| Week TRT UBM OR NEELEETAT RISC What to do on an exam? 1. Determine what type of negligence = Physical Harm (Week 8) = Negligent Misstatement (Week 9) 2. Apply the four steps = Duty of care? Physical Harm : Donoghue v Stevenson ~ reasonable foreseeability of harm and proximity = Breach of that duty? - _2steps s. 48 — foreseeable risk, reasonable response (4 factors) "Did the breach cause harm? (damages) = Causation; remoteness = Is there a defence? Contributory negligence? Voluntary assumption of risk? 1. OVERVIEW OF TORTS AND NEGLIGENCE What is a tort? (CACL 14.10) * “Tort” is a Latin word meaning twisted’, ‘crooked’, or ‘wrong’. * Tort law is concerned with legally binding obligations that arise when one person’s wrongful conduct infringes another persons’ rights and loss, or damage is caused. ‘* Wrongful interference with an individual's person or property ‘© Torts are ‘civil wrongs’ (contrast with ‘criminal wrongs’= crimes) ‘* Creates corresponding ‘duties’ and ‘rights’ - Protecting general rights enjoyed by all individuals - Not dependant on a contractual agreement between the parties involved - The rights and duties exist and are imposed by the law (common law and legislation) © Examples of torts: 59- Tort of battery — right to be safe from intentional physical harm to your body - Tort of defamation — right to enjoy a good reputation - Tort of trespass — right to enjoy property free from interference - land and personal items - Tort of nuisance — right to peacefully enjoy land - Tort of negligence — right to be safe from unreasonable, careless conduct of others Overview of negligence (14.40-14.50) ‘* Anaction for negligence if about careless behaviour and can, therefore, be applied to any form of human or business activity. It does not involve a specific form of conduct. * Negligence law requires members of society (including those engaged in business activities) to adhere to minimum standards of conduct, to avoid injury to others. * Not about perfection — but about reasonable conduct © Negligence may cause; - Physical harm (includes injury, illness and property damage) - Psychological harm - Economic loss (financial loss) ~ includes loss of income, medical expenses ‘+ If the plaintiff is successful in establishing negligence, damages are recoverable to compensate the plaintiff for the injury/ losses. The defendant is liable. * Policy issue — when someone is injured, who should bear the loss? The person who caused the injury. The state? What role does fault play? The tort of negligence is about finding fault (i.e. ‘negligence’) in the personal who caused the loss. ~ Legislation as created compulsory compensation schemes for injury at work (WorkCover) and for road accidents (Transport Accident commission) — under these schemes no-fault liability arises - the question is only whether you were injured — Not whether the employer/ other driver was at fault - Part 3-5 ACL -strict liability for manufacturers of goods with safety defects that injure (could sue under both areas 60of law (negligence and ACL) ~ BUT ONLY COMPENSATED ONCE) - Part 3-5 ACL- Not examinable * Common law - The common law principles governing negligence liability have been reformed by legislation. - E.g.: Modifying common law principles (breach/damage) and caps on liability - Topic 1- statutory law can modify the common law (as parliament is the sovereign law-making body ‘Legislations - Wrongs Act 1958 (Vic) -check Moodle for extracts 1. Does D owe a duty of care to P? Reasonable foreseeability Proximity Broader policy considerations when a new situation arises 2. Ifso, has D breached that duty of care? Was ita foreseeable risk? If yes, how would a reasonable person in D's position have responded? 3. Ifso, has P suffered damage? Was damage caused by the breach? (‘but for’ test) Is the damage too remote? (reasonable foreseeability test) 4. Are there any defences? Contributory negligence Voluntary assumption of risk Peer professional opinion (Week 9) ll, ELEMENTS OF NEGLIGENCE ~ DUTY OF CARE — Step 1: Establishing a duty of care — Does D owe P a duty of care? “Snail in the bottle” case 61May Donoghue and a friend went to a café, ordered and paid for an ice-cream drink The café owner pored the ginger beer into a glad containing the ice cream Donoghue drank some of the ice cream drink and lifted the bottle to pour the remainder of the ginger beer into the glass. The remains of a decomposed snail dropped out of the bottle into the glass Donoghue later complained of stomach pain and the doctor diagnosed her as having gastroenteritis and being in a state of nervous shock. * Manufacturer s=pretailer sm» friend =» May Donoghue Who could May Donoghue sue? Her friend who bought her the ginger beer> The café owner who sold it to her friend. But there is no contract between May and the retailer The manufacturer who made it. But there is no contract between May and the manufacturer Donghue sued manufacturer. Duty of care: You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your ‘neighbour’ (‘reasonable foreseeability of harm’ test) Who is your neighbour in law? Who does the duty of care extend to? Those who are ‘so closely and directly affected’ by the defendant's act that the defendant should have foreseen the consequences to the plaintiff. (‘neighbour/ proximity test) Why limit scope of the tort of negligence in this way? If injury is not foreseeable and there is no neighbour test, liability is too broad. Broad principle established: Duty of care can arise in any context where loss or injury was ‘reasonably foreseeable’ and where the parties were in sufficiently close ‘proximity’ that it required one party not to cause harm to the other. Established negligence as a tort, independent of contract. Applied the broad principle/ rule to the specific facts in the case. Narrower principle also established: A manufacturer owes a duty of care to consumers to take reasonable care when manufacturing products to protect consumers from reasonably foreseeable injury to their person or to their property. Must not allow foreign objects to enter items for consumption. Doing so is failing to take reasonable care and is negligent, 62= Verdict: Donoghue won the case and was awarded damages. DUTY OF CARE IN FIVE SPECIFIC SITUATIONS (CACL FIG 14.4) WAWNE Acts causing physical harm Acts causing mental harm Liability for omissions Acts causing pure economic loss Statements causing pure economic loss Acts causing physical harm (CACL 14.130-14.150) Does D owe a duty of care to P? Explain and then apply, the legal tests established in Donoghue v Stevenson —> Reasonable foreseeability of harm test © Was it reasonably foreseeable that the D’s acts or omissions could cause harm to others? — Proximity/ neighbour test © Does P belong to a class of people that D should have regarded as being “at risk” of being injured or suffering loss? I the P closely and directly affected by D’s acts? Are the parties in sufficiently close proximity? Example - Manufacturers: manufacturers owe a duty of care to consumers. Must take reasonable care to protect consumers from injury (to person or property) that are reasonably foreseeable - ensure product is safe for use of consumption by consumers. Cases: 63- Dr Grant and his underpants = Severe dermatitis (rash) due to chemicals in the underwear — nearly died - Manufacturer breached duty to take reasonable care in the production of the underwear to not cause injury to Grant ‘* Example — Occupiers of premises: Owe a duty of care to those who lawfully enter the premises. Must take reasonable care to ensure that the premises are safe — e.g.: Clean, in good condition, free from hazards and not in a state of disrepair * Cases: Australian Safeway Stores v Zaluzna (CACL 14.140) - Customer slipped on wet floor - General duty of care exists - Foreseeability of harm and customer is in a relationship of close proximity with the supermarket (occupier) - Clean and check floors often - Car park lights not on ~ manager of shop attacked at night in car park - Duty does not extend to taking reasonable care to prevent physical injury resulting from the criminal behaviour of third parties (unfair burden) - Duty of care did not arise 2. Acts causing mental harm (CACL 14.170} ‘© Mental harm by itself (not associated with physical harm to P) * Test from the High Court of Australia: * Reasonable foreseeability taking into account: a. Relationship between the parties b. P’s physical and temporal proximity to the event that cause the mental harm . What the expected response of a person of normal fortitude might be 6a‘* Victoria — Wrongs Act reforms — must be recognised psychiatric illness or disorder and other limitations in certain circumstances (CACL 14.210) 3. Liability for omissions (CACL 14.220-14.260) * General principle: no liability or for failing to act except where there is a positive duty to act. Look for a relationship that establishes a duty. ‘© In what circumstances is there a positive duty to act? Where the parties are in a pre-existing relationship that contains elements of reliance or dependence, or where the defendant is in a position of control - Parent and child - School authority and student - Employer and employee - Doctor and patient © Doctors have a duty to warn patients of the risks associated with a surgical procedure © Needed to warn patient that he might go blind in the other eye. = Occupier and visitor © Need to warn visitors of shallow water 4. Acts causing pure economic loss (CACL 14.280) © What is “pure economic loss”? - Financial loss that is not a result of personal injury or damage to property. - If financial loss flows on from injury (e.g.: loss of oncome, medical expenses), or property damage (e.g.: loss of profits due to negligent fire) this is not a case of pure economic loss — this financial loss is clearly recoverable. * General principle: courts are reluctant to find a duty of care is owned in circumstances where D’s negligent acts result in P suffering a pure economic loss. - Why? indeterminacy of liability: Ultramares (CACL 14.280) ‘* To establish a duty of care, more than reasonable foreseeability of harm and proximity is required W key factors to consider: “salient features” outlined in Pere VApand 1, Reasonable foreseeability? Yes 652. Indeterminacy of liability? No — growers could be identified within a particular area Individual autonomy? No - Unreasonable interference here 4, Vulnerability to risk? Yes - P totally dependent on D and could not protect self (compare with Johnson v Esso; Marsh v Baxter) 5. Defendant's knowledge of the risk and its magnitude? Yes — aware of break out of disease and repercussions 6. Decision: duty of care owed (compare with Johnson v Esso; Marsh v Baxter) Ill, ELEMENTS OF NEGLIGENCE: BREACH OF THE DUTY OF CARE —> Step 2: Has D breached the duty of care? ‘© Test: Has D met the standard of care required by the law of negligence? ‘© What is the standard of care expected of someone who owes a duty of care? - Perfection? No (D does not “guarantee” safety of P or P’s property) - Reasonable behaviour? Yes ‘* The principles to consider in determining whether D has failed to exercise the proper level of care are set out in s. 48 of the Wrongs Act (Vic). Breach of duty (14.1450-14.520) ‘* To determine breach: two step approach — need to consider: 1. Step 1 - Reasonably foreseeable risk: s. 48(1) Wrongs Act (Vic) - Isthe risk one which requires a reasonable person to respond? 