Australia: Hamcor Pty Ltd v State of Queensland: implications for local government

On 1 October 2014, the Supreme Court of Queensland delivered its decision in the matter of Hamcor Pty Ltd & Anor v State of Queensland & Ors [2014] QSC 224. The decision has important implications for local governments, widening the circumstances in which local governments may be at risk of civil liability, particularly in negligence.

BACKGROUND

The background to the case is complex, and concerns a number of issues not directly relevant for present purposes. In this case note, we have summarised the key facts relevant to the case's implications for local governments.

The case arose out of a fire in August 2005 at a chemical factory owned by Hamcor Pty Ltd (Hamcor). In responding to the fire, the Queensland Fire and Rescue Service (QFRS) attempted to extinguish the fire using significant volumes of water. However, because the fire was a chemical fire, this had serious adverse consequences.

The water combined with the factory's chemicals to product a large quantity of contaminated fluid. This fluid escaped into nearby bushland, and into the soil and building slabs of Hamcor's premises. This caused the premises to become contaminated land, resulting in remediation costs to Hamcor in excess of $ 9 million (significantly greater than the land's value).

As a result, Hamcor commenced proceedings against the State in negligence.¹ Hamcor alleged that the QFRS had been negligent in seeking to extinguish the chemical fire with water, rather than simply containing the fire and allowing it to burn out. Hamcor claimed that, but for QFRS's negligence, Hamcor would have been able to avoid the significant remediation costs arising from the seepage of the contaminated water.

DECISION

The Supreme Court, comprised of Dalton J, ultimately dismissed Hamcor's claim against the State. However, aspects of its reasoning have important, and concerning, implications for the potential civil liability of public authorities, including local governments.

In order to make out its case in negligence, Hamcor was required to prove that the State owed Hamcor a duty of care, that the State breached its duty, and that the breach caused loss to Hamcor.

The Court accepted the State owed Hamcor a duty of care, holding that once the QFRS attended Hamcor's land and began exercising its statutory powers as a specialist agency, it became subject to an obligation to take reasonable care to protect Hamcor's property in exercising its powers.

The Court also held that the State had breached this duty of care. The Court held that, apart from in relation to a number of specific areas of the site, it was not reasonable for the QFRS to have used water in its efforts to extinguish the fire. Justice Dalton noted that at all times QFRS had been aware of the risk posed by contaminated water, and that there was no evidence that QFRS had considered the "reasonable" alternative strategy of simply allowing the fire to burn out.

Importantly for local governments, the State also unsuccessfully sought to argue that the "standard of care" by which its alleged breach was to be assessed should have been reduced by section 36 of the Civil Liability Act 2003 (Qld) (CLA).

That section provides as follows:

36 Proceedings against public or other authorities based on breach of statutory duty

(1) This section applies to a proceeding that is based on an alleged wrongful exercise of or failure to exercise a function of a public or other authority.

(2) For the purposes of the proceeding, an act or omission of the authority does not constitute a wrongful exercise or failure unless the act or omission was in the circumstances so unreasonable that no public or other authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its functions.

On its face, it would appear that the section would have been of significant assistance to the State in relation to QFRS's actions.

Indeed, the Court accepted that if the section applied, it would have protected the State from liability. At [210], Justice Dalton stated that an exercise of power will only be "unreasonable" for the purposes of section 36(2) if it is so unreasonable that it effectively invalidates, or makes improper, the exercise of power. Her Honour noted that this would be "extraordinarily difficult" for a plaintiff like Hamcor to prove. This illustrates the fact that the standard of unreasonableness required by section 36 is very high.

However, importantly, her Honour held that section 36 did not apply at all to a claim in negligence.

Despite the broad wording of section 36(1), Dalton J emphasised the heading to the section which refers to "breach of statutory duty". After considerable analysis, her Honour held that because of this, the section will only apply to a claim for "breach of statutory duty". "Breach of statutory duty" is a distinct cause of action from negligence, and is far less common.

Justice Dalton noted that if section 36 was intended to apply to negligence, its effect would be to "drastically" lower the standard of care expected of public authorities. Given this, Her Honour considered that such an intention would need to have been much more clearly expressed in the legislation.

Accordingly, the Court held that section 36 provided no protection whatsoever to the State in this case.

As noted above, the Court ultimately held that the State was not liable. This was due to a specific provision in the Fire and Rescue Service Act 1990 (Qld) which protected the QFRS from liability for any acts or omissions done pursuant to that Act. The Court held that the QFRS's actions had been undertaken pursuant to the Act, and so could not give rise to any liability.

IMPLICATIONS

The Supreme Court's narrow interpretation of section 36 of the CLA has serious implications for local governments and other public authorities. While the QFRS was able to avoid liability by relying on a specific statutory exemption, the Court's approach to section 36 significantly narrows the scope of that section.

Previously, the section was often understood as applying to any proceeding based on a public authority's wrongful exercise of power, or failure to exercise a power. For example, if a person threatened to commence negligence proceedings against a local government over a failure to take enforcement in relation to sewage runoff from a development, section 36 could have provided the local government with some comfort that unless its conduct was highly unreasonable, it would likely be protected from liability.

However, the effect of the Supreme Court's decision is that section 36 of the CLA will now no longer have any application outside of claims for a "breach of statutory duty". As noted above, "breach of statutory duty" is a relatively unusual cause of action, and is far less common than negligence. This means that, in a practical sense, section 36 of the CLA can no longer be seen to provide meaningful assistance to local governments.

Given this, local governments may now need to consider whether they should review any decisions that may have been taken in reliance on section 36 of the CLA, in case they now need to take further steps to reduce their potential liability.

Footnote

¹Hamcor's proceedings also included a separate insurance case against two further defendants. However, this case note does not consider that separate case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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