Strickland Brothers Ltd v Attorney General [2009] WSSC 10 (17 February 2009)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

STRICKLAND BROTHERS LIMITED a duly incorporated company having its registered office at Apia.
Plaintiff

AND:

ATTORNEY GENERAL sued for and on behalf of the MINISTRY OF POLICE, PRISONS & FIRE SERVICES
Defendant

Counsel: K Drake for plaintiff
R Wendt and U W Fuimaono for defendant

Judgment: 17 February 2009

JUDGMENT OF SAPOLU CJ

Background

1. According to the evidence that was adduced by the plaintiff Strickland Brothers Ltd (SBL) which is a private company, in 2001 one of its customers who, for convenience I will refer to as W, purchased goods on credit from its store at Lepea. The value of the said goods was $2,052.

2. A written agreement was then executed by SBL and W for the payment of the goods. The agreement provides for interest of 1.5% per month or 18% per annum payable on the outstanding balance of the debt.

3. Evidence was also adduced by SBL that after the initial purchase, W purchased more goods on credit from SBL. The value of these additional goods is not clear from the evidence.

4. About February 2003, W left for the United States having paid only $1,565 towards her debt. She did not return to Samoa until 2005. When SBL discovered that W had returned to Samoa, two of its employees went to W, at where she was staying, to pay her debt to SBL. However, W avoided SBL’s employees. After three or four unsuccessful attempts by SBL’s employees, SBL decided to contact its solicitors on Monday 8 August 2005 to seek a writ of arrest against W. This was because SBL suspected that W might return to the United States the same night, thereby evading payment of her debt.

5. A writ of arrest was duly obtained by SBL’s solicitors from the Court on 8 August 2005. At that time, W’s indebtedness to SBL was about $10,300 inclusive of accrued interest.

6. The writ of arrest was directed to the police for execution. An employee of SBL’s solicitors then accompanied a police constable to the house where W was staying in order to execute the writ. This was on Monday afternoon, 8 August 2005.

7. Later on in the same afternoon, W was accompanied by the police constable to the Apia police station. In the evening, W and her father, in the company of two police officers, went to the manager of SBL. Apparently, W’s father pleaded with SBL’s manager for help. SBL’s manager refused. W, her father, and the police officers then left.

8. On the following day, 9 August 2005, SBL learnt that W had left for the United States the previous night. As a consequence, SBL has brought these proceedings against the Attorney General, being sued on behalf of the police. It is claimed by SBL that by reason of the negligence of the police in carrying out the execution of the writ of arrest issued by the Court, W has been able to leave the country thereby denying the plaintiff SBL recovery of its claim against W. Damages are sought in the total amount of W’s indebtedness to SBL.

9. Counsel for the Attorney General have opposed the claim in negligence by SBL on three grounds. The first ground, which relates to liability, is that the police owed no duty of care to SBL. The second and third grounds which relate to quantum of damages should the police be held liable in negligence are that there is no satisfactory proof of W’s total indebtedness to SBL and the interest charged on W’s debt is not valid in law.

Negligence

10. The most relevant authority cited by counsel on both sides on the issue of negligence is the recent decision of the House of Lords in Customs and Excise Commissioners v Barclays Bank [2006] UKHL 28; [2006] 4 All ER 256. In that case, the claimants, the Commissioners of Customs and Excise, brought claims against the defendants, two British companies, for alleged non-payment of Value Added Tax (VAT). As the claimants believed that the defendants would dissipate their assets in order to defeat judgments which the claimants were likely to obtain, they sought freezing orders (familiarly known as Mareva injunctions) against each of the defendants. Freezing orders were granted by the Court. These orders were then served on Barclays Bank (the Bank) in which both defendant companies held current accounts. The Bank then notified the claimants by letter that it would abide by the terms of the freezing orders. Soon thereafter, the Bank permitted substantial payments to be made out of the current accounts of the defendant companies notwithstanding the freezing orders. In due course, judgment was entered in favour of the claimants against the defendant companies. Neither defendant paid any part of the judgment and the claimants were unable to recover the full outstanding VAT in any other way. The claimants, therefore, brought proceedings in negligence against the Bank claiming damages in the sums it paid out of the current accounts of the defendant companies in breach of the freezing orders.

11. So what happened was that the claimants brought proceedings against the defendant companies for unpaid VAT. The claimants then sought and obtained from the Court orders (familiarly known as Mareva injunctions) to freeze the defendant companies current accounts at the Bank. These freezing orders were served on the Bank. However, after service of the orders the Bank permitted substantial payments to be made out of the defendant’s current accounts in breach of the freezing orders. Subsequently, judgment was entered for the claimants in proceedings against the defendants but the latter were unable to pay any part of the judgment. The claimants then brought proceedings in negligence against the Bank claiming damages in the total amount of the sums it paid out of the defendants current accounts in breach of the freezing orders. The House of Lords unanimously held that the Bank owed no duty of care to the claimants. Punishment for the Bank lies in contempt for disobedience of the Court’s order. The claim in negligence, therefore, failed.