2. Step 2 — Reasonable person's response: s. 48(2) Wrongs Act (Vic) - How would a reasonable person respond to the risk? 1, Reasonably foreseeable risk: s. 48(1) = A person is not negligent in failing to take precaustions against a risk of harm unless: © The risk of injury was reasonably foreseeable: s 48(1)(a) © The risk is not insignificant: s 48(1)(b) ‘© Areasonable person would not have taken precautions in the circumstances: s 48(1)(c) 662. How would a reasonable person respond to the risk? s. 48(2) - (14.460;14.520-14.650) = The standard of care expected is that of a reasonable person = What would a reasonable person, in the position of the D, do by way of response to the risk? = This is assessed objectively — it is an impersonal test = The reasonable person is equipped with the same skills and expertise expected of a person exercising a particular trade or profession. = Consider in context of circumstances at that time (without the benefit of hindsight) * Consider four factors to determine what a reasonable person would do: Section 48(2) Wrongs Act 1958 (Vic) (2). In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): a. The probability that the harm would occur if care was not taken b. The likely seriousness of the harm ¢. The burden of taking precautions to avoid the risk of harm d. The social utility of the activity that creates the risk of harm Balancing test cost 0 DANGER/RISK au 67Take steps to avoid rsks if reasonable to do so costo DANGER/RISK au You don't ned to address minor risks or those too costly to prevent costo DDANGER/RISK wae 1. Probability of the risk of harm/ injury ‘* When a risk is small, a reasonable person can ignore it. What a reasonable person must not do is create a risk that is substantial. The greater the likelihood of the risk occurring, the more that is expected of D to take reasonable steps to prevent it occurring. Case: Bolton v Stone (CACL 14.530) - Struck by a cricket ball (outside the grounds) - Duty of care? Yes - Breach? No. Why? Very unlikely - Boy dived off bridge into river — struck submerged sandbar — quadriplegic 68- Duty of care? Yes. Breach? No. Why? People dove for 40 years without injury (no other reported incidents) — very low probability. . Gravity of the harm/ seriousness of consequences if risk happens (CACL 14,550) The more serious the risk, the greater the need for precautions. What are the potential consequences and how serious are they? E.g.: harm to a person — death, permanent injury, concussion, broken bone etc Of particular relevance where: - The activity is dangerous - Phas a particular vulnerability that D knows about Paris v Stepney Borough Council (CACL 14.570) - Issue: Employer's liability for one-eyed worker - Duty of care? Yes - Breach? Yes - No goggles provided to welder — spark in eye - Gravity of harm of injury to eye = high — complete blindness 3. Burden on D of eliminating the risk (CACL 14.590) #)‘one must balance the risks against the measures necessary to eliminate the risk’; Watt Hertfordshire (CACL 141580) * The earlier it is to eliminate the risk, the less likely a D’s failure to take precautionary steps will be justifiable. # The court could take into account the cost and inconvenience/ difficulty involved in taking precautionary measures, and any risk that these steps may themselves involve - To stop selling oysters or to relocate the fishery altogether -Too difficult, expensive and inconvenient - Unreasonably high burden on the D. - Indoor cricket player suffered serious eye injury - Evidence showed eye injuries are common — helmets not available at that time. 69- D not expected to design and manufacture helmets for use by players in indoor cricket game - No negligence for not providing helmet 4. Utility of D’s conduct (CACL 14.620) * Did the conduct have such high social value that we forgive the breach (e.g.: ambulance driving at speed; rescuing people from flood) ~The risk of injury to the firefighters was weighed against the lifesaving activity engaged in by the fire service. - The emergency of the situation and utility of the defendant’s conduct in saving a life outweighed the need to take precautions. Wilson v Nilepac (CACL 14.640) - Psuffered spinal injury as a result of a crunch exercise involving a medicine ball Did the personal trainer breach their duty of care? Does physical activity have “social utility”? Yes, generally speaking But the focus is on the “social utility of the activity that creates the risk of harm” ~ the activity here was the crunch exercise, this itself has no relevant social utility. Limited notion of social utility for the purposes of assessing the breach Evaluating Response (CACL 14.610) ‘+ When evaluating the reasonableness of D’s response, the following is to be considered (s. 49 Wrongs Act): - Burden of taking precautions to avoid risk of harm includes the burden of taking precautions to avoid similar risks (e.g.: the burden to do it at National Park A, plus you have to do it at National Park B, CD etc) - The fact that the risk could have been avoided by doing something a different way does not itself give rise to liability (hindsight is always 20/20) - The fact that subsequent action was taken does not constitute an admission of liability. 70* When analysing a scenario, make sure you reach an overall assessment as to whether it is likely that there has been a breach of the duty or not, taking into account the four factors — weigh the factors/ balance them against each other overall in the circumstances. ‘© Can be difficult assessment to make. IV. ELEMENTS OF NEGLIGENCE: DAMAGES > Step 3: Has P suffered loss/ damage/ injury as a result of D's breach? Is P entitled to damages to compensate them for the loss/ damage/ injury? (14.680) ‘* Aim of damages is to put the plaintiff 9as far as money can do so), back in the position that he or she was in before the tort was committed. * Two aspects: 1. Causation: the negligence was a “necessary condition” of the occurrence of the harm: s 51(1)(a)(factual causation) Loss/ damage/ injury suffered by P was caused by D’s negligence - Ask: Did the breach of duty cause the loss? And 2. Remoteness: It is appropriate for the ‘scope of D’s liability’ to extend to the loss or damage or injury: s 51(1)(b). The loss must not be too remote for the breach - Ask: is the loss reasonably foreseeable? Causation (14.690) ‘© The negligence was a “necessary condition” of the occurrence of the harm: s 51(1)(a)(factual causation) Loss/ damage/ injury suffered by P was caused by D’s negligence ‘* P must show that ‘but for’ the breach, the loss or damage would not have occurred. ‘* If the circumstance of the case were the same, except for the D’s negligence, would the P have suffered the loss? If not, it is the D’s negligence that is taken to be the cause of the damage. (Need not be the sole cause: March v Stramare (14.820) 1~The HC has affirmed that the main question in an injury into causation remains whether it was more probable than not that D’s breach was the cause of P’s loss. - Woman on crutches ~ slips and falls on chip on the store floor - Floor cared for. Proper systems of cleaning and inspection in place? - Likely that if the floor had been cared for, the chip wouldn’t have been there (more probable than not they violated the duty) - Did not have to establish the exact time of when the chip was dropped or exactly how long it had been there. Causation often clear in cases of physical injury. May be more difficult to establish in other cases, or where there is more than one act or even that would cause Ps loss. Richtoll v WW lawyers (14.720) - Lawyers negligent in not conducting a further search of ASIC register before client advanced money ($4.5 million) in pursuant to a loan. Borrower default on the loan. - The search would have shown the borrower was in financial trouble and had had receivers appointed. - The court found the client would have lend the money, anyway, given the nature of their lending activities. - The lawyer’s negligent conduct did not cause the loss, Breach of duty, bur no causation. Remoteness (14.760) The loss must not be too remote from the breach. Is it appropriate for the ‘scope of D’s liability to extend to the loss or damage or injury? (s. 51(1)(b)) Policy question: to what extent should a defendant be made responsible for all the loss ‘caused by’ the breach? Answer at common law and statute (Wrongs Act s51(1)(b)) a defendant should only be responsible for damage that is reasonably foreseeable — to demand more is too harsh Losses that are not reasonably foreseeable are too remote, and therefore not recoverable. This question is different to the duty of care question — here we ask if a loss is reasonably foreseeable in the abstract. The loss suffered by P 2must be reasonably foreseeable, or, of the same type or kind as the foreseeable damage. Wagon Mound (No 1) (14.770) - Oil spill in Sydney harbour from ship - Oil floats to wharf, mixes with cotton waste. - Gets set on fire by molten metal during welding - Would not normally ignite on water - P's wharf was damaged - Not reasonably foreseeable. - ‘Although there was a clear casual connection between the events that took place, that was not enough. D is only liable for the harm caused if the harm was of a kind that was reasonably foreseeable’. - To demand more is too harsh; to demand less ignores the minimum standard of conduct expected = Later case succeeds when it is shown that the carrier actually knew real risk of fire — negligent to allow oil spill knowing this — Wagon Mound (No. 2) V. ELEMENTS OF NEGLIGENCE: DEFENCES, —> Step 4 — Does the Defendant have a defence? Will damages be reduced or prevented altogether? * Contributory negligence (apportions loss and reduces damages accordingly) “| was careless, but you were careless too” * Voluntary assumption of risk (complete defence) “You were doing something that you knew was risky” ‘© Peer professional opinion Contributory Negligence (14.810-14.840) * D's defence: P failed to take reasonable care of own safety. “I was careless, but you were careless too” ‘* Damages that are assessed will be reduced to reflect the P’s own contribution to the damage: Wrongs Act ss 62-63: - Drunk driver strikes truck parked in the middle of the road at night - Drunk driver sues truck driver for injuries 73- Both were careless - 70% drunk drivers’ fault, 30% truck drivers’ fault - Drunk driver can get 30% of damages - Falls after slipping on broken step - But was not using handrail - Use handrail (50% at fault =50% damages) Voluntary assumption of Risk (14.850) * Aperson cannot complain of damage which results from a risk which was accepted (Wrongs Act s 54) ‘* Aware of the risk, fully appreciated it and accepted it freely and willingly —may be difficult to establish * “You knew it was risky and accepted the risk” ‘* If obvious risk — presumption of awareness — P must show not aware (s. 54) ‘* Complete defence — no damages payable * Eg. AFL footballers who suffer concussion and later are brain damaged — voluntary assumption of risk is possible defence (but probably no breach not to provide helmets; also do not consent to other players flagrantly disregarding rules of the game) 74WHAT TO DO ON AN EXAM? 1. Determine what type of negligence? = Physical Harm (week 8) = Negligent Misstatement (week 9) 2. Apply the 4 Steps (negligent misstatement) = Duty of Care? Legal test depends on = Isita two-party scenario/P requested the advice/information? (apply Hedley Byrne; MLC; Shaddock} OR = is Pa third party? (apply Esanda factors) + Breach of that Duty? — (2steps s.48 — foreseeable risk, reasonable response — professional standard of care) = Did that breach cause harm? (damages) — Causation; remoteness = Isthere a defence? Peer Professional Opinion? Contributory negligence? Voluntary assumption of risk? OVERVIEW OF NEGLIGENT STATAMENTS CAUSING PURE ECONOMIC LOSS (14.340) ‘+ Negligent statements causing pure economic loss: - Negligent advice ~ Negligent supply of information ‘+ “words” rather than “acts”, which cause pure economic loss ~ because the advice or information is incorrect/ false/ inaccurate. ‘+ Distinguish from (i.e. need to look at the scenario/ facts provided). - Physical harm (e.g.: physical injury, property damage) Mental harm = _ Acts which cause pure economic loss * Of particular relevance to professional advisers, such as: - Accountants - Auditors - Financial advisers = Bankers ‘+ Liability for negligent misstatement is governed by the same broad rules that we establish last week: = Duty of care - Breach of duty = Damage 7s- Defences ‘+ BUT the legal tests that we need to apply are NOT the same for all of the steps. ‘+ There are some important differences in applying the steps, that we cover this week: ~ Duty of care — we need more than ‘reasonable foreseeability’ and ‘proximity’ — test from Donoghue v Stevenson not suitable ~ Breach ~The four factors are a poor fit here ~ do not apply these. Instead, use professional standard of care. - Damages —the same - Defences ~ the same, but extra defence ~ Peer professional opinion 1. Elements of negligent misstatement (Fig 14.4) 5. Does D owe a duty of care to P? Special relationship: = Anassumption of responsibility by D and - Reasonable reliance by P Esanda factors if P is a third party/ advice or information was not provided at P’s request 6. If so, has D breached that duty of care? Was it a foreseeable risk? If yes, how would a reasonable person in D’s position have responded? Standard if care of ordinary person exercising and professing to have that skill. 