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Overview of the Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad case

Describe about the Business Law for Australian Landmark.

Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 11 ALR 227

This case was the landmark Australian case as a result of which an exception to the general rule which grants recuperation for pure economic loss was not allowed. The exception took place in certain situations where the defendant could rationally anticipate that a particular person, as different individual from a general class of individuals, would have to suffer and compensate for the monetary harm which took place as a result of their behavior. Further, the key Facts, issues, laws and applicability of the case would be discussed so as to display the significance of the same (Webstroke Law, 2016).

Facts of the Case

A Processing contract was initiated between Australian Oil Refining Pty Ltd (‘AOR’) and Caltex Oil (Australia) Pty Ltd (‘Caltex’).

According to this agreement AOR refined crude oil was transported to its factory on the southern shore of Botany Bay of Catlex, and then it transports the advanced goods back to Caltex’s oil workstation on the northern shore of Botany bay by the help of a tube that ran under Bay.

AOR owned the tube. Under the provisions of the contract Caltex preserved the ownership of the oil in its numerous forms, and AOR was accountable for the danger of harm or damage to the oil as it passed through its tube.

The Dredge Willemstad was being utilized to scour a water channel in the Bay when it wrecked the tube on 26 October 1971. The workers of the dredge were aware of the tube issue.

The loss was caused because:

The track plotter chart which was offered by Decca Survey Australia Ltd erroneously depicted the area for dredging and

The workers of the Dredge botched to recognize the fault in the track plotter chart and also to verify their position by conservative means.

In order to recover the damages,AOR filed a petition against both the workers of the dredge and Decca which comprises of the reimbursement for the harm caused to the tube and the goods which were incorporated in it.

The Supreme Court of New South Wales decided that both the workers of the dredge and Decca were lawfully responsible for the loss which was caused and so, they would have to grant compensation of $125,000 to AOR.

Caltex also at the other hand filed a petition against the workers of dredge and Decca in carelessness to recuperate reimbursement for the expenses it acquire in having to arrange it as a substitute means of conveying petroleum goods until the tube was renovated.

The Facts of the Case

The Supreme Court rejected this assertion on the basis that Caltex did not own the land which was damaged by dredge and that the damage which was experienced by Caltex was a pure economic loss.

Caltex appealed this decision to the High Court.

Legal Issues

Was Caltex’s pure economic loss was recoverable in an action which was brought for the act of negligence or not? The loss was pure economic loss and not substantial economic loss which would have been recoverable because it was not a loss that streamed out from the physical injury which was caused to Caltex’s land or individual. The tribunals had formerly been disinclined to permit the recuperation of pure economic loss for policy reasons, including the outlook of undefined legal responsibility.

Rule and Relevant Law

According to the tort law of Australia, Pure Economic Loss has been defined as the pecuniary harm which was experienced as the consequence of the act of negligence on the part of another person which was not escorted by any physical damage to an individual or land (Stephen Wawn Associated, 2016).

As per the old approach a pure economic loss was differentiated from a momentous economic loss; but as per the present law of the state it was stated that the remarkable case of Hedley Byrne & Co Ltd v Heller & Partners Ltd in the year 1964, have modified the law in order to permit the revitalization of pure economic loss resulting from any negligent words (Law Teacher, 2016). Though, an obligation of concern in this context could not arise simply from reasonable foresee ability there were other exceptional stipulations.

Similarly, Negligence has been defined to be taken place in the circumstances where one individual owes to another person an obligation of concern, carelessness was occurring or failing to do something that a sensible individual would or would not carry out as it causes to another individual harm or failure as an end result  (Legal Services Commission of South Australia, 2016) (Marshall & Gibson Lawyers, 2012).

As per the general rule the adjudicator stated that economic loss which was not substantial upon the impairment which was caused to the plaintiff’s workers or land was disregarded; because of the fact that, the failure which was anticipated was not sufficient to make purely economic loss recoverable (Gillies, 2004).

Although, it was organized by the judges to generate an exemption to the general rule but in doing so, he preferred an approach to the issue which would not form the angle of isolation in informal or policy conditions of harm as it was done in the case of Hedley Berne by way of restricting the obligation of concern.

Legal Issues and Relevant Law

This specific complexity in designing a restricted obligation of care has not taken place in the case of Hedley Byrne which was a kind of case where this method was previously utilized, because in all those matters the plaintiff has been the only predictable injured party. The constituents which were required in order to make a decision of the matters in which it does occur was a practicable general meaning of "limited class".

At present the tribunal did not observe any manner of attaining this. The term would possibly have to be distinctively defined from case to case. From this point of view the obligation of care approach was slight more striking than the isolation approach which requires case-by-case meaning of "predictable and significant" (Dietrich, 2000).

It was recognized by the judges in this matter that Decca and the workers were fascinated in the dredge which had the indispensable way of skill having regard to the specific elements of the association among the parties in this specific case (Chircop, et al, 2012).

The approach of obligation of concern was adopted by the court, but unlike some of the adjudicators, it does not make an exemption to the S.C.M. v Whittall rule for the recuperation of purely economic loss. Rather it generates an innovative rule to substitute it.

