decided that it should on the basis of the solicitor’s level of control in the
situation.
Although Dawson, Toohey, Gaudron and Gummow JJ all used the term
‘proximity’, only Toohey and Gaudron JJ saw it as a conceptual determinant of
the duty of care. Thus most references to proximity were to ‘rule-based’
proximity. All the judges thought ‘something extra’ was required to establish the
duty; they all discussed policy factors - in particular those associated with pure
economic loss, namely indeterminate liability, economic advantage and the
effect on other areas of law. Only McHugh J, who dissented, saw these as
significant problems - these policy issues were central to his denial of the duty of
care. However, the issue of the level of control the defendant had over the

81 Hill v van Erp, note 35 at 178.

82 Ibid.
83 Ibid at 189, per Toohey J.
84 Note 49 supra.
85 Note 51 supra.
2000 UNSWLaw Journal 49

situation of the plaintiff appeared to emerge as a the major factor in determining

the duty of care, whether couched in terms of proximity or not. Thus the label for
the test for the duty of care was uncertain, but there was substantial agreement
about the outcome.
The issue for the High Court in Esanda86 was whether, in an action for
negligence for pure economic loss, it is sufficient to argue only that it was
reasonably foreseeable by the auditor that, in entering into financial transactions,
creditors and financiers of a corporation might rely on the audited accounts of
the corporation along with an unqualified auditor’s report on them. The High
Court held unanimously that the appeal should be dismissed, and the judges
accepted San Sebastian8789 as correctly stating the law as to negligent
misstatement. Neither Brennan CJ nor McHugh or Gummow JJ mentioned
proximity, and they all, in separate judgments, determined the case on the basis
that the category required reasonable reliance and that the information should be
communicated for a purpose likely to lead the plaintiff R enter into a transaction.
This followed the content of proximity in Caparo. Justice Dawson, and
Toohey and Gaudron JJ in a separate joint judgment, all discussed proximity.
Justice Dawson said proximity was required and could be shown in a number of
ways, the relevant ones here being reasonable reliance and recognition of the
purpose for which the statement was made. Justice Toohey and Gaudron J
acknowledged some of the indeterminacy of proximity but held that it must be
shown in order to establish a duty of care. Once again they related the content of
proximity to control and the assumption of responsibility (that is, where it is or
should be known that the information will be acted on for a serious purpose).
Thus the factors required to establish the duty of care in this category were
very similar for all the judges. The only judge to discuss policy issues was
McHugh J, who did so in depth, considering policy problems created by the
extension of liability (including a likely increase in the cost of auditing, the
reduction in competition for auditors and a reduction in standards of auditors)
and its effect on the administration of the court system, and the further policy
question of who are better placed to absorb losses - auditors, or investors and
creditors.
In Northern Sandblasting v Harris,90 the respondent, Nicole Harris, was nine
when she was electrocuted by the garden tap in her garden, and suffered brain
damage, leaving her in a vegetative state.91The respondent argued, inter alia, that
the landlord owed a common law duty to ensure that the electrical system in the
premises was let in a safe condition (that is, they should have inspected the
switch box), and that the landlord owed a non-delegable duty to Nicole in

86 Note 34 supra. See C Phegan, “Reining in Foreseeability: Liability o f Auditors to Third Parties for
Negligent Misstatement” (1997) 5(2) Torts Law Journal 123.
87 Note 3 supra.
88 Note 3 supra.
89 Esanda , note 34 supra at 781 ff.
90 (1997) 188C L R 313.
91 She died some three weeks before the High Court handed down its decision.: G Orr, “The Glorious
Uncertainty o f the Common Law? Northern Sandblasting Pty Ltd v Harris” (1997) 5(3) Torts Law
Journal 208.
50 Principle in the Duty o f Care in Negligence Volume 23(2)

