Indonesian seaweed farmers win Australian oil spill class action

Judge finds that Montara was negligent and owed a duty of care to local seaweed farmers after causing a damaging oil spill.

In this decision, Yates J delivered judgment in favour of the applicant following the trial of the Montara class action.

The proceeding is brought on behalf of approximately 15,000 Indonesian seaweed farmers, whose crops were allegedly destroyed when oil from an oil spill at the Montara oil field operated by the respondent spread to the southern coastal area of Rote, Indonesia in 2009.

The cause of action on which the applicant and class members relied is common law negligence. They alleged that the respondent owed them a duty of care when it set about suspending and operating an oil well in the oil field (the H1 Well) in 2009; it breached that duty of care, which resulted in a well blowout that remained unabated for more than 10 weeks; oil from the blowout killed, and caused a drop in the production of, their seaweed crops; and they suffered loss and damage as a result.

The respondent denied liability at trial. While it accepted that it was negligent in suspending and operating the H1 Well, it argued that it did not owe the applicant and class members a duty of care; the evidence did not establish that any oil reached the relevant parts of Indonesia; if the oil did reach those parts, it would not have been in a form that would have been toxic to seaweed crops; and the applicant’s claim of loss was not supported.

Justice Yates found in favour of the applicant on all of the critical issues in dispute. His Honour’s decision is lengthy and detailed (running to 1171 paragraphs) and cannot be done full justice here. For present purposes, some of the key aspects of the decision are summarised below.

  1. Duty of care: His Honour held that the respondent owed the applicant and class members a duty of care. His Honour said that he was “in no doubt” that it was reasonably foreseeable to a person in the respondent’s position that a failure to properly suspend the H1 Well could result in an uncontrolled oil spill that could cause loss or damage in the relevant parts of Indonesia, including to businesses involving the commercial exploitation of the marine ecosystem. In so finding, his Honour rejected the respondent’s reliance on a report and certain modelling relating to the risk of a well blowout and the likelihood of oil impacts and potential harm to the coast-line of Indonesia. His Honour observed that the low likelihood of a blowout expressed in the report “did not account for the gross incompetence of the respondent in suspending the H1 Well” (at [1035]). Taking this into account, the respondent’s own expert conceded that there was “a very high risk” of a blowout (at [1036]). With respect to the modelling, while it showed no impacts to the coastline of Indonesia, it also did not address what happened in the present case. His Honour said that “the respondent cannot absolve itself from a duty of care simply because it chose to model only the loss of oil from a wing tank and not the loss of oil from a well blowout possibly lasting several weeks, which was the actual risk that was posed by its negligent conduct” (at [1039]). Finally, his Honour rejected the respondent’s submission that the policy consideration of indeterminacy of liability militated against the recognition of a duty of care. In this regard, his Honour distinguished cases involving pure economic loss from those involving physical harm (at [1043]):

I accept the applicant’s submission that 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.

  1. Breach: His Honour held that the respondent breached its duty of care. The only issue raised by the respondent in relation to breach was foreseeability. His Honour held that the respondent’s failure to properly seal the H1 Well created a very high risk of a well blowout and a sustained uncontrolled oil spill. His Honour held that in these circumstances the risk of harm to businesses that depended on the commercial exploitation of the marine ecosystem of Indonesia was foreseeable. In so finding, his Honour rejected the respondent’s reliance on the report and modelling discussed above.
  2. Causation: His Honour was satisfied, on the balance of probabilities, that oil from the H1 Well blowout not only reached the relevant coastal areas of Indonesia, but also caused or materially contributed to the death and loss of local seaweed crops (including the applicant’s). Central to his Honour’s finding was his acceptance of the testimony of the Indonesian seaweed farmers who gave evidence at trial. His Honour said (at [1010]):

We will never know the precise mechanism(s) or pathway(s) by which the crops died here.  But the fact that: (a) Montara oil from the H1 Well blowout reached the coastal areas of Rote/Kupang; (b) the crops located where the oil was observed died shortly after the oil arrived; (c) this coincident event was widespread in the Rote/Kupang region; and (d) 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 ignored.

His Honour also rejected the evidence of certain of the respondent’s experts, including Dr Maki, who applied a predictive ‘Toxic Units Model’ and opined that any oil that reached Indonesian shorelines would have been essentially non-toxic to seaweed crops. His Honour said that the opinion could not be accepted in light of the first-hand observations of the seaweed fishermen. His Honour also observed that there were reasons to doubt that the ‘Toxic Units Model’ could predict the fate of the seaweed crops, including because it was applied to brown kelp (not seaweed) and addressed only one of multiple mechanisms by which seaweed could be damaged by oil.

  1. Damages: His Honour rejected the respondent’s submission that the applicant’s loss was not supported. His Honour held that, although difficult to assess and attended with uncertainty, the applicant’s loss could be calculated and he was entitled to an award of damages. As the applicant had no system of record-keeping or records showing his production, costs or profit of seaweed farming, his Honour relied on the applicant’s estimates. His Honour engaged in a detailed analysis of the applicant’s evidence and calculated his loss in each of the years from 2009 to 2014 by subtracting the estimated income the applicant actually earned in those years from the estimated counterfactual income he would have earned from seaweed farming but for the respondent’s negligence. Applying this method, the applicant’s loss for 2009 to 2014 was 421,622,000 Indonesian rupiah, which his Honour discounted by 40% to account for the uncertainty attending the loss calculation. His Honour thus assessed the Applicant’s damages at 252,997,200 Indonesian rupiah (around A$23,000) plus interest. His Honour did not make any findings in relation to how much compensation is owed to the rest of the class members, which will be determined at a later date.

Case details

 

Sanda v PTTEP Australasia (Ashmore Cartier) Pty Ltd (No 7) [2021] FCA 237

Federal Court of Australia, Yates J;
19 March 2021
Applicant’s Solicitors: Maurice Blackburn;
Respondent’s Solicitors: Allens;
Applicant’s Funder: Harbour
Austlii Link: Accessible here

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