The Court preceded to the list the issues which in his view show a quantity of closeness among the defendant's act and Caltex's loss which was adequate to give rise to accountability in the defendant to reimburse Caltex for its economic harm (Cane, 1977). The immediacy for which the adjudicator gazes was not principally informal. But presume if Caltcx had for some time been unable to organize substitute transportation and had accordingly evaded on agreements for the supply of petrol then the ensuing harm which was caused to Caltex would seem, to be so roundabout as to be disregarded.

In the current case, Caltex's harm did occur, in the opinion of the judges from the physical effect of the harm of the petroleum goods. The defendant owed a obligation of care to Caltex because the land of Caltex-crude oil at the processing plant and goods thereof-was in such physical proximity to the place where the defendant's tasks had their physical effect.

It also was the place where the dredge went for its working which would have the physical effect such as "restriction which was occurred through the tube of the crude oil and the goods. Restriction on the land of Caltex was anticipated as a result of such work (Latimer, 2012).


The Court then requested to response to the opposition which were imposed to the recuperation of purely economic loss that the reimbursement may be away from the capability of the defendant to disburse. As the court states that, this was no cause why the loss would be left with the injured party (Kalderimis, 1999).

On the other hand, a ruling which could not be performed by which there was nothing to transfer for the onus from the victim. Also the comments of the judges only points up the fact that the welfare of the plaintiff and the defendant divergence, but it grants no guidance as to how that clashes would be determined (Supreme Court of Tasmania, 1999).


At the end it could be concluded that it could carefully be said to have been determined in Caltex was that the mere fact states that the only harm endured by the plaintiff was purely economic loss which was not accurately or instantly substantial upon physical harm to the individual or land of the plaintiff. As it would not prevent recuperation of that harm.

 It might also be harmless to state that the S.C.M. u. Whittall test of causal proximity to physical harm was not law in Australia, although it must be memorized that the judge reaffirmed that rule and went no further than creating an exception to deal with the current case.

Four strands of reasoning supporting the decision in favour of Caltex are found in the judgments.

A Judge founded his verdict on a procedure of looking at the situations of the harm in order to scrutinize that whether, whatever its character was. He stated that it was an result of a physical cause on the land of the plaintiff.

An obligation of concern approach was adopted by two other judges. It restricts the range of recuperation for purely economic loss by entailing, in effect that the plaintiff be a constituent of a exclusively anticipate and restricted class.

A remoteness of damage test was adopted by other adjudicator (Kidner, 2012).

At last, a circuitous evaluation of public policy opinion without the conciliation of any suggestion about privileges and obligations was adopted by the judge (Manderson, 2006).

According to Justice Mason, though, there was no supplementary constraint of proximity which was required but still he stated that:

A defendant would then be lawfully responsible for economic harm which was caused due to his neglectful act when he could reasonably anticipate that a particular person was different from a general class of individuals, and then he would bear monetary harm as a result of his acts. These approaches eradicate or reduce the view that they would come into survival in regard to the obligation which was originated to an undetermined class of individuals; it guarantee that obligation was restrained to those people whose monetary harm falls within the area of foresee ability.

Although all of the Judges of the High Court namely (Gibbs, Stephen, Mason, Jacobs and Murphy JJ) gave different reasons but the case was commonly decided on 9 December 1976 in connection to Caltex’s appeal that the case was decided in the favor of Caltex as the economic loss which was beared by Caltex was recoverable.


Cane, P.F. (1977). Recovery In The High Court Of Purely Economic Loss Caused By Negligent Acts. Western Australian Law Review.

Chircop, A., Letalik, N., McDorman, T.L., and Rolston, S. (2012). The Regulation of International Shipping: International and Comparative Perspectives: Essays in Honor of Edgar Gold. Canada: Martinus Nijhoff Publishers.

Dietrich, J. (2000). Liability In Negligence For Pure Economic Loss: The Latest Chapter (Perre Vapand Pty Ltd). James Cook University Law Review, 7.

Gillies, P. (2004). Business Law (12th ed.).Sydney:Federation Press.

Kalderimis, D. (1999). "Contractual Economic Loss in New Zealand - "Who, Then, is my Neighbour" Really?" . Victoria University of Wellington Law Review 16. 29(2). 193.  

Kidner, R. (2012). Casebook on Torts (12th ed.). United Kingdom: OUP Oxford.

Latimer, P. (2012). Australian Business Law 2012. Australia: CCH Australia Limited.

Law Teacher. (2016). Pure Economic Loss. Retrieved on 30th November, 2016 from:

Legal Services Commission of South Australia. (2016). Negligence. Retrieved on 30th November, 2016 from:

Manderson, D. (2006). Proximity, Levinas, and the Soul of Law . Canada: McGill-Queen's Press – MQUP.

Marshall & Gibson Lawyers. (2012). A Short History of Negligence Lawsuits. Retrieved on 30th November, 2016 from:

Stephen Wawn Associated. (2016). Characterize the Harm – Pure economic loss. Retrieved on 30th November, 2016 from:

Supreme Court of Tasmania. (1999). Negligence & Foreseeability: Doctrine of Law or Public Policy.  Retrieved on 30th November, 2016 from:

Webstroke Law. (2016). Caltex Oil Pty v The Dredge “WillemStad” [1976, Australia].Retrieved on 30th November, 2016 from:

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