7. If so, has P suffered damage? Was damage caused by the breach? (‘but for’ test) Is the damage too remote? (reasonable foreseeability test) 8. Are there any defences? Contributory negligence Voluntary assumption of risk Peer professional opinion 76DUTY OF CARE For a long time, courts said no duty of care was owned by professionals for negligent advice causing pure economic loss. Why? - Th reason was summed up in 1931 in Ultra v Touche (CACL 14.280) where Cardozo J said that no duty of care was owned by the auditor to its client because such a finding of liability for an indeterminate amount of money for an indeterminate (period of) time to an indeterminate class of possible plaintiffs. - Astatement may potentially have far wider repercussions than a physical act - The law adjusted to address this issue - Special relationship? Hedley Byrne v Heller (1964) (CACL 14.350) Breakthrough case — Hedley Byrne v Heller - HB wants to know if it should do business with Easipower - HB asks Heller if Easipower is credit worthy - Heller: Easipower — credit worthy — but actually is not - But, disclaimer in advice: “confidential. For your private use and without responsibility on the part of the bank or its officials” Issue: Is Heller liable for the negligent advice it gave to HB that caused the pure economic loss? Decision: Recognised (for the first time) that a duty of care could arise - Aduty of care can exist provided there is a “special relationship” based on some element of “reliance” - On the facts, however, there was no duty of care (and no liability) because of the disclaimer = the limitation clause saved Heller in the case (no liability) - An appropriately worded disclaimer makes reliance unreasonable To establish a duty of care, P must prove that there was a special relationship based on: - An assumption of responsibility by the defendant; And - Reasonable reliance by the plaintiff A number of following cases have fleshed out what is required in terms of a special relationship, and reliance “MLC Evatt (CACL 14.370}; Shaddock v Parramatta iy Council (14.390) 7- Sanda Finance V PMH (CACL 14.430) — Duty of care and third parties * When does a ‘special relationship’ arise? MLC v Evatt (14.370): Barwick Gd: - Whenever a person gives information or advice (whether that information actively sought or merely accepted by the other person); - Upon serious matter (especially a business matter); and - The relationship of the parties arising out of the circumstances is such that the speaker realizes, or ought to realise, that they are being trusted; - Particularly if they have access to information or expertise on the matter in question; - THEN: The speaker, choosing to give information and advice, comes under a duty to provide that information or advice with reasonable care. ‘+ Shaddock V Paramatta City Council (CACL 14.390) - The paramatta city council was asked by Shaddock, a developer, whether the land that it intended to acquire was affected by a road- widening proposal. - The council advised the developer that the land (pictured on the north-west corner of Macquarie and O'Connell St) was not affected by a road-widening proposal, when in fact it was, - Shaddock suffered pure economic loss as a result of the council’s failure to disclose information - the development had to be scaled back and Shaddock argued it would not have bought the property if it had been aware of the road widening proposal. - Shaddock argued the Council owed it a duty of care in responding to. its inquiry - The HC posed three questions: i. Was the advice given in respect of a serious business matter> ii, Were the circumstances such that the adviser should have realised that he/ she was being trusted and relied upon to give correct advice on which the advice intended to act? And iii, In the circumstances, was it reasonable for the other person to have relied on the advice? - The HC answered these questions in the affirmative - Held there was no distinction between providing advice (as a professional such as an accountant does) and ‘merely’ providing information (as the council officer did) because it was the kind of information that required ‘skill and competence’ that the council had, and the council knew or ought to have known that the plaintiff 78intended to act or rely on the information. Where else to you get this information? - This was sufficient to create a ‘special relationship’ and a duty of care - The council was liable for the plaintiff's economic losses - Duty extends to merely supplying information Duty of care: Elements (14.360) ‘* Asdemonstrated in Hedley Byrne; MLC v Evatt; Shaddock , to succeed in establishing duty of care, the plaintiff must prove that there was a special relationship based on = An assumption of responsibility by the defendant, indicated by: - Advice/ information is on a serious matter or business matter; and - The defendant should have realised he or she was being relied on to give correct advice/information; and = Reasonable reliance by the plaintiff - Was reliance on the advice or information by P reasonable in the circumstances? - Itis reasonable to rely on experts or people with exclusive access to knowledge - [tis not reliable to rely on advice or information with disclaimers. = If Pisa client of D, and has paid for Ds services this would support an assumption of responsibility by D and reasonable reliance by P(but it is not necessary for P to be D's client- negligence is independence of contract) ‘© In San Sebastian the High Court held that although usually there would be an antecedent request from P to D (e.g. ‘please provide me with information about road widening or credit worthiness’) as a means of establishing reliance and the special relationship that must exist, this prior request is not essential. ‘© Aduty of care can arise where a Defendant has volunteered information or advice, such as making it publicly available: San Sebastian (14.410) (but Plaintiff failed based on the facts in that case) * Often see disclaimers on websites where general information is provided —e.g. By lawyers, accountants, professional bodies etc. DISCLAIMER The information on this website: ~ isnot legal advice = isgeneralin nature = should not be relied upon 79+ may not reflect the most recent developments (both in the law and generally) For legal advice that is relevant and applicable to your particular circurnstances, you should consult a lawyer directly. ‘ABC Lawyers do not accept any liability in connection with the use of this website or the information found here. Al users of this website access and use the information found here at their own risk and they are entirely responsible for any damage they experience from such access or use. + Ifa third party relies on a negligent statement made by another person, such as a solicitor, accountant, auditor or financial adviser, and suffers loss, can that third party sue? + Can the duty of care extend to a third party who did not request the advice or information from the D? (indirect relationship with the D) * Example: auditor — duty of care owed to company. Audit report prepared at the request of and for the purposes of the company. + Potential third parties who may rely on the audit report: © Creditor/lender (e.g. supplier; bank) © Shareholders © Potential investors Third party situations (14.430) - Esanda Finance - Financier - Excel - Guarantee of repayment to Esanda for loaning money to various companies associated with Excel. - Peat Marwick Hungerfords (PMH) - Excel’s auditor - Esanda wants to know if it should lend money to Excel-backed companies - Excel provides Esanda with an Audit report (done by PMH) - Esanda lends, Excel goes bankrupt - Esanda sues PMH (which it never spoke with) for the bad audit - There was no suggestion that the audit report was prepared specially for Esanda - Esanda claimed that PMH owed it a duty of care, as Esanda relied on the audit report and belonged to a class of persons who might reasonably have done so. 80Esanda v PMH continued: Issue: Did PMH owe a duty of care to Esanda in auditing Excel’s accounts? Is a duty of care owed where P did not request the advice or information from D? jon — PMH did NOT owe a duty of care to Esanda. = Mere knowledge that someone might see the advice and act on it is not enough (mere reasonable foreseeability is not sufficient) = Heightened “reasonableness of reliance” test. P must show: — D knew or ought to have known that the information or advice would be communicated to the P individually or as a member of a class to which P belongs (e.g. investors, shareholders or lenders) — Fora purpose that would be very likely to lead P to enter into a transaction of the kind P did enter into — Inreliance on the information or advice = without seeking further advice or making their own inquiries — and thereby risk incurring the economic loss if statements were untrue = This is essentially an “intention to induce” standard - one way to show reasonable reliance is to establish that the auditor's intention was to induce the P to act on the advice or information in the way that they did ~Esanda was not able to establish this = Esanda was in a position to appoint accountants and conduct its own inquiries before deciding to enter into financial transactions with Excel = There was nothing to suggest that it was reasonable for Esanda to act on the audited reports without further inquiry - reliance without further inquiry was not reasonable in the circumstances * Court finds it is unreasonable to rely on audits without further inquiry = No duty of care = itis much more difficult for a third party to establish that a duty of care is owed. a1Ill, BREACH OF DUTY Breach of duty (14.450-14,520) - 2 steps: — Step 2: Has D breached the duty of care? — Test: Has D met the standard of care required by the law of negligence? To determine breach: same two step approach — need to consider: = Step 1 - Reasonably foreseeable risk: s.48(1) Wrongs Act (Vie) — isthe risk one which requires a reasonable person to respond? = Step 2 - Reasonable person’s response: s.48(2) Wrongs Act (Vie) — How would a reasonable person respond to the risk? Step 1: Reasonably foreseeable risk: s.48(1) A person is not negligent in failing to take precautions against a risk of harm unless: — The risk of injury was reasonably foreseeable: s 48(1)(a) — The risk is not insignificant: s.48(1)(b) — Areasonable person would have taken precautions in the circumstances: s.48(1)(c) — THIS STEP IS EXACTLY THE SAME (SEE WEEK 8) Step 2: How would a reasonable person respond to the risk? S.48(2) = The standard of care expected is that of a reasonable person. = STILL LOOKING AT HOW A REASONABLE PERSON WOULD RESPOND, BUT DO NOT APPLY THE 4 FACTORS = The four factors do not work well with negligent misstatement cases causing pure economic loss (or professional negligence generally) 82Professional standard of care (14.480, 14.560) Ww. Instead, we consider the professional standard of care and use the legal test established in Rogers V Whitaker: (part of judgment extracted at CACL 14.560 p. 316) — For professionals and persons with special training or skills (accountants, engineers, lawyers, doctors, financial planners etc.): — ‘the standard of reasonable care and skill required is that of the ordinary skilled person exercising and professing to have that specialized skill’ Consider in context of the circumstances at that time (without the benefit of hindsight) [14.460] [14.480] [14.490] Standard of Care: Insurance Brokers ~ steps reasonable insurance brokers are expected to take to discharge the duty of care: Understand nature and extent of client instructions Advise client about optimal insurance Consider and take into account Client’s commercial sophistication Previous advice given Any reason to disbelieve client’s information If do not take these steps, fail to meet the required standard of care Specialists — if the Defendant advertises themselves as a specialist — then held to a higher standard of care — e.g. Specialist tax accountant This standard of care is often informed by peer professional opinion defense - did the defendant do what other competent professionals in their field do? DAMAGES, DEFENCES Damages (14.680) Step 3: Has P suffered loss as a result of Ds breach? Is P entitled to damages to compensate them for the loss? Same two requirements as for negligent acts. Need to establish: Causation: ‘but for’ test / Wrongs Act s51(1)(a) - the negligence was a “necessary condition” of the occurrence of harm. Ask: Did the breach of duty cause the loss? 83* BUT FOR THE WRONG ADVICE/INFORMATION, the Plaintiff would not have taken the action that incurred the loss * Remoteness: It is appropriate for the ‘scope of D’s liability’ to extend to the loss or damage or injury: s.51(1)(b). The loss must not be too remote from the breach. ASK: is the loss reasonably foreseeable? + thal per 4720 The lawyer was negligent — a reasonable lawyer would have conducted a further search of the ASIC register shortly before the loan amount was advanced. - The lawyer’s negligent conduct did not cause the loss. - The court found the client would have lent the money, anyway, given the nature of their lending activities. - Breach of duty, but no causation. - Pure economic loss of $4.5 million not recoverable. Defenses Step 4 - Does the Defendant have a defence? Will damages be reduced or prevented altogether? = Same principles apply as in week 8 = Remember to check: — Contributory negligence (partial defence) — Voluntary assumption of risk (total defence) — BUT AN ADDITIONAL DEFENCE = PEER PROFESSIONAL OPINION (complete defence) Peer Professional Opinion (14.660) * This is a defense once a breach has been established. ‘* Once P proves breach of professional standard of care, D is liable unless he or she can show he or she acted in accordance with peer professional opinion. * If successfully argued, it is a complete defense and D will not be liable for any damages 84Wrongs Act ss 59-60 - factors to consider (CACL 14.660) A professional does not incur liability if he or she acted in a manner that was widely accepted by peer professional opinion as competent professional practice. However, court can overrule if the opinion is irrational. There may be differing opinions on a matter. Peer professional opinion does not need to be unanimous to be considered widely accepted. Closely related to standard of care for professionals The type of evidence that could be brought forward is: independent expert reports and testimony; professional standards directions from a professional association (if applicable) Common practices and customs in the particular profession or industry. Court can consider professional standards and customs — but these are not conclusive — can still be found negligent even if these were complied with Court reluctant to accept peer opinion: Peer must accurately and exhaustively comment on the D’s conduct Peer must be appropriately qualified and hold appropriate expertise Must comment objectively and not demonstrate any bias towards D Defense failed in Cam & Bear v McGoldrick — peer not independent — avoided giving objective evidence Court may also make findings of fact that are inconsistent with the D’s version of events — if the peer professional opinion is based on assumptions associated with the D's version of events, and is. inconsistent with the court’s finding of facts, the peer professional opinion defense will fail (see e.g. Mules v Ferguson (14.670)) OTHER LEGAL ACTIONS Uncertainties and difficulties exist in mounting a common law action for negligent misstatement. Statutory causes of action may also be relevant and can be brought in conjunction with an action for negligent misstatement. Examples under the ACL: 5.18 - misleading or deceptive conduct S.60 - consumer guarantee that services will be rendered with due care and skill May be easier to satisfy and remedies may be broader. 85Section 18 of the ACL ‘* Section 18 of the ACL is used in many negligent misstatement cases, often in conjunction with common law negligence * Review the s 18 criteria and see why it is attractive and may be preferable: — “Engage in conduct” - broadly defined, including silence and omissions — “Misleading or deceptive” — “lead into error” - not a high barrier — “strict liability” - no intention or fault is required — catches innocent, negligent and fraudulent conduct - compare to negligence where fault is at the heart of the claim — Causal connection between conduct and loss is required but, if shown, no fault is required — No exclusion of s 18 is permitted — though P can be put on notice that it cannot rely on the statements: Butcher v Lachlan Realty — Wide remedies are available including damages under s 236 86| Mee 0-THELAWOF BUSES ORGAMSATONS-AONEYANO,— ‘What to do on an exam? "Determine type of dispute FIRST = Does a partnership exist? Section 5 definition (plus s.6) = Carrying on a business + Incommon "With view of Profit — Plus s.6~ discuss any rules relevant based on facts — Note: whether a partnership exists may not be in dispute (facts may make it clear there is a partnership) — if not in dispute, no need to discuss. "Is there an internal dispute between the partners? = Has partner violated a duty to other partners? Fiduciary and statutory duties (ss.32-34) — Did partner bring in extra property? Does it belong to the partnership? = Is there Liability to a Third Party? — Did partner enter into binding transaction (contract)? (ss.9 and 13) = Insscope of business? + Inusual way? Did third party know or believe there was no authority or not dealing with partner? = Did partner commit a wrongful act? (ss.14 and 16) = Inordinary course of business? |. TYPES OF BUSINESS ORGANISATIONS * Sole Trader/Proprietor (e.g. electrician) + Agency (e.g. real estate agent) - week 10 + Partnership (e.g. accounting firm) — week 10 + Company/Corporation (e.g. Google) - week 11 + Trust (e.g. family business) + Franchise (e.g. McDonalds) + Association (may be incorporated) (e.g. Dairy farmers) 87I, AGENCY The law of agency (15.10) = Agency = “Acting through another person” = Law of agency allows one person to authorize another person to do any act that he or she has capacity to do themselves. = When the agent does act, the principal has to bear the consequences. = In BTF1010 we focus on agency as it relates to partnerships and corporations. Principal and agent relationship (15.10) ‘Appoints agent Deals with the third party on behalf of the principal Contract created between third party and principal ‘Agent’s role has been completed (drops out of the picture). ‘Authorises agent to act. Nature and scope of an agent's authority (15.2) Actual Authority (15.220-15.270) ACTUAL AUTHORITY: Agent has ACTUAL authority to do X — Express - Agreement/instructions = Eg. Salesperson in a retail shop - authorized to sell goods/make sales at normal prices ~ may have a limit on express authority — not allowed to give any discounts without obtaining the manager’s approval 88= Implied — as a matter of necessity or incidental to carrying out acts within express authority — to do everything in the usual course of business to complete the transaction = eg. salesperson - Receive cash and other forms of payment from customers — Issue receipts Arrange delivery of goods Apparent Authority (15.280) APPARENT AUTHORITY: Agent APPEARS TO OTHERS to have authority to do X "Protects third parties ™ Acting outside/exceeding actual authority — E.g. Salesperson — gives a discount on the goods, but is not authorized to do so = Principal still bound if within apparent authority —E.g. by hiring the person as a salesperson, the company is representing to customers that they have the power that one would expect a salesperson of that type to normally have. How would a reasonable person in the position of the customer have seen the salesperson’s authority? Ill, PARTNERSHIPS ~ FORMATION AND NATURE Created by Agreement (16.20) = Arises from agreement between two or more persons who decide to go into business together = contractual relationship — Express (oral or written) or implied by conduct — Pool assets and abilities = May not be a formal partnership agreement - e.g. wife and husband running a café — may not have written anything down = Existence of a partnership depends on the true nature of the relationship between the parties (even if parties describe themselves as. being or not being in a partnership, court may find otherwise) = No formalities to create ~ contrast with creation of a company which requires approval and registration 89Formation and nature (16.20 -16.70) * Restrictions on size — at least two people and up to 20-s.115 Corporations Act (except where it is a professional practice (see footnote 6, p.366)) = Choose a business name - Must use the full name of all of the partners- e.g. Joanna Boderick & Marcia Lee (not practical if many partners - e.g. some law firms and accounting firms have 100s of partners) OR register a business name for trading purposes (Business Names Registration Act), e.g. “Snazzy Cuts Hairdressers” = Eclipsed by rise of corporations. Common structure for: — Small businesses and family businesses — Accounting and law firms = Medical practices — Pharmacists — Architects Personality liability of partners = Nota separate legal entity (contrast with company) = Partners are personally liable - unlimited liability for the debts and liabilities of the partnership = Possible to establish a limited partnership under the Partnership Act, and register with ASIC (16.780-16.790) = One or more partners can limit liability to a fixed amount — but cannot take part in the management of the firm or bind the firm — Atleast one partner must have full liability for the debts and liabilities of the partnership — Not popular - company preferred — Some professions have adopted — e.g. law and accounting firms (as were historically barred from incorporating) Does a partnership exist? (16.80) — Disputes may arise over whether a partnership exists or not - the court will decide if a partnership exists - Existence of a partnership depends on the true nature of the relationship between the parties (even if parties describe themselves as being or not being ina partnership, court may find otherwise) — Why is it important to know if there is a partnership? 