Thu, 17 Nov 2005 14:32:53 +1100
High Court of Australia on causation and policy issues
High Court of Australia has just handed down judgement in Travel
Compensation Fund v Robert Tambree t/as R Tambree and Associates
 HCA 69. The case concerns the issue of causation, for statutory
purposes under legislation prohibiting misleading and deceptive
conduct (specifically the Fair Trading Act 1987 (NSW) s
42, identical except that a man is not a corporation to s 52 of
the Trade Practices Act 1974 (Cth)). But the comments made
are explicitly said to also be relevant to causation for the purposes
of common law negligence - see para  per Gleeson CJ, para 
per Gummow & Hayne JJ, Kirby J at .
Travel Compensation Fund (TCF) is a body set up by the travel agents'
industry and the various State governments to provide compensation
for travellers who book trips with agents, who then take the money
but fail to provide the trips etc. A travel agency run by a Ms Fry
and her father went under after having previously been licenced
agents. Their previous approval as licenced agents had been granted
by TCF on the basis of 2 annual audit reports provided by Mr Tambree
and his firm. At trial it was found that those audit reports had
been misleading as they had not taken into account trips booked
but not paid for. If the reports had been accurate Ms Fry's firm
would not have been licenced for as long as it was. When complaints
from creditors became obvious TCF did its own investigation and
revoked the licence to trade. But for some 2½ months after
this, until a Government inspector actually went to the shop and
changed the locks, the firm continued illegally to trade. Claims
for compensation for loss of funds by customers were made to TCF.
TCF sued Tambree for the losses caused due to the illegal trading,
under s 42 of the FTA and in common law negligence.
trial judge found in favour of TCF. The statutory cause of action
was made out and there was a duty of care in this sort of negligent
misstatement case. The NSW Court of Appeal ( NSWCA 24) agreed
but overturned that part of the verdict (the bulk of it) that related
to money paid during the period of illegal trading. Sheller JA,
in a judgement concurred in by the other 2 members of the Court,
held that the illegal nature of Ms Fry's activity in the period,
while a "factual" cause of the damage (see para ),
should be held as a matter of policy not to be a "legal"
As a value judgment I do not think that what Ms Fry did following
her termination of participation could be regarded as a normal occurrence.
A person would not normally terminate the licence which enabled
that person to conduct a travel agent’s business and yet continue
to conduct that business illegally.
before the HC judgement I said to students that I would have thought
it was reasonably "normal" for people who are not supervised
by the Government to attempt to rip others off! Given that the Fund
was set up to deal with cases of dishonesty, it is hard to see why
the dishonesty of a former travel agent was not the "very sort
of thing" likely to happen from a failure of supervision.
is always pleasing when the HC agrees with me! All 5 members of
the Court hold for this sort of reason that the loss suffered by
a fraudulent agent being enabled to continue trading was just the
sort of loss that the accountants should have known was to be avoided
by their report being provided to the TCF (which they knew it would
The most interesting part of the HC judgement is the internal debate
over how to frame the test for causation at common law (and for
statutory purposes) in Australia today. An unspoken part of the
background (since the facts here occurred before 2002) is the change
to the law of causation made under the "tort reforms"
which I have mentioned previously in this forum. In NSW, for example,
the relevant provisions now are contained in Part 1A, Division 3
of the Civil Liability Act 2002. In particular s 5D (1)
now explicitly "divides up" the question of causation
into what is a "necessary condition" of the harm ("factual
causation"), and the question "whether it is appropriate
for the scope of the negligent person's liability to extend to the
harm so caused ("scope of liability"). In addition s 5D(4)
says that the "scope" question is to be determined by
considering "whether or not and why responsibility for the
harm should be imposed on the negligent party".
here will no doubt be aware that Prof Jane Stapleton has had an
immense influence on recent discussions of causation in the common
law world. The Ipp Report (the committee convened by the Commonwealth
Government in 2001-2002 to deal with the "tort crisis"
that led to the recent reforms, chaired by Justice Ipp of the NSW
Court of Appeal) explicitly adopted her analysis of the law in recommending
the provisions that lie behind s 5D. Sheller JA in the NSWCA decision
appealed from in TCF v Tambree cited the judgement of Ipp
JA writing (judicially this time) in Ruddock v Taylor and
adopting explicitly a "two-stage" test of causation.
what does the High Court in Tambree has to say about this?