relation to the stove, to ensure that reasonable care was taken with the
electrician’s work. In the result the landlord was held liable by a majority of four
(Brennan CJ, Toohey, Gaudron and McHugh JJ) to three (Dawson, Gummow
and Kirby JJ dissenting), but there was no majority holding on any one of the
arguments.
A majority of the judges clearly dealt with ordinary duty of care by reference
to Donoghue v Stevenson, or ordinary foreseeability of harm, rejecting the rule in
Cavalier v Pope.92934Only Toohey and McHugh JJ thought that the landlord owed
a non-delegable duty to Nicole. In considering non-delegable duty, Brennan CJ
and Dawson and Gaudron JJ appeared to consider whether it was a hazardous
activity. Justice Toohey, McHugh, Gummow and Kirby JJ all emphasised the
elements of special vulnerability, and control, referring to Bumie Port Authority
v General Jones L td 93 Justice Gaudron, Toohey and McHugh JJ discussed
proximity specifically, and Dawson and Kirby JJ did so implicitly when they
used the language of ‘special relationship’. All the judges except Toohey J were
using rule-based proximity. In his discussion of proximity, Toohey J emphasised,
as he had in the previous two cases, the use of proximity in relation to novel
categories - he said that the first step is to establish an analogy with a previous
category, and then to decide by the use of policy whether the category should be
added or extended. His judgment appears to be a mixture of proximity-as-
principle and rule-based proximity or incrementalism.
The approaches taken by the judges to the duty of care in Pyrenees Shire
Council v Day94 once again varied a great deal. The case concerned the council’s
failure to notify the occupiers of a defect in a fireplace which ultimately caused
damage to the premises next door. Justice Toohey approached the duty of care
on the basis that the requirements of reasonable foreseeability and proximity
must be met, and that, in this case, the scope and content of proximity depended
on reliance. Here he drew on the treatment of general reliance by the House of
Lords in Stovin v Wise95 (that is, where the plaintiff is dependent on the local
authority for protection). He said that proximity embraces reasonable
foreseeability and fairness of application of duties.
Justice McHugh also used the language of general reliance. His approach to
the duty of care was to say that, where there was an omission, in order to
establish a common law duty there must be a special relationship. Such a
relationship might arise from ownership, occupation or control of land or
chattels, from the receipt of a benefit, or from assumption of responsibility. In
this case the relationship arose because of general reliance. He pointed out that
general reliance only arises where the situation is too complex or of such
magnitude that ordinary individuals cannot take care of themselves in relation to
it - or where individuals are especially vulnerable.
The majority, who held that a duty was owed to both the Days and the owners
and tenants of the other property, took other approaches. Chief Justice Brennan

92 [1906] AC 428.
93 Note 49 supra.
94 Note 24 supra.
95 [1996] AC 923.
2000 UNSW Law Journal 51

rejected the general reliance approach and held that the duty arose as a breach of
statutory duty, taking the incremental approach. Justice Gummow also rejected
general reliance. To determine the duty of care he took the approach of Dixon J
in Shaw Savill and Albion Co Ltd v Commonwealth,9 namely that the
circumstances of the defendant are significant and where an omission is alleged,
the character in which he acted and the nature of the duties the defendant was
performing are significant to the duty, and the court should consider both reason
and policy. He held that the touchstone of the shire’s duty was its control
(including its knowledge that the possibility of the fire was great, and the fact
that only shire officers knew) over the safety of persons from fire. This
established a duty of care.
Justice Kirby preferred to consider general reliance in the context of
proximity in the three stage test from Caparo. Applying that test here, he
considered the first two stages to be met, and in relation to the third stage he
emphasised the policy issues relating to statutory authorities and concluded that
they were not sufficient to preclude duty. He held the council was liable to all
the defendants.
Another strong illustration of varieties of incrementalism appeared in Romeo v
Conservation Commission o f the Northern Territory91 where the majority
proceeded in classic common law form to look at the rules established within
particular categories, and applied those rules in a fairly narrow form of
incrementalism. Justice Brennan used the category of breach of statutory duty.
Justice Toohey, Gummow and Gaudron JJ all considered the issue by
considering the duty owed to members of the public who enter onto public land.
Justice Kirby’s approach, with its emphasis on justice and fairness in the Caparo
test could be characterised in Stanton’s terms as broader incrementalism when he
observed that “the law of negligence must ultimately respond to common notions
of fairness and justice”.96978

