Commerical

—
Topic 4: Carelessly causing harm; Negligence and Negligent Misstatement
Commercial

‹#›

1

Overview of this topic:
Carelessly causing harm to person or property;
Carelessly causing financial harm

‹#›

Learning Outcomes:
When will a person be legally responsible for carelessly harming the person or property of another?
When will a person be legally responsible for carelessly causing financial harm to another person?

‹#›

Reading materials
Chapter 6 of Nickolas James’s (Wiley, 5th ed, 2020):

‹#›

Carelessly causing harm to person or property

‹#›

Causing harm to
person and property
Financial harm
5

TORT OF NEGLIGENCE
TORT OF NEGLIGENCE
A person commits the tort of negligence if they carelessly cause harm to another person.
Negligence is by far the most common tort.
Most acts that cause harm to other people are the result of carelessness rather than intent.
Since the civil liability reforms following the insurance crisis the law of negligence is now a combination of case law and statutory rules.

‹#›

TORT OF NEGLIGENCE
Elements
TORT OF NEGLIGENCE:ELEMENTS
A person commits the tort of negligence if:
1. They owe the other person a duty of care; and
2. They breach the duty of care; and
3. Their breach causes the other person to suffer
reasonably foreseeable harm.

‹#›

TORT OF NEGLIGENCE: Elements

1.Duty of Care
In most cases the establishment of the existence of a
duty of care will be relatively straightforward, provided
that the relationship between the parties falls within the established categories of duty of care [slide 14].

But Note: These established categories exist because of the principles established in Donoghue v Stevenson (1932) AC 562.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
To discuss liability under any one of the established categories would therefore, firstly require a reference to or discussion of Donoghue v Stevenson.
So the starting point in a discussion on Negligence must begin with Donoghue v Stevenson because it was as a result of what said in that case about the elements of Negligence – and in particular, the Duty of Care – that the established duties of care came to be known as such.

‹#›

Donoghue v Stevenson: Facts and Decision

Miss Donoghue consumed a drink in a café in Scotland that had been bought by her friend.
She became violently ill after consuming decomposed snail.
Then, a duty of care was only owed to people harmed by the negligent acts of others in specific and limited circumstances:
contract between parties
Manufacturer making something dangerous
Manufacturer acting fraudulently.
Therefore, as the law stood, Miss Donoghue could not take legal action over the snail in her ginger beer.

CLip

‹#›

Donoghue sued the manufacturer
She claimed that the
manufacturer was negligent – in
that he supplied contaminated
food.
That food caused her harm.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
Issue:
Whether the manufacturer owed Donoghue a duty of care given that there was no contract between the parties and the manufacturer had not acted fraudulently.
It was held that he did. The court took the view that if a manufacturer sells a product which cannot be examined either by the distributor or the ultimate consumer, then that manufacturer owes a duty of care to ensure that the product is free from any defect likely to cause harm.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
During the course of making its decision, the court (per Lord Atkin) made a statement which sets out the components which must be considered when determining whether a duty of care is owed.
This statement is contained in the next slide.

‹#›

13

TORT OF NEGLIGENCE: Elements
1.Duty of care
‘The rule that you are to love your neighbour becomes, in law, you must not injure your neighbour; and the lawyer’s question, ‘who is my neighbour?’ receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, in law, is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.’
[Emphasis added].

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
So remember that it is a result of the principles stated
in this decision that the established categories of duty of care came into existence because an examination of any of these established categories will reveal that they are based on what was said in that case.
Therefore, an answer on the issue of Negligence should start with Donoghue v Stevenson and then discuss the relevant established head of duty of care.
These established heads of duty of care are set out in
the following slide.

‹#›

TORT OF NEGLIGENCE: Elements
1. Duty of care

Established Categories:
Motorists owe a duty of care to other road users.
Doctors owe a duty of care to their patients.
Manufacturers owe a duty of care to people who use their products.
Occupiers owe a duty of care to people who come onto their premises.
Employers owe a duty of care to their employees.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
Lord Atkin’s statement is referred to as the ‘neighbour’ principle and should be the first factor to be discussed when answering a question on whether a duty of care exists.
As the statement indicates, to discuss the issue of whether an individual is a neighbour at law also requires a discussion as to whether the harm was ‘reasonably foreseeable’:

Bourhill v Young [1943] AC 92
An accident occurred as a result of the motor cyclist’s negligent driving. The plaintiff did not see the accident but only the result of it. She suffered nervous shock and sued the motor cyclist.

