02 Aug 2012

Exemplary damages for dust diseases in South Australia: Be careful what you wish for

by Greg Williams, Yehudah New, Adam Stevens

Companies at risk of dust diseases litigation arising out of exposures in South Australia need to be aware of the increase both in the likelihood of litigation and the potential damages.

Defendants in dust diseases cases may have perceived some advantages to being sued in South Australia, given that awards of damages have tended to be lower in that state. However, that is likely to change now that the Full Court has confirmed exemplary damages will be awarded where there was constructive knowledge of risk (BHP Billiton Limited v Parker [2012] SASCFC 73).

This is the first ever award of exemplary damages under the Dust Diseases Act 2005 (SA) and clarifies the application of a law which has been the subject of debate in South Australia since the DDA was enacted. Given that most defendants would have constructive knowledge, this means exemplary damages will be the norm in South Australia.

This development has the potential to empower the plaintiffs' bar and may raise the tariff for resolution of dust diseases claims in that state. It is also likely to trigger the resolution of a backlog of cases in South Australia which have been awaiting judicial determination of this issue.

Facts of this case: BHP Billiton v Parker

William Parker alleged that he developed asbestosis as a result of exposure to asbestos dust and fibres as a shipyard worker at Whyalla between 1971-72.

At first instance, Justice Lovell found that BHP Billiton was liable for Mr Parker's asbestosis and awarded approximately $52,000 in compensatory damages and $20,000 in exemplary damages. BHP Billiton appealed to the Full Court.

Dust Diseases Act in effect imposes strict liability when it comes to exemplary damages

Exemplary damages in common law are rare and only awarded where a defendant has acted with "conscious wrongdoing in contumelious disregard of another's rights" – a high threshold.

But section 9(2) of the Dust Diseases Act, as interpreted by the Full Court, goes well beyond the common law position, and of dust diseases legislation in any other Australian jurisdiction. Under it, the Court “should” award exemplary damages if the dust diseases defendant:

  • knew that the plaintiff was at a risk of exposure to asbestos dust; and
  • knew that exposure to asbestos dust could result in a dust disease

even if the defendant did not know at the time that the plaintiff was, in fact, exposed.

This means that exemplary damages should be awarded if there was knowledge that a particular person’s role carried with it a risk of exposure to asbestos. This includes imputed as well as actual knowledge. There is a residual discretion not to award exemplary damages, but the Court said such cases would be “outside the norm”.

Full circle

South Australia-based dust disease plaintiffs formerly tried to have their matters transferred to the swifter (and comparatively more generous) NSW Dust Diseases Tribunal. The Dust Diseases Act was passed with the stated purpose of expediting asbestos claims within South Australia and discouraging reverse forum shopping out of the jurisdiction.

This decision reinforces those policy objectives, as plaintiffs will find South Australia an even more attractive forum for their claims. The pre- Dust Diseases Act defendant-driven movement back to South Australia may have reduced dust diseases defendants' exposure with respect to quantum, but they will be exposed to "strict liability" exemplary damages, representing a new risk both in terms of reputation and quantum. Granted, the amount of exemplary damages awarded in this case was not large, but did represent nearly 40% of the amount of compensatory damages awarded.

The difficulty for defendants arising from section 9(2) is that it is triggered by the state of the their knowledge at the time of the asbestos exposure, most often many many years ago. There is little which can be done now to affect the risk that they will be subject to an award of exemplary damages.

Companies at risk of dust diseases litigation arising out of exposures in South Australia need to be aware of the increase both in the likelihood of litigation and the potential damages.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.