12. In Customs and Excise Commissioners v Barclays Bank plc [2006] 4All ER 256, the House of Lords refer to the three tests used for deciding whether a duty of care exists in a particular set of circumstances where pure economic loss is claimed. These are: (a) assumed responsibility or the assumption of responsibility by the defendant test, (b) the three – fold test, and (c) the incremental test.

13. At pp 260 – 261, Lord Bingham states:

"The parties are agreed that the authorities disclose three tests which have been used in deciding whether a defendant sued as causing pure economic loss to a claimant owed him a duty of care in tort. The first is whether the defendant assumed responsibility for what he said and did vis-à-vis the claimant, or is to be treated by the law as having done so. The second is commonly known as the threefold test: whether loss to the claimant was a reasonably foreseeable consequence of what the defendant did or failed to do; whether the relationship between the parties was one of sufficient proximity; and whether in all the circumstances it is fair, just and reasonable to impose a duty of care on the defendant towards the claimant (what Kirby J in Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180, para 259, succinctly labelled ‘policy’). Third is the incremental test based on the observation of Brennan J in Sutherland Shire Council v Heyman [1985] HCA 41; (1985) 157 CLR 424, 481, approved by Lord Bridge of Harwich in Caparo Industries Ptc v Dickman [1990] UKHL 2; [1990] 2 AC 605, 618, that:

"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, or to reduce or limit the scope of the duty or class of persons to whom it is owed."

14. At p. 283, Lord Mance states:

"The conceptual basis on which Courts decide whether a duty of care exists in particular circumstances has been repeatedly examined. Three broad approaches have been suggested, involving consideration (a) whether there has been an assumption of responsibility, (b) whether a three-fold test of foreseeability, proximity and ‘fairness, justice and reasonableness’ has been satisfied or (c) whether the alleged duty would be ‘incremental’ to previous cases ...

"All three approaches may often (though not inevitably) lead to the same result. Assumption of responsibility is on any view a core area of liability for economic loss. All three approaches operate at a high level of obstraction. What matters is how and by reference to what lower – level factors they are interpreted in practice, see eg Caparo Industries plc v Dickman [1990] S AC 605, per Lord Bridge of Hawich (at pp 617 H – 618D) and Lord Oliver of Aylmerton (at p 633B – D)."

15. The other Law Lords in Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28; [2006] 4 All ER 256, namely, Lord Hoffman, Lord Rodger of Earlsferry and Lord Walker of Gestingthorpe also refer in their judgments to the assumption of responsibility test and the three – fold test. All Law Lords were, however, in agreement that the appropriate test to be applied to the circumstances of that case was the three-fold test. None of them considered the assumption of responsibility test or the incremental test to be appropriate to the circumstances of the case.

16. Counsel for the Attorney-General in this case rely in their submissions on the reasoning of Lord Bingham and His Lordship’s conclusion that on an application of the three – fold test to the facts of Customs and Excise Commissioners v Barclays Bank plc, no duty of care was disclosed.

17. Lord Bingham states at p. 265 that the notion of assumed responsibility cannot apply to the facts of the case because the Commissioners were bound by law to comply with the order of the Court; they had no choice. As it is put by Lord Walker of Gestingthorpe at p. 280: "In this case the appellant Bank has not, in any meaningful sense, made a voluntary assumption of responsibility. It has by the freezing order had responsibility thrust upon it."

18. Lord Bingham then refers to the three – fold test and states that it is common ground between counsel that the foreseeability element of the three – fold test is satisfied. Likewise, the proximity element is satisfied in the sense that one party served a Court order on the other and that other appreciated the risk of loss to the first party if it was not observed.

19. Lord Bingham then states that it is the third element of the three – fold test which must be determinative, that is to say, in all the circumstances is it fair, just and reasonable to impose a duty of care on the defendant. This element is also labelled by Lord Bingham as the ‘policy" element, citing Kirby J in Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180, para 259. His Lordship then explains why he does not think that in the circumstances it is fair, just and reasonable to impose a duty of care on the defendants.

20. I will only refer to the reasons stated by Lord Bingham which are relevant to this case. First, the Mareva jurisdiction in which the freezing order was issued is one exercised by Court order enforceable only by the Court’s power to punish those who breach it. This jurisdiction makes sense on the assumption that the only duty owed by a party upon whom the order is served is to the Court. Secondly, a defendant cannot owe a duty to the party which obtains an order against it since they are opposing parties in litigation and no duty is owed by a litigating party to its opponent. "It would be a strange and anomalous outcome if an action in negligence lay against a notified party who allowed the horse to escape from the stable but not against the owner who rode it out" per Lord Bingham at p. 266.

