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Negligence Alleged Against State of Victoria for Quarantine Implementation

5 Boroughs NY Pty Ltd v State of Victoria; Roberts v State of Victoria [2021] VSC 785 (2 December 2021)

The plaintiff alleged negligent conduct against the State of Victoria in implementing hotel quarantine.  The defendants applied for summary judgment contending that the plaintiff's claim has no real prospect of success.  The Court, in resolving this dispute, relied upon the Civil Procedure Act 2010 (Vic).

Facts:

The plaintiff, 5 Boroughs NY Pty Ltd (‘5 Boroughs’) claims, from the defendants, the State of Victoria and others (‘the State’) damages for economic loss suffered as a result of the stage 3 and 4 lockdown restrictions on economic activity imposed during the second wave of the COVID-19 virus. 

The plaintiff contends that these restrictions were the inevitable result of COVID-19 transmission events at two hotel quarantine sites caused by the negligent failure of the State to implement effective infection prevention and control measures at the sites. 

The defendants apply for summary judgment pursuant to ss 62 and 63 of the Civil Procedure Act 2010 (Vic) contending that the plaintiff’s claim has no real prospect of success.  Alternatively, the defendants seek an order pursuant to r 23.02(a) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) striking out the whole of the statement of claim on the ground it does not disclose a cause of action.

The defendants submitted that the statement of claim should be struck out because it does not disclose a cause of action, the relevant considerations overlap considerably with those applicable in an application for summary dismissal.  The plaintiff, and the group members it represents, carried on a retail business as at 1 July 2020, which involved the supply of goods or services in Victoria to members of the public in attendance at their premises (‘Victorian retailers’).  They claim that they were prevented from supplying goods or services as a result of the imposition of stage 3 and 4 restrictions, including workplace closures.  The duty of care alleged to be owed by the defendants is a duty to take reasonable care to ensure that ‘effective infection prevention and control measures’ were implemented in respect of hotel quarantine.

The defendants submitted that, taking the plaintiff’s pleaded case at its highest, no duty of care of the novel type contended for is owed by the State.  As the plaintiff has no real prospect of establishing a common law duty of care, it could not be in the interests of justice for the court to conduct a full hearing.  The defendants submitted that the features of any hotel quarantine program established by the State amount to government policy involving the weighing up of financial, economic, social and political factors.  These decisions are not justiciable in negligence. Furthermore, the court must take a particularly cautious approach to recognising novel duties of care in pure economic loss cases. 

Issue:

Whether or not the claim has a real prospect of success.

Applicable law:

Civil Procedure Act 2010 (Vic) ss 62 - permits a defendant to apply for summary judgment on the ground that the plaintiff’s claim or part of it has no real prospect of success.

Civil Procedure Act 2010 (Vic) s 63 - provides that, subject to s 64, the Court may give summary judgment in a civil proceeding ‘if satisfied’ that a claim has ‘no real prospect of success’. 

Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 23.02(a), (c), (d) - provides that where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading does not disclose a cause of action the court may order that the whole or part of the indorsement or pleading be struck out or amended.

Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158(2013) 42 VR 27  - where the Court of Appeal set out the relevant test to be applied in determining an application for summary judgment made under Part 4.4 of the Civil Procedure Act

General Steel Industries Inc v Commissioner for Railways (NSW) (‘General Steel’) [1964] HCA 69(1964) 112 CLR 125 - provides that the test of whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’. 

Wheelahan v City of Casey (No 12) [2013] VSC 316 - reviewed some of the authorities on the sufficiency of pleadings when challenged under Rule 23.02.

Babcock & Brown DIF III Global Co-Investment Fund, LP v Babcock & Brown International Pty Ltd (No 2)[2017] VSC 556 - provided that the Court should consider the pleading under a challenge as a whole and adopt a practical case management approach to pleading objections, rather than accepting technical objections when the true nature of the case to be met is clear from reading the pleading as a whole and there is no embarrassment to filing a responsive pleading. 

Analysis:

The defendants submitted that there is incoherence at three levels.  First, there is an inconsistency between one of the objectives of implementing hotel quarantine, namely not to impose unreasonable restrictions on detained persons’ rights, and the duty to avoid commercial harm to business owners.  Second, there is inconsistency between the objects of limiting loss of life and negative impacts on the health of Victorians, with the duty to take steps to prevent economic loss to the plaintiff and group members.  Third, the posited duty is incompatible with the decisions made by authorised officers under the Public Health Act and the statutory scheme for compensation in Part 10, Division 3 of the Public Health Act.

The defendants reject the plaintiff’s attempt to distinguish the State’s conduct in this case from policy-making by framing the duty as one which relates to the ‘implementation’ of hotel quarantine, on the basis that the two are inextricably intertwined.  The plaintiff contended that the health directions were not a novus actus interveniens or ‘fatal causal break’, because there is a ‘direct and inexorable connection between the second wave outbreak’ and the restrictions.  The defendants submitted that the statement of claim should be struck out because it does not disclose a cause of action, the relevant considerations overlap considerably with those applicable in an application for summary dismissal.   The defendant must ‘establish that it would be futile to allow the statement of claim to go forward, because it raises a claim that has no real prospect of success in the sense of being “fanciful”’. 

The defendants submitted that courts are particularly cautious in recognising a novel duty to avoid causing economic loss for which liability is indeterminate.  Economic loss, unlike physical damage, is capable of ‘rippling’, conceivably indefinitely, from the individuals immediately affected to others.  As a ‘general rule, no duty will be owed to those who suffer loss as part of a ripple effect. 

Conclusion:

The Court concluded that it is not fanciful to dispute the defendants’ contention that the intervening event of the imposition of the stage 3 and 4 restrictions served to break the causal chain between the alleged breach of the duty of care in hotel quarantine, and the ultimate loss suffered by Affected Businesses.  The proceeding was summarily dismissed. 

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