My initial quick reading is that there are two (or maybe three?)
Gummow & Hayne JJ in a joint judgement, esp at -, specifically
reject the view that in answering the question of causation the
broad question "ought the defendant be held liable?" is
what the court should be addressing. In doing so they specifically
reject the approach of Ipp JA in Ruddock. However, they
accept the view for which Environment Agency v Empress Car Co
(Abertillery) Ltd  2 AC 22 is often cited, that the test
of causation may vary according to the purposes for which it is
asked. And they also accept that "consideration of legal policy"
(as opposed, presumably, to "policy at large" or "social
policy") will inform the selection of causative factors to
determine liability. Their Honours suggest at  that the wider
"policy" approach is at work in the judgement of Lord
Nicholls of Birkenhead in Kuwait Airways Corpn v Iraqi Airways
Co (Nos 4 & 5)  AC 883 and to cast doubt on that.
(I will frankly admit I'm not familiar with this decision yet; but
will have to read it over Christmas!) Their Honours at  link
their rejection of these "broad" policy considerations
in the area of causation with the rejection by the Court in Sullivan
v Moody (2001) 207 CLR 562 of similar "broad" criteria
for determination of duty of care under the Caparo three-stage
What is very interesting from a purely Australian perspective is
that there also seems to be an attempt in their comments in 
to reject what has been known as the "common sense" approach
to causation laid down in March v Stramare, which seemed
to be one of the few points in the law of negligence on which courts
could agree in recent years!
(2) Kirby J is in almost complete disagreement on all these points,
while concurring in the result in this case. His Honour refuses
to accept that the approach outlined in March v Stramare
needs to be revisited - . In particular reference in that decision
to the need to consider "policy" issues is still relevant,
and the NSWCA here were correct to refer to those issues. His Honour
at  is even able to cite a specific passage from the judgement
of Gummow J in Chappel v Hart which approves of the need
to refer to "policy considerations"! He supports the comments
of Lord Nicholls in Kuwait Airways impliedly criticised
by Gummow and Hayne JJ. He rejects the distinction between "policy"
and "principle", while acknowledging that at the moment
the HCA is bound not to follow the Caparo approach to the
duty of care. He calls for greater transparency in articulation
of reasons for drawing the line of causation at one point rather
(3) It is slightly harder to pin down the other two members of the
Court on these broader issues. Gleeson CJ allows that issues of
causation involve "normative" considerations, but still
sees that the distinction between "policy" at large and
"legal principles" is valid, and the court should be applying
the latter- -. "Mere" value judgements about whether
someone "ought" to be held liable are not appropriate.
Callinan J affirms the approach in March v Stramare. Candour
in revealing reasons for causation decisions is desirable- .
But he rejects a formal "two-stage" approach to causation
as out forward by Ipp JA in Ruddock. The illegality of
Ms Fry's actions did not affect the chain of causation here.
email is far too long already so I conclude with some final brief
It is perhaps unfortunate that the decision of the NSWCA was so
wrong. I had little doubt it would be overturned. The core paragraphs
of Sheller JA's reasons for finding that causation was not established
seemed (with all respect to Kirby J who valiantly defends the general
reasoning) to be a classic example of a reliance on unvarnished
"policy" or personal prediliction. His Honour's reference
in para  quoted above to what he personally "as a value
judgement" would have regarded as a "normal occurrence"
seems to be at the worst end of the scale here. That has made it
easy for those who seem to want a return to a higher degree of certainty
and legal rules to criticise an approach which argues for broader
matters to be taken into account.
And just when Australian torts lawyers thought things couldn't get
worse given the confusion over what ultimate criteria should be
applied for determination of a duty of care in negligence, we now
also find that we aren't completely clear on the issue of causation
Lecturer & LLB Program Convenor
School of Law
Faculty of Business & Law
University of Newcastle
Callaghan NSW 2308
ph 02 4921 7430
fax 02 4921 6931
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