Autex Industries Limited v Auckland City Council CA198/97 [1998] NZCA 276; [2000] NZAR 324 (23 February 1998)

Last Updated: 30 December 2023

IN THE COURT OF APPEAL OF NEW ZEALAND CA 198/97

BETWEEN AUTEX INDUSTRIES LIMITED

Plaintiff

AND AUCKLAND CITY COUNCIL

Defendant

Coram: Richardson P Gault J Henry J Keith J Blanchard J

Hearing: 2 and 3 February 1998

Counsel: P J McDonald and A R Tobin for Plaintiff P R Rzepecky for Defendant

Judgment: 23 February 1998

JUDGMENT OF RICHARDSON P, GAULT AND HENRY JJ DELIVERED BY RICHARDSON P

On 3 August 1996 an Auckland City Council water main running under Rosebank Road, Auckland, burst at a point some 8 metres from premises occupied by Autex Industries Limited (Autex). Water from the burst pipe damaged Autex's premises, plant, equipment and stock. Autex sued the Council in the High Court in respect of its loss, calculated at $206,780.17.

The Statement of Claim is sparse. Two causes of action are pleaded. The first presupposes strict liability on the part of the Council for the escape of the water

and the resulting loss. The Statement of Claim avers that Autex occupied premises at the particular address, that the Council at all material times owned and operated a water main which ran under the defendant's road immediately outside the plaintiff's premises, and that:

On 3 August 1996 the Defendant's water main burst at a point approximately 8 meters from the Plaintiff's premises, causing the Plaintiff's premises to be flooded, thereby causing damage to the Plaintiff's premises, plant, equipment and stock totalling $206,780.17, full particulars of which have been provided by the Plaintiff to the Defendant.

WHEREFORE THE PLAINTIFF SEEKS JUDGMENT AGAINST THE DEFENDANT.

The second cause of action pleads negligence on the part of the Council in various particularised respects.

Autex applied for summary judgment on the ground that the Council had no defence to the first cause of action. It did not in the summary judgment application rely on the cause of action in negligence. The supporting affidavit of the Financial Director of Autex states that Council staff at the scene accepted that the burst water main was responsible for the flooding and it had never been suggested that that was not so. The affidavit also deals with the calculation of damages and the absence of any challenge to the quantum of the claim.

The notice of application expressly relied on the decision of this court in Irvine and Co Ltd v Dunedin City Corporation [1939] NZGazLawRp 67; [1939] NZLR 741. Irvine is on all fours on the facts with the present case. In Irvine, on removal into this court from the trial court the majority (Myers CJ, Smith, Johnston and Fair JJ, Ostler J dissenting) held the city liable for the resulting damage. At the beginning of his judgment Myers CJ recorded that it was an action based solely upon nuisance. However, all the judgments referred to Rylands v Fletcher (1868) LR 3 HL 330 or to

the rule in Rylands v Fletcher, presumably perceiving that case as a species of nuisance or analogous to nuisance. The rule in Rylands v Fletcher, deriving from conceptions of mutual duties of neighbouring landowners, with various qualifications imposes strict liability for escape of dangerous things in consequence of some non-natural use of that land.

The grounds stated in the present notice of opposition to the application for summary judgment are that the rule in Rylands v Fletcher is no longer good law in New Zealand, that the Council's use of the land under Rosebank Road to install and operate a water main was a natural use, and that summary judgment is not in the interests of justice. The notice of opposition also recorded that the Council relied on the decision of the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd [1994] HCA 13; (1994) 120 ALR 42.

In that case, which concerned the escape of fire from premises, the High Court of Australia by a majority (Mason CJ, Deane, Dawson, Toohey and Gaudron JJ, Brennan and McHugh JJ dissenting) held that for the purposes of the common law of Australia the rule in Rylands v Fletcher should be seen as absorbed by the principles of ordinary negligence, subject to the qualification that there may remain cases in which it is preferable to see a defendant's liability in a Rylands v Fletcher situation as lying in nuisance or trespass. In a footnote to that qualification the majority judgment at p 67 cited Cambridge Water Co v Eastern Counties Leather Plc [1993] UKHL 12; [1994] 2 WLR 53. The Cambridge Water case was decided some months after the completion of the argument but shortly before delivery of judgment in the Burnie case. In the Cambridge Water case the House of Lords saw the rule in Rylands v Fletcher essentially as an extension of the law of nuisance, and held that foreseeability by the defendant of harm of the kind which occurred was a prerequisite to the recovery of damages both in nuisance and under the rule in Rylands v Fletcher

