Actio per quod servitium amisit 2 CLMS 1
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Barclay v Penberthy  HCA 40. French CJ, Gummow, Hayne, Crennan, Bell JJ; Kiefel J agreeing separately; Heydon J dissenting. 2.10.12.
A Cessna twin aircraft crashed off the West Australian coast in 2003. Three occupants were killed, another two injured.
The aircraft was owned by Fugro PL, whose employed pilot was Mr Pemberthy. The charterer wasNautronix PL, a marine technology developer whose employees were the deceased and injured.
Mr Barclay was a licensed aeronautical engineer who had designed an engine sleeve bearing installed in the aircraft in 2000.
At first instance, Nautronix and the survivors and the spouses of the deceased won verdicts against the pilot, indemnified by his employer, and likewise against the engineer, except for the Nautronix claim against the engineer for loss of profits.
The aircraft operator Fugro sued the engineer who was found one third liable to Nautronix.
The WA Court of Appeal found the engineer and the pilot were obliged to the charterer Nautronix in respect of economic loss from injury to the employees who survived.
But the Court of Appeal barred Nautronix recovery based on the employee deaths because of the rule in Baker v Bolton (1808) 170 ER 1033: death of a human being cannot be complained of as an injury in a civil court.
In the High Court, the plurality noted issues as applicability of the rule in Baker v Bolton, whether the action per quod servitium amisit yet availed about the Commonwealth, and whether the pilot owed the charterer Nautronix a duty to avoid pure economic loss from the loss of service of the injured employees.
The majority considered authorities on Baker v Bolton, noting [in 25], “In Swan v Williams (1987) 9 NSWLR 172 at 176-177, Samuels JA observed that the only continuing influence of the rule in Baker v Bolton in NSW was to exclude actions at the suit of an employer for damages for loss of services occasioned by the death of an employee.”
Then  “The pattern of Australian legislation is a pointer towards the continued existence of the rule in Baker v Bolton as a matter of common law. In Swan, the NSW Court of Appeal rejected submissions that the rule in Baker v Bolton should be discarded. Their Honours did say that the decision of this Court in Woolworths Ltd v Crotty (1942) 66 CLR 603 was authority for the proposition that the rule in Baker v Bolton remained part of the common law in Australia. The better understanding is that the assumption made by both parties in Crotty was that the rule did apply unless the term ‘wrongful act’ in Lord Campbell’s Act, as was held to be the case, included contractual as well as tortious wrongs.
“Any further contraction in the scope of the rule in Baker v Bolton is a matter for Australian legislatures” .
Heydon J and Kiefel J in their separate reasons agreed, and their Honours also agreed that the action per quod servitium amisit yet availed.
The plurality : “In the last edition of McGregor on Damages to deal with the matter (13th ed, 1972, 1167), it was said that the basic measure of damages ‘should be the market value of the services, which will generally be calculated by the price of a substitute less the wages which the master is no longer required to pay to the injured servant’. In its written submissions Nautronix challenges that statement, but, subject to what appears below, it should be accepted.”
Then, “The essential point is that like any plaintiff the employer is obliged to take reasonable steps to mitigate the loss occasioned by the defendant’s interference with the provision of services by the injured employee” [in 58].
“If by statute, industrial award, or the terms of employment, the employer is required to pay to the injured employee sick pay or medical expenses, these outgoings should be ascribed to that anterior obligation of the employer. They are not consequences which flow merely from the injury to the servant and should not be ascribed to the tortfeasor” their Honours noting in Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237, Fullagar J holding pensions as payments for services already rendered [at 293] and reserved whether recovery of medical expenses paid by the employer was too remote [at 291].
The plurality [yet in 58] quoted Fullagar J in Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 409: “… wages paid to the injured person himself are paid not because of the injury to the servant but because of the antecedent obligation to pay them. The same considerations apply, of course, to sick pay and pensions”.
The Justices described [in 60] as “applicable in Australia” remarks of Kelly JA in Genereux v Peterson Howell SC  2 Ontario Reports 558. Canadian Courts had “… observed caution in dealing with the scope of the recoverable damages and have disapproved any extension of the basis of assessing the amount recoverable beyond the actual value of the services lost”.
The plurality : “Particular difficulties may arise where the plaintiff is a one-man company controlled by the injured party. The better view is that, even here, the measure of damages does not include a loss of profit suffered by the company. This is so unless the plaintiff satisfies the Court that the loss is attributable to the loss of services and no other likely cause has been identified.”
Heydon J said [in 101]: “To speak of the actio per quod servitium amisit being ‘absorbed back’ into negligence is a malapropism. It did not come from the much younger tort of negligence. It cannot go back into it. Further, absorption is a euphemism for abolition,” declaring such was the legislatures' preserve.
Kiefel J noted [in 131] of the action per quod “This might suggest an analogy with the property a master formerly had in a slave. However it has been pointed out that both Sir William Holdsworth and Sir William Blackstone refer, not to the master having a proprietary interest in the servant, but rather in his services. It was the loss of services for which a remedy was provided by way of the action. The loss of the employee’s services was regarded as the gist of the action.”
There was no basis for refusing to recognise the cause: .
Kiefel J : “Consistency with the purpose and scope of the action per quod servitium amisit requires that damages be limited to the cost of substitute labour. In Cattanach v Melchior (2003) 215 CLR 1, it was observed that the employer suffers damage only when it is forced to pay a salary or wages to its injured employee when it is, at the same time, deprived of the employee’s services. To permit recovery on any wider basis, including for profits lost, would be to transform an exceptional remedy for a particular type of loss into a substantial exception to the general principles which have developed concerning recovery of economic loss in tort. In terms of the coherence of the law, that would be undesirable.”
Considering pure economic loss, the plurality noted Woolcock Street Investments PL v CDG PL (2004) 216 CLR 515 at 529, and approved the first instance judge allowing the Nautronix claim for pure economic loss against the pilot, who was aware of the purpose of the charter, but not the engineer whose work had been completed without any notice of the contentious charter party.
Heydon J criticised the separate question process as leaving unargued the actual damages.
Kiefel J noted Caltex v Dredge 'Willemstad' (1976) 136 CLR 529 and German and French regimes before agreeing with the plurality .
A1: B Walker SC, H Langmead SC, M Rush, inst DLA Piper. A2: D Fagan SC, S Richards, inst SRB Legal. R2 & 3: W Harris SC, A Golem, inst Herbert Smith Freehills.