B. What approach to the duty of care binds courts below?

In Richards v State o f Victoria,9910in the Victorian Court of Appeal, Callaway
JA considered the problem of how to approach the duty of care in Australia. He
noted the confusion engendered by the range of different approaches being made
by recent judgements and decided to resolve it by use of the strict doctrine of
precedent. He said that the High Court had made binding statements requiring a
two-stage test of reasonable foreseeability and proximity as a conceptual
determinant of the duty of care in a series of cases, stating the test as it was
posited in Gala v Preston100 and referred to Bryan v Maloneym as the last
authoritative statement where a majority of the High Court stated a test for the

96 (1940) 66 CLR 344 at 360-361 cited by Gummow J in Pyrenees SC v Day , note 24 supra.
97 Note 24 supra.
98 Ibid at 476. The main issue in the case was the standard o f care, but naturally the court considered how
the duty o f care should be approached.
99 Richards v State o f Victoria [1998] VCSA 103 (“Richards”).
100 Ibid at [8], per Callaway JA, citing Gala v Preston , note 47 supra.
101 Ibid at [8], per Callaway JA, citing Bryan v Maloney, note 50 supra.
52 Principle in the Duty o f Care in Negligence Volume 23(2)

duty of care. He then interpreted Hill v van Erp as having possibly relaxed the
test somewhat, except in cases of physical injury caused by failure to warn. He
then said:
We cannot depart from binding statements simply because a majority of the pres^gj
members of the High Court of Australia might be thought to take a different view.
By contrast, in CSR v Wren,1 02103 the NSW Court of Appeal took a different view
of what authority in the High Court required of them. In this case an employee of
a subsidiary of CSR developed asbestosis and mesothelioma from breathing in
asbestos fibres at the factory where he worked. The question was whether CSR
owed a duty of care to Wren, even though he had been employed not by them,
but by their subsidiary. The case thus raised issues about competition between
corporate law and tort law.104105Justices of Appeal Beazley and Stein relied on
Justice Dawson’s approach in Hill v van Erp. They emphasised, as had the
majority in Hill v van Erp, that proximity’s role was to provide the extra
requirements beyond reasonable foreseeability that would establish a duty of
care, but that proximity is the result rather than a process. They appeared to see
the establishment of a duty of care in three stages - first determine reasonable
foreseeability of harm and use the category of case to decide what extra is
needed to establish a duty; then if this is a new category, use analogy with
established categories to incrementally establish new ones, and third, use policy
to decide whether the new categories can be justified. This is an amalgam of
general incrementalism and the Caparo test.
The recent decision in Perre v Apand105 does not appear to relieve the
situation. The case concerned pure economic loss caused to potato producers
because a seed company, Apand, had negligently introduced infected seed into
an adjacent property. There was a strong emphasis on policy issues in all the
judgments - both in relation to indeterminate liability, and to the need to deal
with pure economic loss in a way which does not interfere with commercial
imperatives. Justice Gaudron noted that commercial imperatives often impliedly
allow pure economic loss with impunity, and Gleeson CJ and Gummow J both
emphasised that contract would normally govern such losses in a commercial
setting. They both discussed the matter in terms of interference with other legal
doctrine. Justice Gummow emphasised a concern that debate about pure
economic loss may turn on an ‘unarticulated premise’ that the common law
values competitive conduct.
Chief Justice Gleeson agreed with Justice Gummow’s reasons that the duty of
care existed, noting that actual foresight of the likelihood of harm had existed.
Gummow J held that the test was reasonable foreseeability of harm, with the
emphasis on reasonableness. He said the first step should be to identify the
interest to be protected (this was similar to the judgment of Gaudron J in
Hawkins v Clayton). Courts may deal with pure economic loss differently if the