. But liability was strict, not dependent on proof of negligence. We should add that

in Tock v St John's Metropolitan Area Board (1989) 64 DLR (4th) 620 the Supreme Court of Canada rejected the application of Rylands v Fletcher where the backup of water caused by blockage in a storm sewer caused flooding to the plaintiff's residence. It did so on the ground that public sewerage and drainage systems constitute an ordinary use of land for the general benefit of the community. The Supreme Court of Canada went on to hold that the Board was liable in nuisance.

On the application of the Council Master Kennedy-Grant removed the present application for summary judgment into this court. The High Court, it was accepted, was bound by Irvine. That decision had stood unchallenged for 60 years but the rule in Rylands v Fletcher as applied in Irvine, had been qualified in Cambridge Water and, as the Master put it, "effectively abolished" in Burnie. Master Kennedy-Grant concluded that the sooner the challenge to Irvine went to this court the better for these litigants and for the public at large. It seemed to be assumed by everyone concerned that the issues of law and their resolution on a summary judgment application could be determined by legal argument as to relevant common law principles and considerations of precedent and public policy, drawing on discussions in decided cases in various jurisdictions and without any evidence, for example as to the particular water main and its maintenance and the operation of water mains in general in New Zealand, relevant historical developments affecting the powers and functions of local government, any effects of technological change, the insurance of risk (the present claim is a contest between the respective insurers) and the economic and social implications underlying strict liability and fault liability respectively, including the content and impact of the concepts of reasonable user and non-natural user.

In the course of argument in this court Mr Rzepecky for the Council recognised the importance, if challenging Irvine, of providing an evidentiary foundation for arguments as to the future course of the common law in New Zealand. He submitted that the matter was not appropriate for summary judgment

determination and the issues raised should be canvassed at trial with the opportunity for both parties to adduce and test such evidence as they wished to call.

In terms of r 136(1) of the High Court Rules:

Where in a proceeding to which this rule applies the plaintiff satisfies the Court that a defendant has no defence to a claim in the statement of claim or to a particular part of any such claim, the Court may give judgment against that defendant.

The principles governing summary judgments are well settled. The onus is on the plaintiff to satisfy the court that the defendant has no defence to the claim. Here, the plaintiff relies on the authority of Irvine. The defendant submits that Irvine no longer reflects the common law of New Zealand in its application to the present circumstances and should not be followed. Where the only defence raised is a question of law which is clear cut and does not require findings on disputed facts or the ascertainment of further facts, the court should normally decide it on the application for summary judgment (Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1, 4 and 8). But if the defence may depend on the ascertainment of further facts the obligation is on the defendant to provide an affidavit containing an adequate evidential foundation. It is not sufficient to state in the notice of opposition that the action will be defended on the basis of facts not deposed to by or on behalf of the defendant. Here the Council has not provided any affidavits. It seeks to invoke developments in case law in other jurisdictions and in the notice of opposition also asserts that the Council's use of the land under the street for a water main was a natural use. As Lord Porter said in Read v J Lyons & Co Ltd [1947] AC 169, 176:

... each [ie the questions whether something "is dangerous" and whether a "use" is a "non-natural" one] seems to be a question of fact subject to a ruling of the judge as to whether the particular object can be dangerous or the particular use can be non-natural, and in deciding this question I think that all the circumstances of the time and place and practice of mankind must be taken into consideration so that what

might be regarded as dangerous or non-natural may vary according to those circumstances.

No doubt there have been some changes in the provision of water to public and private premises which may have affected the risk of escape of water causing damage to neighbouring properties. However, there is no evidence of the nature, extent and significance of those changes as bearing on the question of whether the user in the present case should be regarded for the purposes of the common law as constituting reasonable or natural user by the Council of the land under the street. Further, on the wider question of what if any common law principles other than those in Irvine should now apply to water being held or conveyed in bulk, expert evidence as to the likely economic and social implications of alternative legal rules might well provide more assistance in evaluating public policy considerations rather than simply relying on intuitive assessments.