90= One party might want to share the profits (‘lam a partner and therefore I’m entitled to a share’) = One party might not want to share the losses/expenses (‘I am not a partner and therefore | do not have to share the losses/expenses’) = One party might argue they are owed an account of profits due to breach of a fiduciary obligation (‘We are partners and you have breached your fiduciary duty’) Is there a partnership? Legal definition of partnership (16.80) ™ Section 5 of the Partnership Act 1958 (Vic) defines a partnership as: the relation that exists between persons — carrying on a business — incommon — with a view of profit — All3 elements must be satisfied - may establish 2 out of 3— will not be enough — can be difficult to apply to the facts Essential elements of a partnership ~ “Carrying on a business” (16.90) ‘carrying on a business’ = ‘business’ - any ‘trade, occupation or profession’ — systematic, organised, records kept (compared to a hobby) = ‘carrying on’ = repetitive or regular acts — Need a pattern or series of acts — one-off transaction is more likely to be a joint venture At which point do parties start ‘carrying on a business’? — need not have commenced trading — pre-trading activities will amount to carrying on the business (have “embarked on the business”) ~ e.g. Acquiring the premises, work to prepare the restaurant, acquiring furniture and equipment, advertising the business — Why was this important? — Relationship had broken down — other partners were not sharing proceeds with Khan a1= Court found Khan was a partner - entitled to profits and to a share in the partnership property on dissolution of the business Contrast with @SUGBERIVAEMIIMGALIGMS0) — creation of business plan, market research and other exploratory activities does not = carrying on a business — just at idea stage Essential elements of a partnership —"in common” (16.140-16.150) “in common” "Need to establish a ‘mutuality of rights and obligations’ = The business must be operated by or on behalf of all the partners — All members need not be active in day to day management as long, as it is being carried on on their behalf (e.g. B is an agent of A and is carrying on the business on behalf of both A and B) — BUT must have a right to a say in the management of the business — Reciprocal rights and obligations = E.g. sharing in profits and losses/expenses = Consider the facts and circumstances - e.g. Degiorgio v Dunn [16.150] — no partnership — no share in profits — paid flat fee for performances, no sharing of expenses, absent overseas for 17 months Essential elements of a partnership — “with a view to profit” (16.160) ‘with a view to profit” = Need to intend to make a profit (even if you don’t) ~ and to divide the profit amongst partners — sporting clubs, societies or charitable organisations are not ‘partnerships’ — profits are not shared among the members (and members also not liable for debts (beyond membership fee)) Evidence of a partnership — Section 6 - Statutory Rules (16.170 -16.240) Supplementary guidance: s.6 statutory rules In determining whether or not a partnership exists “regard shall be had” to the following rules: = $.6(1) - Common Ownership = $.6(2) - Sharing of Gross Returns = $.6(3) - Profit Sharing 92= The rules in section 6 have been included in the Act to supplement, not replace, the statutory definition in section 5. Particularly assist in assessing whether the parties are “acting in common’, = Factors that may indicate a partnership but are not sufficient on their own. Critical to establish carrying on business in common (s.5). Rule 1: common ownership - s6(1) = Common or joint ownership of property (like land or buildings) does not necessarily mean that the common owners are ina partnership. Rule 2: sharing of gross returns - s6(2) = Sharing of gross returns does not of itself mean the sharers are ina partnership, Cribb v Korn (CACL 16.190) = Landowner received share in gross returns in exchange for use of the land. = But no involvement in the farming of the land or right to direct or control the farming = No mutuality of rights and obligations. = Not carrying on a business in common. Rule 3: profit sharing - s6(3) = Sharing of profits creates a strong presumption (prima facie evidence) that there is a partnership — but is not conclusive. = The other party has the onus of proving that there is not a partnership = This presumption does not apply in the circumstances set out in s.6(3)(a)-(e) Examples where the presumption does not operate (not presumed to be a partner in these situations): = s6(3)(a): a debt repaid in instalments out of profits. - e.g. CoxV Hickman (CACL 16.210) (debts paid to creditors out of profits does not mean creditors are partners) = s6(3)(b): remuneration paid to an employee on the basis of a share of profits. - e.g. Plummer v Thomas (CACL 16.220) (Plummer paid 50% of profits as, wage, but does nothing else = not a partner) = s6(3)(c): payment of an annuity to a widow or child of a deceased partner. = s6(3)(d): loan with the interest dependent on profits. 93= s6(3)(e): annuity for goodwill part of sale of business dependent on profits. IV. PARTNERSHIPS ~ RELATIONSHIP OF PARTNERS WITH EACH OTHER = Internal dealings and management of the partnership — rights and duties towards each other = Hallmarks: — Contractual relationship = Agency relationship — Fiduciary relationship — Rights and duties under the common law and statute (Partnership Act 1958 (Vic)) Contractual Rights and Duties (16.260) = Partnership agreement = oral or written or implied by conduct = A formal written partnership agreement might exist (accountants, doctors, lawyers, etc) - might deal with membership, capital, entitlements, % share in profits, losses and capital, management, accounts, dissolution, dispute resolution, goodwill, etc = Terms implied under the Partnership Act: s.28 — if not dealt with in the partnership agreement “Fills in any gaps” General rights and duties under Partnership Act: s 28 Examples: — Share equally in capital and profits and lose: (regardless of initial investment - see 5 28(1) = Firm indemnifies every partner for firm-related expenses: s 28(2) — Every partner may take part in management: s 28(5) — No partner entitled to remuneration: s 28(6) — No person can be introduced without consent of all: s 28(7) — Decisions to be decided by majority: s 28(8) 94= Books to be kept at the place of business and all have access: s 28(9) = Also: Restriction on right to expel a partner: s 29 (CACL 16.270) Agency Relationship (16.420 -16.450) = Partners are both principals and agents of each other — Apartner is an agent of the other partners and may bind them (as an agent can bind his/her principal); and — Apartner is also a principal and may be bound by the acts of the other partners (as a principal may be bound by the acts of an agent) — Law of agency under the common law and s.9 of the Partnership Act — consider actual authority (express and implied) and apparent authority + Liability to third parties for debts and obligations. Fiduciary relationship (16.290) Fiduciary relationship - partnership is founded on mutual trust and confidence Fiduciary duties: — Act in good faith for the benefit of the partnership — avoid any actual or potential conflict of interest — Make full disclosure towards each other =) continues after dissolution until partnership wound up: Chan Statutory Duties (16.290) Statutory duties (reflect common law fiduciary duties) = Partners must render true accounts and full information of all things affecting the partnership: s.32 = Duty to account for benefits derived without consent from dealings concerning the partnership or from use of the partnership property, name or business connection: 5.33 = Duty not to compete with partnership (without consent) - if do, must account for all profits: s. 34 95Fiduciary duties and statutory duties = Example —A and B are in partnership as builders. The partnership enters into a lucrative contract with Mega Developers Pty Ltd. A is a major shareholder and director of Mega Developers Pty Ltd, but does not disclose this to B. = Example -A and B are in a partnership as architects. The partnership has submitted a tender to design a new house. Without telling B, A submits a tender in his own name and undercuts the partnership tender so as to. win the project and does win Partnership property — Definition and rights (16.360) = Under s 24 partnership property includes: = Items originally brought into the partnership as partnership property (depends on intention) — items acquired on account of the firm — items acquired for the purposes of and in the course of the partnership business = Goodwill = Under s 25: — items bought with partnership money are deemed to have been bought on account of the firm, unless contrary intention appears. — What right does each partner have to the partnership property? — Partners have no title to specific property (e.g. the painting on the wall, or the car) but a right to his/her proportion of the surplus after the sale of assets and the payment of debts — Fluctuates over the course of the business ~ determined on dissolution Personal Property of the partner — partnership property? (16.360) = Ifa partner’s property is used for the partnership, does it remain the separate property of the partner, or does it become partnership property? — E.g.a partner uses her own personal computer for bookkeeping purposes — is kept on the business premises — Eg. a partner uses his own personal van to make deliveries, but, also for private use (and does not own another motor vehicle) 96= determining what is the property of the partnership is important particularly at the end of the partnership relationship = Can the partner demand the return of the computer? Can the partner demand the return of the van? Can have it only if itis his or her property (and has not become partnership property). = Depends on intention - either as expressly agreed or as evidenced by the conduct of the parties and manner in which the business was conducted e.g. Harvey v Harvey (CACL 16.370) — Land never became part of the partnership property — even though improvements to the property were made. Clear intention that it was intended to remain the property of Harvey so it could be taken over by his son when old enough Vv. PARTNERSHIPS — RELATIONSHIP OF PARTNERS TO THIRD PARTIES = Liability to third parties (those external to the partnership) for: — Debts and obligations (ie. contracts) - ss.9 and 13 — Wrongful acts and omissions —ss.14 and 16 Liability of partners to third parties — Contracts (16.420 - 16.550) Liability for debts and obligations (contracts): ss 9 & 13 = Each partner is liable jointly with the other partners for all debts and obligations of the firm incurred while he/she is a partner: s.13 = The type of liability that might arise is: — Asupplier might be owed money — Alender might be owed money — Aclient/customer might sue for damages for breach of contract "When is the partnership bound? = Partner acted within scope of actual authority (16.430) = What if the partner exceeded their actual authority? Did the partner act within apparent