21. Lord Bingham then goes on to say in p. 266:

"It is clear, thirdly, that a duty of care in tort may co-exist with a similar duty in contract or a statutory duty, and I would accept in principle that a tortious duty of care to the Commissioners could co-exist with a duty of compliance owed to the Court. But I know of no instance in which a non-consensual Court order, without more, has been held to give rise to a duty of care owed to the party obtaining the order; and one would have to ask whether a similar duty is owed by the subject of a search order, or a Norwich Pharmacal order, or a witness summons, in any case where economic loss is a foreseeable consequence of breach. It would seem that the Commissioners argument involves a radical innovation.

"Fourthly, it is a notable feature of this appeal that the Commissioners adduce no comparative jurisprudence to support their argument. The House was referred to no material from any Commonwealth jurisdiction to show recognition of a duty of care such as that for which the Commissioners contend ..."

22. His Lordship then concludes his reasons by sayings:

"Lastly, it seems to me in the final analysis unjust and unreasonable that the Bank should, on being notified of an order which it had no opportunity to resist, become exposed to a liability ...

For this exposure it had not been in any way rewarded ..."

23. Before going further, I should note here that the three – fold test applied in Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28; [2006] 4 All ER 256 has not found favour as a test for determining whether a duty of care exists with some Judges in the High Court of Australia: see Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180: for example, per Gleeson CJ at pp 193 – 194; per McHugh J at pp208 – 212. However, Kirby J in the same case adopted and applied the three – fold test. His Honour said at p. 275:

"As an approach or methodology for deciding whether a legal duty of care in negligence exists, I suggested that the decision maker must ask three questions:

1. Was it reasonably foreseeable to the alleged wrongdoer that particular conduct or an omission on its part would be likely to cause harm to persons who have suffered damage or a person in the same position?
   
2. Does there exist between the alleged wrongdoer and such person a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’?
   
3. If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrongdoer for the benefit of such a person?
   

"A study in the trends in the decisions of appellate Courts in several countries of the common law suggests, to my mind, a gradual movement towards this approach, including in (but not limited to) cases of pure economic loss"

24. It is clear from the three-fold approach that it is not sufficient in a claim for damages for pure economic loss to show that the defendants’ negligence was a cause of the plaintiffs loss and the loss was reasonably foreseeable, as the plaintiffs’ submissions seem to suggest. Foreseeability of loss or harm is only one of the three elements of the three-fold test.

Discussion

25. Given the similarities between the circumstances of this case and those in Customs and Excise Commissioners v Barclays Bank plc in the sense that what is involved in the two cases is essentially the alleged disobedience by a non- party of a Court order which arises out of proceedings between a plaintiff (claimant) and a defendant and a consequential civil claim in negligence by the plaintiff against the non- party due to the alleged disobedience, I have decided to apply the three – fold test and the reasoning of Lord Bingham in Customs and Excise Commissioners v Barclays Bank plc with a few modifications, to suit the facts of this case.
    

26. In the first place, the usual remedy for disobedience of a Court order is contempt proceedings to punish those who breach such orders. "This regime makes perfect sense on the assumption that the only duty owed by a notified party is to the Court" per Lord Bingham at p. 266.

27. Secondly, W cannot owe a duty of care to SBL which obtained the writ of arrest since they are opposing parties in litigation and no duty is owed by a litigating party to its opponent. It would therefore, be a strange and anomalous outcome if an action in negligence lay against the police "who allowed the horse to escape from the stable but not the owner who rode it out" per Lord Bingham at p. 266. In other words, it would be strange and anomalous if the police in this case were held to owe a duty of care to SBL when W does not.

28. Thirdly, there has been "no instance in which a non-consensual Court order, without more, has been held to give rise to a duty of care owed to the party obtaining the order" per Lord Bingham at p. 266. The writ of arrest obtained by SBL and given to the police for execution would be a non-consensual Court order.

29. Lastly, it seems unjust and unreasonable that the police in this case should, on being notified of the writ of arrest which it had no opportunity to resist, become exposed to liability.

30. By analogy to the Commissioners of Customs and Excise v Barclays Bank [2006] 4 A11 ER 256, it must follow that in this case the police owed no duty of care towards SBL which obtained the writ of arrest against W who is alleged to have an unpaid debt with it.

Conclusions

31. For the foregoing reasons, the claim by SBL against the defendant is dismissed.

32. In view of that conclusion, it is unnecessary to deal with the other issues raised by counsel for the defendant.

33. Counsel to file submissions as to costs in seven days.

CHIEF JUSTICE

Solicitors
Drake & Co for plaintiff
Attorney General’s Office, Apia, for defendant