The Council has not provided an evidential foundation to raise an arguable defence. In the ordinary course a defendant who has not raised an arguable defence must submit to summary judgment. However, the court has a residual discretion under r 136 to refuse summary judgment even though the material before the court does not in itself raise an arguable defence. With some hesitation we conclude that this is such a case. Clearly both parties and Master Kennedy-Grant in removing the summary judgment application into this court considered that there was sufficient material before the court to allow reconsideration of Irvine having regard to common law developments in other jurisdictions. In that regard the notice of opposition asserted that Rylands v Fletcher was no longer good law in New Zealand, expressly relying on Burnie, and also that the Council's use of the land under the street to carry water in a water main was a natural use of the land. The Council having mistakenly assumed it was unnecessary to adduce any affidavit evidence, now seeks to do so.

Against that background we are persuaded that the case is not appropriate for entry of summary judgment and the proper course is to dismiss the application and remit the case to the High Court for trial in the ordinary way of the causes of action. In doing so we are not to be taken as expressing any view as to the evidence which might be adduced or as to the need for any extensive curial review of the law in this area. Finally, although averting summary judgment, the Council, which sought the removal of the summary judgment application into this court, failed to provide an evidential foundation for this defence and should pay costs in respect of the summary judgment application.

In accordance with the views of the majority the summary judgment application is dismissed with costs to Autex of $10,000 together with any reasonable disbursements in relation to the application in both courts, including travel and any accommodation expenses of one counsel as fixed if necessary by the Registrar.

Solicitors:

Peter McDonald, Auckland, for plaintiff McElroys, Auckland, for defendant

IN THE COURT OF APPEAL OF NEW ZEALAND CA198/97

BETWEEN AUTEX INDUSTRIES LIMITED

Plaintiff

AND AUCKLAND CITY COUNCIL

Defendant

Coram: Richardson P Gault J Henry J Keith J Blanchard J

Hearing: 2 and 3 February 1998

Counsel: PJ McDonald and AR Tobin for Plaintiff

PR Rzepecky for Defendant

Judgment: 23 February 1998

JUDGMENT OF KEITH AND BLANCHARD JJ DELIVERED BY BLANCHARD J

The defendant to this summary judgment application, the Auckland City Council, maintains that it has an arguable defence to the plaintiff’s claim which relies on the rule in Rylands v Fletcher (1868) LR 3 HL 330. Having obtained an order moving the application into this Court the council belatedly asks for the opportunity to call evidence to show that its water main, which burst only a few feet away from the plaintiff’s property causing considerable damage, was constructed, maintained and monitored in accordance with usual and proper practices. The evidence would also confirm, it is said, that there was no negligence on the part of the council giving rise to the escape of the water. Under the head of

claim in respect of which summary judgment is sought negligence is not alleged or admitted. It is, however, conceded by the council that damage to the plaintiff’s property from flooding was foreseeable if the main burst.

The council argues that this Court should follow the decision of the majority of the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd [1994] HCA 13; (1994) 179 CLR 520 who said that the rule in Rylands v Fletcher has been absorbed by the tort of negligence. But, in a cryptic passage, a qualification was added, namely that

there may remain cases in which it is preferable to see a defendant’s liability in a Rylands v Fletcher situation as lying in nuisance (or even trespass) and not in negligence. (p556)

In a footnote reference was made to the decisions in Northwestern Utilities Ltd v London Guarantee and Accident Co Ltd [1936] AC 108 (PC) and Cambridge Water Co. v Eastern Counties Leather PLC [1993] UKHL 12; [1994] 2 AC 264 (HL) to which we will later refer.

The council, in the alternative, argues that if Rylands v Fletcher remains part of the law of New Zealand, either as a separate tort or as a branch of the law of nuisance, its use of the sub-soil of the roadway for the conveyance of water was a natural or reasonable use and accordingly it has a defence to the claim. It is convenient to deal first with this defence.