102 Ibid.
103 (1997) 44 NSW LR 463.
104 See P Edmundson and P Stewart, “Liability o f a Holding Company for Negligent Injuries to an Employee
o f a Subsidiary: CSR v Wren” (1998) 6 Torts Law Journal 123.
105 Note 1 supra.
2000 UNSWLaw Journal 53

act or omission amounts to an impairment of an existing right. If so, the

approach to be taken is to see if the risk to the interest or right was foreseeable
and whether sufficient proximity exists to establish a duty, and the second step is
to look at the defendant’s conduct. Here the commercial interests had been
impeded by a denial of access to their main market. He said that the area of pure
economic loss caused by such acts was a ‘gap’ in the common law and the
question was whether negligence could fill it. He answered that it could if it
would not cut across a well-developed body of doctrine and if the particular
connections between the parties showed that the relationship was so close that
the duty of care arose. Here the salient features of the relationship were
knowledge and control by the defendant and the vulnerability of the plaintiff.
Justice Kirby was the only judge to think the solution to the issues created by
the duty of care in this case lay in using the Caparo test.106 His approach to
policy was to consider it as part of the third stage of the duty inquiry as
formulated in Caparo. That is, as part of the “just, fair and reasonable” part of
the test.
Justice Gaudron’s approach to the duty of care was also to ask what interest
had been infringed. She referred to three previous pure economic loss cases107
which she characterised as in the category of cases where pure economic loss is
caused by impairment of a legal right, noting that all these cases had arisen
where plaintiff depended on the defendant, or the defendant had control over the
ability to maintain that legal right. She said that the factors of control and the
other’s dependence together give rise to a relationship of proximity or may be
regarded as special factors which lead the law to impose liability.108109 She
accepted that proximity now signified only the special factors of significance
required to establish a duty of care, and observed:
In my view, where a person knows or ought to know that his acts or omission may
cause the loss or impairment of legal rights and that latter person is in no position to
protect their rights there is a relationship giving rise to a duty of care.1
Justice McHugh noted that the search for a new framework for negligence law
“may be a long one”, and that proximity-as-principle was in demise. He referred
approvingly to the Caltex Oil case but said that it is not necessary to have a
specifically foreseeable individual to establish a duty of care. He said one should
use the incremental approach to the duty of care. If the case fits into a category,
apply the rules of the category; if not, ask if the harm was reasonably
foreseeable. If it was not, there is no duty; if it was foreseeable, then one should

106 Ibid. Chief Justice Gleeson at 610 and McHugh J at 624-626 rejected the Caparo test. Justice Gummow
did not discuss it. Justice Gaudron at 613-614 mentioned it but did not want to use it. Justice Hayne at
698-699 mentioned it but thought it was not very useful, and thought the third stage o f the test - “fair
just and reasonable” - was particularly problematic. Justice Callinan at 716 thought it unnecessary to
consider Caparo because the High Court o f Australia has been taking a different path from the House o f
Lords.
107 Bennett v Minister for Community Welfare (1992) 176 CLR 408 (right to bring action for damage for
personal injury); Hawkins v Clayton, note 51 supra (right to apply for probate) and Hill v van Erp, note
35 supra (right to inherit).
108 Perre v Apand, note 1 supra at 617, per Gaudron J.
109 Ibid .
54 Principle in the Duty o f Care in Negligence Volume 23(2)