authority? = Section 9 (16.470) - apply to see if partnership bound ~ reflects principles of agency in context of partnership Elements of s.9: A partner (acting as an agent) will bind co-partners where: = he/she does any act or enters into a transaction; 7= that is within the scope of the kind of business carried on by the partnership; and = the transaction is carried out in the usual way that partnerships of that kind conduct business. UNLESS (proviso) = the partner had no authority to so act; and = the third party knew this; or = the third party did not know or believe that the person was a partner. The law protects third parties acting in good faith. = Two steps: 12). Ask: ‘what is the kind of business of the partnership?” Was the act/transaction within the scope of this? + Mercantile v Garrod (16.510) Outside express authority. But, common for garage businesses to sell cars - buyer would have no reason to suspect transaction (and had no knowledge there was no authority). — 2. Ask: Was it done in the usual way? Even if the action of the partner was within the scope of what that type of partnership normally does, it must be done in the usual way if it is to bind the other partners. = Goldberg V Jenkins (16520) (borrowed money at 60% interest (normally 6-10%). Not an ordinary business transaction. Lender = should suspect no authority.) PROVISO in s.9: Did the third party know there was no authority or not know or believe they were dealing with a partner? - Ifthe third party knows there was no authority, there cannot be apparent authority, and they are not acting in good faith - Ifthe third party is unaware the person they are dealing with is a partner, then the partnership is not bound — there is no apparent authority + Construction Engineering v Hexyl (CACL 16.540) - T has no authority to enter construction contract (no express authority) - Tsigned contract in its own name AND construction company thought T was acting on its own behalf (did not know of H) (no apparent authority) 98= Joint liability: s 13 (CACL 16.550) - Each partner is jointly liable up to the full amount - Only one legal action is permitted — should sue all partners collectively, at the same time = If for some reason not all partners are sued (e.g. third party not aware of a silent partner), then the partner or partners sued can insist that other members be ‘joined’ in the legal action - If the partners are sued in the firm name, rather than naming individual partners (which is now allowed), then the judgment applies to all partners - If the partnership assets are insufficient to meet the liability to the third party, then the partners will be required to draw on their personal assets — if the assets of one partner are insufficient, then the other partner(s) would have to make up the difference — one partner could potentially be liable for the whole amount to the. third party Liability of partners to third parties - Wrongful Acts (16.620 - 16.670) Liability of partners to third party for wrongful acts of a partner: ss.14 and 16 = Each partner is liable for any loss or harm caused to a third person while acting ‘in the ordinary course of the business of the partnership’ or ‘with the authority of the co-partners’:s. ‘Acts’? Wrongful act or omission: = Tort (e.g. negligence) — Breach of ACL (misleading or deceptive conduct) — Breach of fiduciary duty to client (conflict of interest) = Crime (fraudulent misappropriation of funds) — NB: does not include breach of contract. = Test: was the act done in the ordinary course of the business of the firm? "This needs to be answered by looking at: — the nature and scope of the business of the partnership; and — the partnership agreement — Accounting firm, 3 partners (receivership, tax, and liquidation) — Fraudulent misappropriation of funds by G (crime and in jail) 99= G bankrupt = The receivership work was in the ordinary course of the business — it did not matter that G was the only partner doing receivership work - the fees went into the partnership — the other partners were jointly and severally liable — Davis was not acting in the course of the firm’s business or within authority when he fraudulently deposited cheques into the firm’s account and then misappropriated them — Law firm, but one partner (H) habitually gave investment advice — Why were the solicitors liable to P even though H provided investment advice and not legal advice? — Within usual course of business for that firm — usual for solicitor to enquire on behalf of the client and provide information and assistance = Joint and several liability -s.16 (CACL 16.670) = Each partner is liable both jointly and severally for losses suffered by third parties under s.14 = More than one legal action is allowed — can sue the partners jointly (collectively) or severally (individually) — if only one partner is sued, and the full amount is not recovered, can keep suing until full amount recovered = Ifonly one partner is sued, that partner can be held liable for the full amount to the third party (It is then up to the partner who has been sued to get the others to contribute according to their share of the liability.) = Ifthe third party sues the partners under the firm name, then all partners are caught by the legal action (overcomes the distinction between joint and several liability). 100The exam summary notes were used to do the e-assessment for the end of semester ‘exam (Semester 1 -2020) It isa more summarized version of the lecture notes and were used to study for the final exam. It is what | used during the open-book final exam for quick reference. Case law highlighted in blue. 101AUSTRALIAN CONSUMER LAW * ACL replaced the consumer protection provisions of the former TPA and State and Territory consumer protection legislation, such as the Fair- Trading Acts and the door-to-door sales legislation. * It is administered by the Australian Competition and Consumer Commission (ACCC) and the State and Territory consumer law agencies and enforced by all Federal, State and Territory courts and tribunals. * Applies to conduct engaged in and outside Australia by: - Australian Citizens - Ordinary resident of Australia - Natural persons and corporations engaging in conduct involving postal, telegraphic or telephonic services, the internet - Foreign corporations that have no physical presence in Australia but have online customers in Australia Case: Valve Corporation v ACCC Facts: Valve operates Steam gaming platform which operates in the US. Made false or misleading representations, engaged in misleading or deceptive conduct Held: That the platform had engaged in content in Australia (2.2 million Australian subscribers), despite the lack of physical presence in Australia. CONSUMER GUARAUNTEES * ACL, Pt 3-2 provides for statutory guarantees in contracts for the supply of goods and services to consumers. ‘* In relation to the supply of goods to consumers, there are 9 consumer guaranties. ‘* Depending on which consumer guarantee is breached, the consumer may have an action against the supplier or manufacturer. * Sections 59-59 of the ACL set out 9 consumer guaranties that apply to goods supplied to a consumer. * Consumer guarantees relevant to this unit: 102— Guarantee as to acceptable quality (s 54): The goods are of “acceptable quality” —> Guarantee as to fitness for any disclosed purpose (s 55): The goods are reasonably fit for i, A purpose for which the supplier represents they are fit ji. A purpose the consumer makes known to the supplier or manufacturer that they will use the goods for ‘Answering an ACL question Step 1: Determine if consumer guarantees apply Step 2: Determine what CG was violated = Acceptable quality? (354) = Disclosed purpose (s 55) - Apply test and cases Step 3: Determine remedy = Major or minor violation? —> Define ‘consumer’ good or service s3(1) * Aconsumer acquires goods/services as a ‘consumer’ only if: — The amount payable for the goods does not exceed $40,000; or — The goods are of a kind ordinarily acquired for personal, domestic or household use or consumption; or — The goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads: ACL, s 3(1) — *Aperson does not acquire goods as a consumer if they acquired them for the purpose of resupply or for the purpose of using them up in the course of production or in the repair of other goods or fixtures on land: s 3(2). — These are interpreted very broadly sen2 ote whe cowarvacnes mnecownlt 1. Acceptable Quality (s 54); or 2. Fitness for any Disclosed Purpose (s 55) 103> 1. Acceptable Quality (s 54) * 5 54(1): Where a person supplies goods to a consumer in trade or commerce (other than a sale by auction), there is a guarantee that the goods are of acceptable quality. * Goods are of ‘acceptable quality’ if: — Fit for all purposes for which goods of that kind are commonly supplied; — Acceptable in appearance and finish — Free from defects — Safe — Durable * $54(2): A ‘reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods) would regard them as acceptable by having regard to the following matters: — The nature of the goods — The price of the goods — Statements on labels or packaging — Representations made by supplier or manufacturer Any other relevant circumstances. Case: Thomas v Excel intelligent Pty Ltd Facts: Thomas purchased a garden shed on eBay which described ‘large garden shed’ and ‘heavy duty’. Later found out the shed was not suitable to be a garage or workshop. Held: Excel was in breach of s 54 and s 56; product was not of acceptable quality as did not fit for use as a garage and was not durable. — 2. Fitness for Disclosed Purpose (s 55) * s55(1): If a person supplies goods to a consumer in trade or commerce (other than in a sale by auction), there is a guarantee that the goods are reasonably fit for any ‘disclosed purpose’ and for any purpose for which the supplier represents that they are reasonably fi 104Facts: Pharmaceutical company supplied a prescription drug to a patient. Use of the drug increased the risk of a heart attack in some patients. Held: Did not violate disclosed purpose because patient had not expressly or impliedly made known a purpose that the drug be absolutely safe for or completely free from side effects © What is a ‘disclosed purpose’? — Particular purpose made known to supplier by consumer, expressly or by implication in pre-contractual negotiations. — Particular purpose made known to manufacturer directly or by supplier in pre-contractual negotiations. — 555(3): Consumer must show relied on supplier's skill and judgement- consider experience of salesperson. Consumer Guarantees: Supply of Services * The ACL provides for certain guarantees in relation to contracts for the provision of services. 