Rylands v Fletcher was the law’s response to some catastrophic dam or reservoir collapses: AWB Simpson, Legal Liability for Bursting Reservoirs: The Historical Context of Rylands v Fletcher (1984) 13 Journal of Legal Studies 209. The rule began its life, then, with a concern about the drastic effects on neighbouring landowners or occupiers of the release upon their properties of large quantities of water. In the House of Lords, Lord Cairns LC quoted and entirely concurred in the following passage in the judgment of the Court of Exchequer Chamber delivered by Blackburn J:

We think that the true rule of law is that the person who, for his own purposes, brings on his land and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril, and, if he does not do so, he is prima facie answerable for all the damage which is the natural consequence of its escape. He can excuse himself by showing that the escape was owing to the plaintiff’s default, or, perhaps, that the escape was the consequence of vis major or the act of God...

Blackburn J remarked that it seemed reasonable and just that

the neighbour who has brought something on his own property which was not naturally there, harmless to others so long as it is confined to his own property, but which he knows will be mischievous if it gets on his neighbour’s, should be obliged to make good the damage which ensues if he does not succeed in confining it to his own property.

He instanced “beasts [cattle] or water or filth or stenches.”

Lord Cairns thought the principles to be “extremely simple”. The plaintiff could not complain of the consequences of natural accumulation of water passing off the defendants’ land but, if the defendants’ land were used for a non-natural use, i.e “for the purpose of introducing into the close that which, in its natural condition, was not in or upon it”, then the defendants acted at their own peril. It does not appear that the Judges in Rylands v Fletcher thought that they were dealing with anything more than a particular kind of legal nuisance.

If the interference with the use or enjoyment of the plaintiff’s land or the plaintiff’s proprietary rights over land resulted from the escape of a hazardous substance or thing, the plaintiff suing in nuisance did not need to prove negligence on the part of the defendant landowner. That remains so today: Cambridge Water Co. v Eastern Counties Leather PLC and Hunter v Canary Wharf Ltd [1997] 2 All ER

426. The former case also confirms that under the law of England Rylands v Fletcher is concerned with an extension of the law of nuisance to cases of isolated escape (as compared with continuing or intermittent events) and holds that foreseeability of

damage of the relevant type is to be regarded as a prerequisite of liability in damages under the rule, as it is in nuisance generally.

No artificial damming and piping of water is a natural occurrence; nor is the conveyance of electricity or gas in cables or pipes. But, as a matter of policy, there is no good reason to apply Rylands v Fletcher to smaller pipes and wires by means of which utility services are transmitted to the property of individual users; for there is not the same level of risk to adjoining properties as attends the use of mains and cables. And so, in Rickards v Lothian [1913] AC 263, 280, Lord Moulton, delivering the opinion of the Privy Council, stated:

It is not every use to which land is put that brings into play [the Rylands v Fletcher] principle. It must be some special use bringing with it increased danger to others and must not merely be the ordinary use of the land or such a use as is proper for the general benefit of the community. [emphasis added]

The reference to the general benefit of the community did not exclude from the Rylands v Fletcher doctrine the bulk conveyance of water, gas or electricity by a local authority or utility company. The later decision of the Board in Northwestern Utilities Ltd contained the following passage:

The rule is not limited to cases where the defendant has been carrying or accumulating the dangerous thing on his own land: it applies equally in a case like the present where the appellants were carrying the gas in mains laid in the property of the City (that is in the sub-soil) in exercise of a franchise to do so. (p118)

Significantly, the authority cited by Lord Wright for this proposition, the decision of the English Court of Appeal in Charing Cross Electricity Supply Company v Hydraulic Power Company [1914] UKLawRpKQB 88; [1914] 3 KB 772, was about the bursting of a water main. (Nor was Rickards overlooked, a quotation from it on another point being included in the Board’s opinion.)