‹#›

TORT OF NEGLIGENCE
Elements
1.Duty of care
Issue:
Whether she was owed a duty of care in the circumstances.
It was held that she was not because it was not reasonably foreseeable that the conduct of the motor cyclist would cause harm to the plaintiff.
Accordingly, she was not owed a duty of care.
See also: Chapman v Hearse 106 (CLR) 112

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
Finally, the plaintiff must show that the salient features of the case are consistent with the existence of a duty of care.
The salient features are those factors which the court will take into account when determining whether a duty of care exists.
Sullivan v Moody (2001) 207 CLR 562

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
Sullivan v Moody
In that case, the wife accused the husband of sexually abusing their child who was taken to a doctor for examination. The doctor prepared a report which he gave to the Department of Welfare which conducted an investigation but found that there was insufficient evidence to support the allegations made.
The husband subsequently developed a psychiatric illness and sued both the doctor and the relevant Department.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
ISSUE
Whether he was owed a duty of care by the doctor and/or the Department of Welfare.
It was held that no such duty was owed by either.
In reaching its conclusion, the court considered the following factors:
Coherency in the law: The law of negligence cannot be used to prevent the passing of information about the husband because it would conflict with law relating to defamation.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
Conflicting duties of care: If the doctor owed a duty of care to the husband as well as the child, this would create a conflict of interest because the doctor’s paramount duty is to the child’s welfare.
Indeterminate liability: If the court were to hold that a duty was owed to husband, then there was no reason why this duty could not be extended to others such as immediate or extended family or friends.

‹#›

TORT OF NEGLIGENCE: Elements
1.Duty of care
These considerations are what is referred to as the ‘salient features’ and after having taken these features into account, the court held that a duty of care was not owed to the husband by either the doctor or the relevant Department.
Note that another relevant salient feature is the extent of the control which the defendant exercised in the circumstances because this reflected on the extent of vulnerability of the plaintiff.
This is referred to as the ‘control’ test.

‹#›

TORT OF NEGLIGENCE: Elements

2. Breach of the Duty of Care
Once the duty of care is acknowledged, the second element which must be established is that of Breach of Duty.
There are two tests applied here:
The first relates to the establishment of the required standard of care.
That standard is that of a reasonable person.
This is a general, objective test which establishes what would be required of a reasonable person in the circumstances.

‹#›

TORT OF NEGLIGENCE: Elements
2. Breach of duty of care
Applying the objective test establishes whether the defendant failed to do what a reasonable person would have done in the same circumstances:
Imbree v McNeilly (2008) 236 CLR 510
McNeilly, a minor and without a driver’s licence, drove a vehicle in which Imbree was a passenger. Imbree new that McNeilly did not hold a driver’s licence but nevertheless allowed McNeilly to drive the vehicle. There was an accident in which Imbree was injured. Imbree sued McNeilly.

‹#›

TORT OF NEGLIGENCE: Elements
2. Breach of duty of care
Issue:
Whether McNeilly owed Imbree the same duty of care as another driver would owe to other drivers or whether, given his inexperience, the duty he owed was lower than that owed by a reasonable driver.
It was held that McNeilly owed Imbree the same level of care as a reasonable driver and that the fact that McNeilly was to the knowledge of Imbree, inexperienced, did not detract from that level of duty.

‹#›

TORT OF NEGLIGENCE: Elements
2. Breach of duty of care
The second test applies specific tests in order to establish whether the general standard required was breached in the circumstances:
Probability of harm: Bolton v Stone [1951] AC 850
Held: although it was reasonably foreseeable that the plaintiff could be hit by the cricket ball, the likelihood of this occurrence was so small that no other reasonable person would have taken any further precautions.

‹#›

TORT OF NEGLIGENCE
Elements
2. Breach of duty of care

The likely seriousness of the harm: Paris v Stepney Borough Council [1951] AC 367
Held: The council owed the plaintiff a duty of care. The plaintiff was partially blind as a result of a war injury but nonetheless was employed in a garage without the supply of goggles to protect his face. Whilst attempting to loosen a bolt, pieces of metal flew off it, hit Paris in the eye, and rendered him totally blind.
Given the nature of his injury and the dangerous work he was assigned to do, the court concluded that the council should have provided Paris with protective goggles.

‹#›

TORT OF NEGLIGENCE
Elements
2. Breach of duty of care

The burden of taking precautions: Latimer v AEC [1953] AC 643
Held: The duty owed to a worker had not been breached in the circumstances.
A flood had occurred which made factory floors slippery. The plaintiff slipped on the floor and sued the owner. The court said that the owner could have taken the precaution of closing the factory until the floors were dry but that to do so meant it would incur significant expenses. It concluded no reasonable person would have been required to incur such expense and that therefore, there had been no breach of the duty of care.