2 52 « ifa foll (1): Definition of services: Contract for work including professional work Contract for amusement, entertainment, recreation or instruction Insurance contract Contract between banker and customer Loan contracts person supplies services to a consumer in trade or commerce, the lowing guarantees will apply: - $60: The services will be rendered with due care and skill = § 61(1); The services and any product resulting from the services will be reasonably fit for that purpose ~ § 61(2): The services and any product resulting from the services, will be of such nature and quality, state or condition that they might reasonably be expected to achieve the results - $61(3): There are no guarantees if the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the supplier's skill or judgement. - $62: That the services will be supplied within a reasonable time. 105Consumer Guarantees: Limiting Liability $ 64(1): General rule — cannot exclude the guarantees or limit liability for ‘consequential losses’ in contracts for supply of goods and services. However, there are two exceptions: 1. Unordinary © Where good are not of a kind ‘ordinarily acquired for personal, domestic or household use’, supplier can limit its liability as follows: - Contract for goods - supplier can limit liability to ‘supplying the services again’ ~ Provided that itis ‘fair and reasonable’: s 64(3) - see factors: = Relative strength of the bargaining positions = Were there alternative sources that did not have the term = Did buyer know of the term? = Special order of the buyer 2. Recreation © CCAs 139A(1), (3) — Recreational activities -supplier can limit liability for death or injury - Sporting activity or leisure time pursuit - Any other activity that involves a ‘significant degree of physical exertion or physical risk’. Step 3: Remedies ‘© Distinguish major and minor failures; can it be fixed? * Broadly similar for both goods (s 259) and services (s 267-8) 1. Major Failure: s 260 Goods would not have been acquired if buyer knew of the failure. Goods don’t match the description. Goods substantially unfit for a purpose -either common or disclosed and can’t be easily remedied to fit that purpose. Goods not of acceptable quality because they are unsafe. If ‘major failure’ occurs consumer can: 106- Reject the goods (provided with reasonable time) or recover compensation for any reduction in value: s 259(3). - Recover damages for reasonably foreseeable loss or damage: s 259(4) unless failure caused by problem after goods left supplier. Minor Failure Not major — consumer may require supplier to remedy the failure within a reasonable time or, if supplier doesn’t, then buyer can reject the goods or recover reasonable costs: s 259(1)(2) E.g.: chain saw doesn’t work - Repair - Replace - Refund What if the goods are a gift? Same as buyer: s 266 Buyer to return goods (or if significant cost, supplier must collect the goods): s 263(2)-(3). Supplier must refund the money or replace the goods: s 263(4).. Broadly same remedies for failure to comply with guarantees in relation to services: ss 267-8. UNFAIR CONTRACT TERMS Section 23 of the ACL provides that a term of a consumer contract or a small business contract is void if the term is unfair and the contract is a standard form contract. The contract will continue to bind the parties if it is capable of operating without the unfair term. 23(1): An unfair term in a standard form contract is void - 23(2) If contract can operate without the unfair term it won't be void. 27(2): Meaning of ‘standard form’ contract - Six relevant factors explained in 27(2)(a)-(f) 107* 23(3) Meaning of ‘consumer contract’: One for the supply of goods or services or the sale of land to an individual who acquires them wholly or predominantly for personal, domestic or household use or consumption. ‘© 24(1): Meaning of he term is unfair if it (a): would cause a significant imbalance in the parties’ rights and obligations; (b): is not reasonably necessary to protect the legitimate interests of the advantaged party; and (c): would cause detriment to a party if it was applied * Determining ‘unfair’ - Applying 24(1) the court must consider: "The extent to which the term is ‘transparent’ "The contract as a whole * Legislative examples: s 25 ‘Answering an Unfair Contract Terms question? 4, Determine if this is a standard form contract 5. Determine if term is unfair = Look for automatic renewal or unilateral price increase Apply test and cases 6. Determine remedy ‘* Automatic renewal term = unfair Facts: After a final instalment was paid, customer's bank account would continue to be debited in anticipation of a future order. Held: The automatic renewal term was found to be unfair. The term was declared void. ‘+ Automatic renewal term and many exclusive rights = unfair Facts: JJR could unilaterally raise prices. Customer cannot terminate if they had debt. ‘Automatic renewal (need to cancel in 30 days). JR had exclusive rights to remove waste. Held: The unfair terms in the contract were not transparent. ‘+ Automatic renewal term and many exclusive rights = unfair Facts: Automatic renewal provision. Unilateral price increase. Kept security deposit if consumer didn’t ask for it back Held: Terms were unfair and therefore void. 108STATUTORY UNCONSCIONABLE CONDUCT '* Refers to conduct that is more than simply unfair or harsh — it must have been an element of bad conscience, ‘* $.20-22: ACL prohibits persons from engaging in unconscionable conduct. ‘© Three categories: 1. Unwritten law 2. Goods or services 3. Small businesses How to answer an uncons nable conduct question? 4, Look for especially vulnerable victim (Power Imbalance) = Elderiy? Immigrant? Socially Disadvantaged? Child? 5. Determine if conduct is shockingly bad 6. Determine remedy Inconscionable conduct within the meaning of the unwritten law ‘© 20(1): “A person must not, in trade or commerce, engage in conduct that is, unconscionable, within the meaning of the unwritten law from time to time”. WAS OK Facts: Tenant was suing shopping centre nut tenants lease was about to expire. Centre agreed to renew lease if the tenant dropped the suit. This scenario is not nice but is not shockingly bad either. Case: ACCC v Smton Holdings WAS OX Facts: New tenant must pay extra for right to renew expiring lease from old tenant. Threat to some extent. Casein NOT OK Facts: New tenant must pay extra for right to renew expiring lease from old tenant. Threat to some extent. 2 $2: Inconscionable conduct in connection with goods or services © ACLS 22(1)(a)-U) s the matters to consider Facts: Salespeople targeted old grandmas’ homes to evaluate whether their vacuum. cleaners were good and then tried to sell their own ones. Facts: NRM sold pills for erectile disfunction. Made it incredible difficult to cancel and were being prescribed in an aggressive way. Targeted and pressured group with sensitive 109illness. ‘Immoral to seek and harness the fears and anxieties of men suffering from ED’ (Pressuring vulnerable patients) 3. Unconscionable conduct and small businesses ‘+ $21.22: Also protect small businesses from unconscionable conduct or large businesses. Same factors as listed in 22(1) apply. Remedies * Pecuniary penalty + Damages * Injunction 110+ There are general standards of honesty and fairness that are imposed by the law that affect all players in the market regardless of the agreement. ‘+ We are concerned with imbalances in: - Bargaining power Information ‘* Dual purposes of consumer protection: 1. Protect consumers - Prohibit misleading conduct, specific misrepresentations, certain unfair practices, unfair contract terms and unconscionable conduct. Provide statutory guarantees 2. Protect competitors = Prevent competitors from gaining dishonest competitive disadvantage. MISLEADING OR DECEPTIVE CONDUCT Overview * ACL prohibits deception in conduct or representations. © Misleading or deceptive conduct: - Section 18 of the ACL = Has broad remedies but no penalties = Conduct falls into this category ‘+ Specific false or misleading representations: Primary section 29 of the ACL ~ Broader remedies (civil remedy +penalties #fines) - False representation falls into this category, + §18(1): A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’ Answering a misleading or deceptive conduct question? 3. Determine if ACL applies = Intrade? Or conduct? 4, Determine if s 18 is violated = State dominant message ~ State target audience - State if likely to mislead = Cases very important (try to match facts) = Always look to see if s 29 is also violatedKey points: © $18 applies to ‘persons’ (natural persons) and ‘corporation’ (legal persons). ‘* $18 only applies to conduct occurring ‘in trade or commerce’ — it must have commercial flavour (e.g.: not private sales) ‘* $18 applies to a wide range of ‘conduct’... broader than ‘representations’, ‘* $18 applies where conduct is misleading or deceptive or is likely to be. * $18 creates strict liability and cannot be excluded — no need to prove fault or fraud or breach of good faith. Only question is whether the conduct occurred, and it was relied on, or may be relied on. ‘* Remedies for breach s 18 are very broad and include damages, injunctions, corrective advertising and variation or rescission of contracts. Misleading Conduct ‘+ Apperson (legal or natural) who suffers loss or damage as a result of the misleading conduct may sue for damages or a number of other remedies. ‘+ The criteria that need to be met are: "The conduct must be “in trade or commerce” = $18 only applies to conduct occurring ‘in trade or commerce’, - The court said, “The conduct of a corporation towards persons (must bear a trading or commercial character”. ~ Private, one-off transaction does not satisfy. - Non-commercial topics with no sales do not qualify Researcher claimed that the top of a mountain was Noah's Ark. — Professor sues for s18 — Nitin trade ~ free lectures, non-commercial, creationism. "The person must have “engaged” in conduct. = The person “engages” in conduct when it makes a statement, a claim or a promise or performs some action (or refuses to). SPECIFIC FALSE OR MISLEADING REPRESENTATION ‘* Chapter 3 of the ACL contains provisions designed to protect consumers against specific false representations made by a person in connection with the promotion and supply of goods, services and land. 12False representation - Summary of types e000 $29(1)(a}-(n): (a) that good are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use (b) that services are of a particular standard, quality, value or grade (c) that goods are new (d) that a particular person has agreed to acquire goods or services (e) that purports to be a testimonial by any person relating to goods or services (f) concerning: iii, A testimonial by any person iv. Arepresentation that purports to be such a testimoni to goods or services (g) that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits (h) that the person making the representation has a sponsorship, approval or affiliation (i) with respect to the price of the goods or services (j) concerning the availability of facilities for the repair of goods or of spare parts for goods (k) concerning the place of origin of goods (I) concerning the need for nay goods or services (m) concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including guarantee under division 1 of part 3-2) (n) concerning a requirement to pay for a contractual right that: iii, Is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy iv. Aperson has under a law of the commonwealth, a state or a territory (other than an unwritten law) ; relating How to answer a specific false or misleading representation question? 3 Determine if ACL applies = _Intrade? Representation? Determine if s29 is violated Identify the statement/ representation Why is that false Determine what sub section of 29 Cases very important (try to match facts) *Always look to see if s18 is also violatedFacts: Mixing bow! is burning customers. Company keeps selling product even after learning of the safety issue Held: This creates the FALSE IMPRESSION that itis safe. “(a) that good are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use” Facts: Selling eggs from free range hens. Eggs are not free range Held: False representation of the history of the goods. “(a) that good are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use” Facts: Unlimited plan. The plan is always limited, Held: “That services are of a particular standard, quality, value or grade”. Facts: Sells fruit sticks for toddlers. Shows happy active toddler, “99% fruit and veg” (implies it is healthy. Loaded with sugar Held: “(g) that goods or services have sponsorship, approval, performance characteristics, accessories, users or benefits” Facts: Advertised prices didn’t include booking fees. Held: “(i) with respect to the price of the goods or services” Country of origin representations ‘* 5 29(1)(k) prohibition of false or misleading representations about the place of origin of goods developed in more detail in Part 5-3 (ss 255-257) of the ACL. ‘* 5.255: A representation as to the country of origin of goods (e.g.: “Made in Australia”) can only be made if the goods are subsequently transformed in Australia and at least 50% of the cost of producing or manufacturing the goods has occurred. in Australia, ‘*5.255(3): The requirement that the goods must be “substantially transformed” means that the goods must have undergone a fundamental change in their form, appearance or nature, such as the sewing of cloth into a shirt or the moulding of sheet metal into a panel. 