In Collingwood v Home and Colonial Stores Limited [1936] 3 All ER 200,

208 in giving the leading judgment in the Court of Appeal, Lord Wright later observed:

It is perfectly true that electricity, like gas and water, may be regarded from one point of view as a dangerous thing, and the principle of Rylands v Fletcher has been applied to persons who carry, in their property or in their mains, gas, water or electricity. It would be easy to give instances. I refer to one case of electricity - Midwood & Co., Ltd. v Manchester Corporation [[1905] UKLawRpKQB 136; [1905] 2 KB 597] and the case of water illustrated by the Charing Cross Electricity Supply Company v Hydraulic Power Company, and gas is illustrated by the Northwestern Utilities case, to which I have already referred. But in all these cases there was nothing comparable to the ordinary domestic installation of electric wiring for the ordinary comfort and convenience of life. In all these cases these dangerous things were being handled in bulk and in large quantities; they were being carried in mains, and, in the words in the North Western Utilities Company case, at p.118, “the gas”-or the other substances-”constitutes an extraordinary danger created by the appellants for their own purposes,” and it followed that they acted at their own peril. There was a carriage or an accumulation of the dangerous thing. These cases undoubtedly come within the principle of Rylands v Fletcher, but they seem to me to be very different in principle and in result from the case of the ordinary domestic pipes for gas or water or for wiring electricity...

Thus by the time Irvine & Co. Ltd. v Dunedin City Corporation [1939] NZGazLawRp 67; [1939] NZLR 741 came before five Judges of this Court it was well established that bulk conveyance of water, gas and electricity, however common, was a “non-natural user”. So much was this accepted that it apparently did not require argument, the issue in Irvine revolving around ss171 and 173 of the Municipal Corporations Act 1933 (provisions very like ss347G and 347H of the Local Government Act 1979, which were enacted by Parliament in full knowledge, it is to be assumed, of the decision in Irvine). Section 173 was in the following terms:

Nothing in this Act shall entitle the Council to create a nuisance, or shall deprive any person of any right or remedy he would otherwise have against the Corporation or any other person in respect of any such nuisance.

The Court in Irvine held that s173 applied to both private and public nuisances except those necessarily or inevitably caused in the construction and maintenance of a public work (in respect of which compensation was in general available under s171 in the manner provided by the Public Works Act).

As appears from the section and the judgments, the case was about nuisance.

Smith J commented that

the very presence of the nuisance clause [s173] seems to imply that the Legislature regards a municipal Corporation as a fit subject for the application of the doctrine of Rylands v Fletcher. (p777)

He also said (at p775) that

nothing could be more usual in New Zealand that [sic] the use of streets or the land underneath them for the laying of water- mains. Yet I do not think that makes the use a natural one. Water is not always dangerous, and is sometimes regarded as falling within the rule and sometimes not. In this case, the water was carried in bulk in mains. That renders its use dangerous: Collingwood v Home & Colonial Stores Ltd. Cf Western Engraving Co v Film Laboratories Ltd [1936 1 All ER 106]. In my opinion, that is sufficient to prevent the use of the streets for that purpose from being a natural or ordinary use.

Johnstone J (at p789-790) and Fair J (at p801) expressed the same view.

It is suggested by Mr Rzepecky, for the council, that times have changed and that a respectable argument exists for saying that the law of New Zealand is now different. Seeking, as he did, at a very late stage in summary judgment proceedings the opportunity to adduce affidavit evidence, it was incumbent on counsel to be able to sketch out for the Court what his witnesses might depose to about technological developments in water supply systems since 1939. He was, however, unable to outline any matter which influences us to believe that such developments invalidate the opinions expressed in Irvine. It is apparent from the

remarks of the judges in Irvine that water mains were already commonplace at that time and, very likely, well beforehand. Without any doubt there are more of them at the present day because urban areas are now larger. However, there remains an inherent residual danger in the bulk carriage of water under roadways, although it may well be that the risk has been reduced. This case demonstrates that there is still an occasional escape which is not the result of negligence (here denied) or the act of the plaintiff or a third party (which is not suggested). As to the so-called vis major or Act of God exception about which Blackburn J was equivocal, the burden of proof lies on the defendant (Nicholls v Marsland (1875) LR 10 Exch 255) and no such argument is being raised on behalf of the council. We add that the view may be taken that there is no room for such a defence once the plaintiff has shown that damage from an escape of a potentially dangerous substance was foreseeable.