examine the analogous cases to decide whether a duty was owed. He then gave
some guidance about how to examine those analogous cases - the reasoning in
those cases which established whether a duty existed or not should be treated as
principles in that category, and if really decisive, in other categories. This is an
echo of the treatment of duty of care by Toohey J in Hill v van Erp and Northern
Sandblasting v Harris, and of Justice Dawson’s approach in Hill v van Erp and
is the foundation of the approach taken by the NSW Court of Appeal in CSR v
Wren.
In cases like this one about pure economic loss, McHugh J said, one should
ask whether the defendant should have had the interests of the plaintiff in mind.
In determining this, policy issues will be important factors. If imposing a duty
would create indeterminacy (the floodgates problem) or prevent conduct
legitimately protecting or pursuing business interests, then no duty will be
imposed. However, the fact that neither of these problems arises, does not
automatically mean the duty will exist. The decisive factor, he said, is often
vulnerability and actual knowledge of the risk and its magnitude. Vulnerability
may include reliance and assumption of responsibility.110
Justice Hayne agreed that proximity works only as a description of a result.
He also saw policy as highly significant in establishing a duty of care where the
loss is purely economic. He agreed with the other judges that the policy issues
were indeterminate liability and the need “not to establish a rule that will render
‘ordinary’ business conduct tortious”.111 In order to deal with this question one
should ask what the position would have been if the action had been done
deliberately. Justice Callinan echoed this concern when he said that what had
happened was not the result of ordinary legitimate commercial activity. Justice
Callinan followed Caltex Oil and noted that the law was still developing
piecemeal. He said one has to consider “proximity, foreseeability, a special
relationship, determinacy of a relatively small class, a large measure of control
on the part of the respondent, and special circumstances justifying the
compensation of the appellants for their loss”.112
Once again, a range of approaches seemed to arise in Perre v Apand, despite
the discussion by the judges of the need to develop a coherent approach to the
issue.11314As McHugh J said
Indeed, since the fall of proximity, the Court has not made any authoritative
statement as to what is to be the correct approach for determining the duty of care
question. Perhaps none is possible. At all events, the differing views of the members
of this Court in the present case suggest that the search for a unifying element may
be a long one.1
Consistent themes appear in the judgments, however, notably the fact that
McHugh, Kirby, Hayne, and Callinan JJ all emphasised policy matters in their

110 Ibid at 631 ff, per McHugh J.

111 Ibid at 699, per Hayne J.
112 Ibid at 717, per Callinan J.
113 Ibid at 613, per Gaudron J; at 659, per Gummow J: at 668, per Kirby J at 668; at 698, per Hayne J; at
716, per Callinan J.
114 Ibid at 624.
2000 UNSW Law Journal 55

analysis of rules about the duty of care. Similarly, the emphasis on control and
vulnerability as determinative factors for the establishment of a duty of care
continues to be fundamental to all the judgments.
More recently, in Crimmins Case,ns the High Court again considered the duty
of care in deciding (Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ,
Gummow and Hayne JJ dissenting) that a duty was owed by the waterside
authority to a worker who developed mesothelioma as a result of exposure to
asbestos cargoes. The leading judgment is that of McHugh J, with whom
Gleeson CJ agreed. Justice McHugh held that a duty was owed because of the
vulnerability of the plaintiff as a result of the directions of the authority. The
issue of control and vulnerability as the factual determinant of the duty of care
was also a central factor in many of the other judgments.11516
Justice McHugh observed that the correct approach in determining whether a
duty of a statutory authority arises is “to commence by ascertaining whether the
case comes within a factual category where duties of care have or have not been
held to arise”.117 He thus began with a strongly incrementalist approach, but he
continued:
The policy of developing novel cases incrementally by reference to analogous cases
acknowledges that there is no general test for determining whether a duty of care
exists. But that does not mean that duties in novel cases are determined by simply
looking for factual similarities in decided cases or that neither principle nor policy
has any part to play in the development of law in this area. On the contrary, the
precedent cases have to be examined to reveal their bases in principle and policy.
He went on to explain that close use of analogical reasoning can allow the
principle and policy in earlier cases to be adapted and “[i]n this way, the reasons
in each new case help to develop a body of coherent principles...”.118 Justice
McHugh acknowledged the risk that an extreme incrementalism could become so
fragmented that it ultimately becomes merely “the exercise of a [judicial]
discretion”.119 His approach to incrementalism attempted to deal with that by a
sophisticated use of analogy. But he still yearned towards principle of some kind.

VI. CONCLUSION

The history of negligence law, like that of all areas of law, has been a history
of change and competing dominant rules and theories, and this is nowhere more
true than in the history of the duty of care. Donoghue v Stevenson established the
neighbourhood principle, which itself was a departure from what might be seen
as the previously dominant incrementalism. Since then, various tests have come