14Remedies © Pecuniary penalties: s 224 - Corporations $10 million of 3x value of benefit or 10% annual = Specific false representations and other unfair practices and unconscionable conduct = NV does not apply to misleading or deceptive conduct or unfair contract terms = CCAs 139B(2):Corporations are responsible for the conduct of their employees. © Injunction - Case: Belle Gibson Case + Damages = _ NB liability of persons involved in the conventions; s2(1) makes employees etc personally liable in damages Case: Yorke v Lucas + Other orders: 5237 - Relating to a contract that has been made as a result of a breach of ACL -including misleading or deceptive conduct. + Declaring contract of part of it void = Varying the terms of the contract = Refusing to enforce any or all of the terms of the contract = Directing a fund "Directing a person to repair etc + Other enforcement provisions = Undertakings - Substantiation notice > Adverse publicity order — IEE + Disqualification order for directors 11sWhat to do on an exam? 3. Determine what type of negligence = Physical Harm (Week 8) = Negligent Misstatement (Week 9) 4. Apply the four steps = Duty of care? = Physical Harm : Donoghue v Stevenson ~ reasonable foreseeabilty of harm and proximity = Breach of that duty? = 2steps s. 48 — foreseeable risk, reasonable response (4 factors) "Did the breach cause harm? (damages) - Causation; remoteness = Is there a defence? Contributory negligence? Voluntary assumption of risk? TORTS AND NEGLIGENCE Tort ‘© The “law of torts” is primarily concerned with providing a remedy for one person’s wrongful interference with another's personal or property rights. ‘© Such “rights” arise as a result of corresponding “duties” imposed by law. ‘© Thus, the tort of nuisance that involves a duty not to interfere with an occupier’s use and enjoyment of land creates a corresponding right in the occupier to be able to use and enjoy. * Examples of torts: - Tort of battery — right to be safe from intentional physical harm to your body - Tort of defamation — right to enjoy a good reputation - Tort of trespass — right to enjoy property free from interference - land and personal items ~ Tort of nuisance - right to peacefully enjoy land 116- Tort of negligence — right to be safe from unreasonable, careless conduct of others Negligence ‘An action for negligence is about careless behaviour and can therefore be applied to any form of human claim. Negligence may cause; - Physical harm (includes injury, illness and property damage) - Psychological harm - Economic loss (financial loss) ~ includes loss of income, medical expenses If the plaintiff is successful in establishing negligence, damages are recoverable to compensate the plaintiff for the injury/ losses. The defendant is liable. Policy issue — when someone is injured, who should bear the loss? The person who caused the injury. The state? What role does fault play? The tort of negligence is about finding fault (i.e. ‘negligence’) in the personal who caused the loss. - Legislation as created compulsory compensation schemes for injury at work (WorkCover) and for road accidents (Transport Accident commission) — under these schemes no-fault liability arises — the question is only whether you were injured — Not whether the employer/ other driver was at fault Common law - The common law principles governing negligence liability have been reformed by legislation. - _E.g.: Modifying common law principles (breach/damage) and caps on liability - Topic 1- statutory law can modify the common law (as parliament is the sovereign law-making body Legislations - Wrongs Act 1958 (Vic) 179. Does D owe a duty of care to P? Reasonable foreseeability Proximity Broader policy considerations when a new situation arises 10.If so, has D breached that duty of care? Was it a foreseeable risk? If yes, how would a reasonable person in D’s position have responded? 11.If so, has P suffered damage? Was damage caused by the breach? (‘but for’ test) Is the damage too remote? (reasonable foreseeability test) 12.Are there any defences? Contributory negligence Voluntary assumption of risk Peer professional opinion (Week 9) » Step 2: Establishing a duty of care — Does D owe P.a duty of care? Facts: “Snail in the bottle”. Café owner poured ginger beer into ice cream, Donoghue drank some of the ice cream and proceeded to pour the remaining ginger beer. Remains of a decomposed snail appeared Donoghue complained of stomach pain and doctor diagnosed her. Held: Was able to sue manufacturer for tort of negligence. Judge delivered “neighbour principle”: “You must take reasonable care to avoid ns which you can reasonably foresee would be likely to injure your neighbour”. - Who is my neighbour? “Persons who are so closely and directly affected by my act that | ought reasonably to have them in contemplation of as being so affected when | am directing my mind to the acts or omissions which are called in question. 118* Broad principle established: Duty of care can arise in any context where loss or injury was “reasonably foreseeable” and where the parties were in sufficiently close proximity that it is required one party not to cause harm to the other. Duty of care in five specific situations 6. Acts causing physical harm 7. Acts causing mental harm 8. Liability for omissions 9. Acts causing pure economic loss 10.Statements causing pure economic loss 1. Acts causing physical harm Does D owe a duty of care to P? ‘* Reasonable foreseeability of harm test: The existence of the duty depends on whether the harm suffered by the plaintiff was “reasonably foreseeable”, ‘* Proximity/ neighbour test: Does P belong to a class of people that D should have regarded as being “at risk” of being injured or suffering loss? | the P closely and directly affected by D's acts? Are the parties in sufficiently close proximity? + E.g.: Manufacturers owe a duty of care to consumers. * Cases: Facts: Dr Grant and his underpants. Severe dermatitis (rash) due to chemicals in the underwear — nearly died Held; Manufacturer breached a duty to take reasonable care in the production of underwear. Facts: Customer slipped on wet floor Held: General duty of care exists. Foreseeability of harm and customer is in a relationship of close proximity with the supermarket (occupier) 11gFacts: Need to clean and check floors more often Case: Modbury Triangle Shopping Centre v Anzil Facts: Car park lights were on; manager of shop was attacked in the night in the car park. Held: Duty of care does not extend to taking reasonable care to prevent physical injury resulting from the criminal behaviour of third parties. Duty of care did not arise 2. Acts causing mental harm ‘+ The duty of care extends to the duty not to cause a person psychological damage, independent of physical injury. * Reasonable foreseeability taking into account: d. Relationship between the parties e. P’s physical and temporal proximity to the event that cause the mental harm What the expected response of a person of normal fortitude might be 3. Liability for omissions * The common law imposes no liability for omissions or failing to act. © The only circumstance in which a person may be liable for omissions is where a person has a positive duty to act. ‘* Positive duties may be imposed where the parties are in a pre-existing relationship that contains elements of reliance or dependence or where the defendant is in a position of control. Examples: - Parent and child - Doctor and patient Case: Rogers v Whitaker Facts: Needed to warn patient that he might go blind in one eye. Held: Doctors have a duty to warn patients of the risks associated with a surgical procedure - School authority or teacher and student 120- Employer and employee = Occupier and visitor Held: Needed to warn visitors of shallow water Acts causing pure economic loss A pure economic loss occurs where the plaintiff suffers a financial loss due to the negligence of the defendant and this financial loss was not the result of personal injury or damage to property. E.g.: Loss of profit or an opportunity to make profit, A loss of earnings or expenditure Two types of pure economic loss: 1. Negligent acts causing pure economic loss 2. Negligent statements causing pure economic loss In determining whether a duty of care exists, the courts will consider a number of “salient features”: In the following pure economic loss case, the High Court outlines five criteria that were relevant in determining that a duty of care existed Facts. Reasonable foreseeability? Yes (i.e. the economic loss suffered by Perre was reasonably foreseeable) ii, indeterminacy of liability? No (i.e. imposing the duty on Apand did not expose it to indeterminate liability because there were a finite number of growers within the radius who may have been affected by the defendant's careless conduct) iii, The individual autonomy factors. No (Imposing the duty did not unreasonably interfere with Apand’s commercial freedom) iv. The vulnerability of Risk? Yes (i.e. the plaintiff's business was exposed to Apand’s conduct because they were not in the position to protect themselves against the effect of Apand’s negligence). qiv. The defendant’s knowledge of the risk and its magnitude? Yes (i.e. Apand was aware of the risk that the bacterial wilt disease would break out and was aware of the potential repercussions) ~> Step 2: Has D breached the duty of care? ‘* Test: Has D met the standard of care required by the law of negligence? ‘* To determine breach: two step approach — need to consider: 3. Step 1 — Reasonably foreseeable risk: s. 48(1) Wrongs Act (Vic) - Isthe risk one which requires a reasonable person to respond? 4, Step 2~ Reasonable person’s response: s. 48(2) Wrongs Act (Vic) - How would a reasonable person respond to the risk? 3, Reasonably foreseeable risk: s. 48(1) = Aperson is not negligent in failing to take precautions against a risk of harm unless: ‘© The risk of injury was reasonably foreseeable: s 48(1)(a) ‘© The risk is not insignificant: s 48(1)(b) ‘© Areasonable person would not have taken precautions in the circumstances: s 48(1)(c) 4, How would a reasonable person respond to the risk? s. 48(2) - = The standard of care expected is that of a reasonable person = This is assessed objectively — it is an impersonal test = The reasonable person is equipped with the same skills and expertise expected of a person exercising a particular trade or profession. * Consider in context of circumstances at that time (without the benefit of hindsight) Case: Argo v Al Kammessy = Consider four factors to determine what a reasonable person would do: Section 48(2) Wrongs Act 1958 (Vic) 48(2): In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): e. The probability that the harm would occur if care was not taken f. The likely seriousness of the harm 122