In Cambridge Water, which involved an industrial use of private property, Lord Goff (at p308) equated natural use with ordinary use, as did Lord Moulton in Rickards and Smith and Johnstone JJ in Irvine. Lord Goff said that the concept of natural use had over the years been ”extended to embrace a wide variety of uses, including not only domestic uses but also recreational uses and even some industrial uses.” It is to be noted, however, that he did not mention, and does not appear to question, the categorisation of bulk conveyance of water as not an ordinary use. Likewise, when referring to the doubt introduced by Lord Moulton’s alternative criterion “or such a use as is proper for the general benefit of the community”, Lord Goff mentions the provision of services but again expresses no concern about the bulk carriage cases. The difficulty which he appears to discern relates, rather, to the application of Rylands v Fletcher to situations involving manufacture of goods (such as the explosives in Read v J Lyons & Co. Ltd [1946] UKHL 2; [1947] AC 156).

Mr Rzepecky supported his argument by reference to the decision of the Supreme Court of Canada in Tock v St John’s Metropolitan Area Board (1989) 64 DLR(4th) 620. There, it is true, the Court refused to apply Rylands v Fletcher to a situation of damage to the plaintiff’s basement after a main sewer became blocked and overflowed. The local authority had not been negligent. The notion of non-

natural user was said to be a flexible concept capable of adjustment to the changing patterns of social existence; and public sewerage and drainage systems were said to be an indispensable part of the infrastructures necessary to support urban life and ordinary and proper for the benefit of the community.

It will be apparent that we are unpersuaded by this argument, but if this Court were to adopt the Canadian approach, it would make no difference to the result, for the Supreme Court nevertheless found the local authority liable to the plaintiffs in nuisance. Invasion of the plaintiffs’ property by foul water was a material interference with ordinary comfort as defined according to the standards held by “those of plain and sober habits.” The Courts in a nuisance action consider the severity of the harm suffered by the plaintiff, the character of the neighbourhood, the utility of the defendant’s conduct and whether the plaintiff displayed abnormal sensitivity. But, it was said, when there is actual physical damage to property (as opposed to interference with tranquillity or amenity), the Courts are quick to conclude that the interference constitutes a substantial and unreasonable interference with the enjoyment of property and is thus an actionable nuisance, unless the damage is an inevitable consequence of the exercise of a statutory power. The Supreme Court referred with approval to the judgment of McIntyre JA, for the British Columbia Court of Appeal, in Royal Anne Hotel Co. Ltd. v Village of Ashcroft (1979) 95 DLR (3d) 756. McIntyre JA quoted from and endorsed the view of the trial Judge in that case:

No use of property is reasonable which causes substantial discomfort to others or is a source of damage to their property.

Royal Anne was also an action in nuisance for damage occasion by a random blockage of the local authority’s sewer. The trial Judge found that the blockage did not result from negligence on the part of the appellant authority, its agents or servants, in the design, installation or maintenance of the sewer or in any of the steps taken to deal with the blockage when it was discovered. In dismissing the appeal, McIntyre JA made the following valuable comment:

The conflicting interests must be weighed and considered against all the circumstances. The social utility of the conduct complained of must be weighed against the significance of the injury caused and the value of the interest sought to be protected. But where the conduct of the defendant has caused actual physical injury to the plaintiffs’ land the mere fact the such conduct may be of great social utility, for example construction and maintenance of a sewer, will not attract greater licence or immunity. There is no reason why a disproportionate share of the cost of such a beneficial service should be visited upon one member of the community by leaving him uncompensated for damage caused by the existence of that which benefits the community at large.

It seems to us that the same philosophy of community responsibility underlies the rule in Rylands v Fletcher when it is applied in contexts such as the present. It is clear that the Canadian Courts are by means of a strict application of the law of nuisance able to ensure the same result as is achieved by the rule. Therefore, on that approach, even if this Court were to follow Tock and hold the council’s water main to be a natural and ordinary use, the council would be liable in nuisance notwithstanding anything that its witnesses might say about the construction, maintenance and monitoring of the water system.

