On March 19, 2021, the Federal Court of Australia found in the Sanda v PTTEP Australasia class action case representing over 15 000 Indonesian seaweed farmers, that the oil company breached its duty of care owed to them when suspending and operating an oil well which consequently led to an oil spill in 2009 impacting farmers’ livelihood.
Existence of a duty of care
While acknowledging that the suspension and operation of the well in question was an inherently dangerous activity that carried the risk of harm, the oil company denied that it owed any duty of care to Indonesian farmers arguing that it was not reasonably foreseeable that a failure to properly suspend or operate the well would result in damage in Indonesia due to the great distance (more than 250 km) between the well and claimants’ farm (§1024-1025).
To the question of whether damage to claimants’ farm was reasonably foreseeable as a consequence of the loss of well control, and the consequent release of oil, through the respondent’s carelessness in the operation or suspension of the well, the Court answered positively.
The Court referred to internal documents, notably extracts specifically addressing whether the shorelines of Australia, Timor and Indonesia would be at risk of oil impacts in case of a blowout. The Court also considered that a blowout was reasonably foreseeable considering that none of the control barriers used by the defendant to prevent the uncontrolled release of oil had been tested and each of them was deficient (§1033-1037).
Further, addressing the issue of indeterminacy of liability (a policy consideration which can militate against recognition of a duty of care in cases involving mere economic loss where the imposition of liability might be for an indeterminate amount for an indeterminate time to an indeterminate class), the Court found that it did not apply in this case. “Where, as here, a duty involves the avoidance of physical harm (not merely the avoidance of pure economic loss), the limits of the physical consequences that attend a respondent’s conduct can almost always be sufficiently identified, in terms of time and space, for the purposes of identifying the class of persons to whom the duty is owed, with sufficient certainty” (§1042-1043).
Breach of the duty of care
When discussing whether PTTEP Australasia had breached its duty of care, the Court recalled the distinction between the foreseeability of the risk of harm (which was relevant here) and the likelihood of that risk occurring. “A risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or fanciful is real and therefore foreseeable” (1046).
Once again, the Court referred to internal documents to consider that the risk of harm resulting from the respondent’s act and omissions in failing to properly seal the well was foreseeable. The Court specifically cited the document in which the oil company expressed concern as to whether oil spilled at the well could reach the shorelines of Australia, Timor and Indonesia and harm marine ecosystem there (§1049).
Finally, as to whether farmers’ seaweed crops were damaged as a result of the spill, the Court asserted that “there is no other plausible explanation for this widespread loss, combine to establish the causal connection between the presence of the oil and crop death. The obvious cannot be denied” (§1010).
Importance of internal documents
This ruling demonstrates the importance of internal documents (in this case the Oil Spill Contingency Plan) to establish what a company knew or ought to know at a given time and what was foreseeable in order to find a duty of care and a breach.