115 Note 28 supra.

116 Ibid at 13, per Gaudron J; at 72ff, per Hayne J (with whom Gummow J generally agreed; the dissenters
thought the authority was not in control); at 87, per Callinan J. Justice McHugh, Gummow, Hayne and
Callinan JJ all clearly took an incrementalist approach. Justice Kirby continued to use the Caparo test,
and Gaudron J emphasised the vulnerability o f the worker in her use o f the doctrine o f general reliance.
117 Ibid a t\6 .
118 Ibid at 19.
119 Ibid at 20; Gummow J also noted this problem at 40.
56 Principle in the Duty o f Care in Negligence Volume 23(2)

and gone.120 But part of the dynamic of the common law is the constant search of
judges for doctrinal coherence, and this frequently leads to a search for an
underlying principle.121 Proximity-as-principle could have gone further towards
dealing with the problem of predictability, if the court had been willing to
articulate more clearly what its view of the relationship between legal and moral
responsibility was. Proximity-as-principle was founded, as the neighbourhood
principle was, on a moral idea.12 Whether proximity-as-principle is something
unique or just a different way of expressing the constant flow between levels of
generality in legal reasoning may not be important. The fact that the tests vary
and that the judgments run them together may not be important either. Does this
lead us to the conclusion that the tests don’t matter at all? What role do the tests
play?
The answer may be that it is necessary for the tests to swing between the
emphasis on the principle and the emphasis on the category so that a sense of
coherence is maintained over time - a purely principled approach can lead to a
sense of uncertainty or lack of concreteness and a purely categorical approach
will lead to a sense of rigidity and arbitrariness. But, as the judges themselves
acknowledge, at present we seem to have the worst of both worlds. Narrow
forms of incrementalism may seem arbitrary and unreal because the choice of
category is itself arbitrary. Some kind of framework is necessary, and the judges
need to agree on what it is.
These cases illustrate the difficulties of discerning a test for the duty of care in
negligence in Australia at present. It is clear that proximity-as-principle is in
decline. Its last adherents are Toohey and Gaudron JJ, only one of whom
remains on the High Court Bench, and she appears to have conceded defeat.123
Where proximity is discussed it appears to be rule-based proximity. The
elements of proximity within categories appear to be the same as the ‘extra
factors’ used for incrementalism - that is, reliance and purpose, professional
relationships, the elements of control and vulnerability. Policy factors are clearly
important - but again, they are most likely to be determined by the category and
therefore to fit into a form of incrementalism. However, although they might all
be called incrementalist, there is no agreement on a framework which would
assist with predictability. The incrementalism itself is fragmented.
This suggests that the narrow form of incrementalism (which includes rule-
based proximity) is unlikely to remain satisfactory for long, and we are likely to
see either, a form of incrementalism which allows greater scope for principle
(which is what McHugh J is clearly looking for in Crimmins), or, the

120 As J McHugh points out in “Neighbourhood, Proximity and Reliance”, note 52 supra.
121 See, inter alia, N MacCormick, “Donoghue v Stevenson and Legal Reasoning” in P Bums and S Lyons
(eds), Donoghue v Stevenson and the Modern Law o f Negligence (1991) 191; G Christie, “The Uneasy
Place o f Principle in Tort Law” in D Owen (ed), Philosophical Foundations o f Tort Law (1995) 113.
122 Donoghue v Stevenson , note 5 supra at 580, per Lord Atkin. He noted the basis o f the rule as “a general
public sentiment o f moral wrongdoing for which the offender must pay” and went on, “[t]he rule that you
are to love your neighbour becomes in law, You must not injure your neighbour, and the lawyer’s
question, Who is my neighbour? receives a restricted reply...The answer seems to be - persons who are
so closely and directly affected by my a ct...”.
123 Perre v Apand , note 1 supra at 614, per Gaudron J; Crimmins, note 28 supra at 4, per Gaudron J.
2000 UNSW Law Journal 57

development before long, of yet another principle in the long chain which began
with the neighbour principle in Donoghue v Stevenson. The court is looking for a
framework which can reconceptualise the duty of care. They seem to trust that
this will emerge eventually,24 but until they agree with each other the
fragmentation and confusion will continue.

124 Ibid at 624, per McHugh J at 624; at 658-660, per Gummow J; at 667ff, per Kirby J; at 696ff, per Hayne
J; at 717, per Callinan J.