In the light of the cases to which reference has been made, particularly Cambridge Water, we do not consider that there is a tenable argument that in New Zealand Rylands v Fletcher has been absorbed by the law of negligence. It is scarcely likely that the Privy Council would now depart from the view unanimously expressed by the House of Lords in 1993. Moreover, the High Court of Australia in Burnie, a case concerned with fire caused by welding activities, left the door open for the continued application of the law of nuisance in appropriate cases. Whatever conclusion may ultimately be reached about damage resulting from the spread of fire, in our view cases about bulk storage or conveyance of things which are likely cause damage if they escape - the actual concern in Rylands v Fletcher - are most appropriately the subject of the law of nuisance.

McIntyre JA in the passage quoted above provided a sound policy reason why that should be so. The payment of damages to those injured by non- negligent failure of a public water system ought to be a cost of running the system. The local authority can determine the relative economics of expenditure on preventing escapes, meeting insurance costs or paying compensation. Reference can be made to the remarks of La Forest J in Tock at p646 concerning the need for a cost-benefit analysis in determining the level of preventative expenditure. The risk of calamitous loss to a neighbour, who is necessarily unable to forestall an escape occurring on adjacent property, i.e. is unable to manage the risk, is spread amongst all ratepayers or borne by the local authority’s public liability underwriter. Such a rule of strict liability protects those who may not be able to obtain insurance (e.g. owners of undeveloped land) or who have misunderstood the need for it, perhaps because they are unaware of the presence of underground mains. It also minimises any doubling up of insurance premiums. (Those able to obtain insurance still need it lest the escape of the dangerous substance results from the act of an unknown or impecunious third party unaccompanied by negligence on the part of the council, but the slightness of that possibility will be reflected in minimal premiums.)

The High Court of Australia criticised the rule in Rylands v Fletcher for its “difficulties, uncertainties, qualifications and exceptions” (which largely do not apply in the current context) but has put in its place the practical uncertainties and the transaction costs of the law of negligence, a substitution for which it provided a justification by requiring a heightened degree of care for the handling of dangerous things and by pointing to the tactical advantage for a plaintiff of the doctrine of res ipsa loquitur. But that can provide no guarantee of recovery for someone in the position of the present plaintiff. How could it or its insurer have achieved protection against the risk of damage from the bursting main?

We find persuasive Professor Fleming’s negative commentary on Burnie in (1995) Tort Law Review 56 in which he describes Rylands v Fletcher as a vital component of tort theory and points out that the theories underlying strict liability and negligence are quite different:

Negligence deals with activities that present no undue risk to others, if reasonable care is observed by the actor. But failure to do so makes his or her conduct unlawful so that continuance of the negligent activity can be enjoined. By contrast, strict liability is appropriate for activities which present an abnormal risk, even if all due care is observed. Such activities are nonetheless tolerated, because of their preponderant social utility (but for which they would be prohibited). Putting it a different way: negligence deals with the wrong way of carrying on an activity, the residuary risk of which it is not unfair for victims to shoulder themselves. Strict liability deals with activities which even when carried out with due care retain an abnormal risk and could be deemed negligent as such but for their countervailing utility.(p60)

He adds that the protective effect of strict liability is increasing proportionately to the progress of the technological complexity of society.

No objection has been taken by the defendant to the inclusion under the Rylands v Fletcher head of a claim for damage to the plaintiff’s chattels. It seems to be accepted in the case law that where premises are damaged a claim for interference with their enjoyment can encompass damage to chattels which were thereon: see the authorities referred to on this point by Lord Cooke in Hunter v Canary Wharf Ltd at p463, to which may be added Irvine & Co Ltd v Dunedin City Corporation.

As the judgment delivered by the President indicates, the pleading of the plaintiff’s claim erred on the side of minimalism but no lawyer would have been left in any doubt that it relied upon Rylands v Fletcher. The plaintiff’s application for summary judgment invoked Irvine which, as we have observed, treated Rylands v Fletcher as a nuisance case. The defendant was not misled about the nature of the claim, as is evident from its solicitors’ letter of 17 April 1997 to the plaintiff’s solicitors which mentions both Irvine and Burnie. And, upon the view we take, the absence of defence affidavits is not prejudicial.

We would enter summary judgment in favour of the plaintiff for the amount of its claim, quantum of loss not being in dispute.

Solicitors

Peter J McDonald, Auckland, for Plaintiff McElroys, Auckland, for Defendant