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Business Law for Caltex Oil v Dredge 1976- Case Study

University: Monash University

  • Unit No: 1
  • Level: Undergraduate/College
  • Pages: 3 / Words 809
  • Paper Type: Minor Case Study
  • Course Code: Caltex Oil V Dredge
  • Downloads: 671
Question :

Tort is a common law which provides activities for the wrongs being done to the individual. It covers all the nature and various ways in which tort can provide compensation to all the parties who have given civil wrong to the person. The remedy available for the tort is damages and relief and all the parties get the compensation from the person in various means.

  • Explain the test of reasonable foreseeability?
  • What are the changes and impact came from Caltex appeal?
  • Does negligence also provide compensation to the person who suffered an economic loss?
Answer :


Negligence is the foremost and important element of Tort. It provides reasonable foreseeability on person aspects that they should take care of all the actions being taken by them. It provides that every person has the right to work in a proper manner and should behave in a prudent way. In a basic means, there implies a context that negligence made by a person can harm the individual or property. So when any person infringes the right and makes any civil wrong to breaches then right of the individual that embarks to negligence. It is a legal injury to any person on some legal means. And the relief given in negligence is compensation and damages.


In this case, Australian oil Refining Pty Ltd (AOR) and Caltex Oil Pty Ltd company in Australia. In which AOR an oil refinery delivers oil in the southern shore of Botany Bay by Caltex and from their the oil refinery return to the northern shore of Botany Bay of Caltex, where they have a huge pipeline through which the oil is being transferred. All the pipelines were being owned by AOR and AOR carries all the responsibility of the risk and the damages occurred in the pipeline. With that Caltex has the ownership of the oil, in which all then oil transferred will be carried out by them. On 26 Oct 1971, Dredge Willenstead who use to dredge the water channels was doing that same thing and operator was aware that the pipeline is damaged just because it was inaccurately in a shredded area and Dredge was not being able to show the errors in the location. Just through by this AOR filed a sue against the operator and Decca for getting the compensation for the damage arouse in the pipeline and they received the compensation of $ 125,000. Caltex also filed a sue for getting the compensation for the negligence but the court rejected the sue that there is an economic loss so Caltex appealed in the High court for that loss.

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Issue raised

  • Whether the judge is trial was correct for not giving compensation of Dredge?
  • Do Caltex has the right to take the economic damage?
  • Whether Decca was negligent and as it caused economic loss to Caltex?


Court held that, although there is a general rule that no person will get the damages for the economic loss as it was non recoverable but there are certain exceptions which are to be made clear in that if the defendant can foresee the situations which were been arises and if could have taken proper measures could have avoided the situation or the negligent act so that may amount that plaintiff to get the damages. Court provided certain guidelines and reasons which had to be taken care of and which provide exception in the case they are mentioned below:

  • Decca has the knowledge that the pipeline will be damaged and will create an economic loss to Caltex.
  • Decca was well aware of the fact that the user of the pipeline is Caltex.
  • As the pipeline owned by AOR it is the breach of duty to take care from Decca in order of using that dredge.
  • All the damages suffer are the direct consequences of the detriment suffered.

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Thus, Justice Mason held that, there is no requirement for any additional proximity. The defendant will be held liable for the economic loss occurred to Caltex, as their was a reasonable foreseeability on that place and they were well aware about the situation being arisen that means all the damages when happened dredge were well aware of that fact and despite of that they had taken such steps throughput there is an important element that No person even after knowing and is well aware about the loss that can happen by their action has done anything then they will be liable for all that damages occurred to them.


From this case this is for the first time that Australian case has made certain exception and also given the damages or the recovery of the damages to the person who has suffered economic loss. That was on then basis of reasonable foreseeability and still a breach was done by any person. It covered that the negligent act done by any person is an act through which financial loss incurred and that with the well knowledge of that act will amount to provide damages to the person.

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