‹#›

TORT OF NEGLIGENCE: Elements
2. Breach of duty of care

The social utility of the defendant’s activity: Watt v
Hertfordshire County Council [1954] 1 WLR 835
Held: The council had not breached its duty of care to Watt.
Watt was a fireman who attended an accident to free a woman trapped under a heavy vehicle. A jack was needed. However, the truck specially fitted to carry the jack was not available. So, another truck was used but it was not equipped to secure the jack safely.

‹#›

TORT OF NEGLIGENCE: Elements
2. Breach of duty of care

The truck braked suddenly and Watt was injured when the jack fell on him. He sued the council.
It was held that the benefit such work provided to society –the saving of human life – outweighed the risk taken to drive the truck in an emergency without the normal safety procedure being adhered to. The court held that in such circumstances, there had not been a breach of the duty of care.

‹#›

Requirements to establish a breach of
duty

‹#›

TORT OF NEGLIGENCE: Elements
3. Damage
3. Damage
Damage is the third element of negligence which requires proving three components:
Causation
That means establishing that the breach of the duty of care caused the harm.
The plaintiff must establish that the careless act caused the harm, either directly or indirectly.

‹#›

TORT OF NEGLIGENCE: Elements
3. Damage
Yates v Jones (1990) Aust Tort Reports 81-109
Yates was injured in a car accident due to Jones’ carelessness. A visiting friend offered her heroin to help reduce the pain. As a result, she became addicted to heroin. In her action against Jones the cost of the heroin to which she had become addicted formed part of the amount she claimed.
It was held the accident had not caused her addiction. The heroin given to her by her friend had. Accordingly, that part of the claim was not compensable.

‹#›

TORT OF NEGLIGENCE: Elements
3. Damage
In establishing causation, the court applies the ‘but for’ test – but for the defendant’s breach, the plaintiff would not have incurred the harm sustained.
Reasonable Forseeability
This usually means that the actual harm must have been reasonably foreseeable.

‹#›

TORT OF NEGLIGENCE: Elements
3. Damage
Rowe v McCartney [1976] 2 NSWLR 72
Rowe was a passenger in a car which she had allowed McCartney to drive. As a result of McCartney’s negligence, an accident occurred as a result of which McCartney became a quadriplegic. Although Rowe only received minor injuries, she developed mental illness due to the guilt she felt regarding McCartney’s injury.
When she sued McCartney, she included the costs associated with her mental illness.
It was held that it was not reasonably foreseeable that the mental illness sustained by Rowe would result from the accident and was therefore not claimable.

‹#›

TORT OF NEGLIGENCE: Elements
3. Damage
Remoteness: The harm sustained must not be too remote from the breach of duty.

Wagon Mound (1) [1961] 1 All ER 404
Held that the damage sustained by a dock owner as a result of oil seeping from a tanker when that oil caught fire as a result of sparks from welding work being undertaken by the dock owner’s workers, was too remote from the breach of duty of care. It was not reasonably foreseeable that the seepage of oil would cause a fire and therefore the subsequent damage was too remote to be compensable.

‹#›

TORT OF NEGLIGENCE: Elements
4.Defences
4. DEFENCES
Even if the plaintiff has established all three elements of the tort of negligence, the defendant can still avoid liability, either completely or partially, if they can establish the existence of one or more defences:
Voluntary assumption of risk
This defence is available to the defendant if that party can prove that the plaintiff was aware of the risk but nonetheless was prepared to assume that risk.
If this argument is established, it constitutes a complete defence to an action in negligence. Therefore, it is used if one party only (the plaintiff) is responsible for the harm: Rootes v Shelton (1967) 116 CLR 383

‹#›

TORT OF NEGLIGENCE: Elements
4.Defences
Rootes v Shelton (1967) 116 CLR 383
The plaintiff was waterskiing when the defendant who was driving the boat, drove too close to a boat, thereby causing the plaintiff injury.
When sued, the defendant argued that waterskiing was a risky sport and that the plaintiff had voluntarily assumed the risks associated with that sport, when he agreed to waterski.
Held: The cause of the injury was the boat being driven too close to another moored boat and therefore, the defendant’s actions had caused the injury. The injury had not been caused by any assumption of risk on the part of the plaintiff which was related to the sport.

‹#›

TORT OF NEGLIGENCE: Elements
4.Defences
Contributory negligence
If it can be established that the plaintiff contributed in some way to their own loss or injury, liability will be apportioned between the defendant and the plaintiff.
This defence is therefore only a partial defence and, if applied, will only be effective to reduce the amount of the plaintiff’s damages, not to negate the entire action in Negligence:
Ingram v Britten

‹#›

TORT OF NEGLIGENCE: Elements
4.Defences
Ingram v Britten [1994]
Ingram drove a tractor belonging to Britten at excessive speed and injured himself. The tractor was not fitted with a metal frame to protect the driver.
Held: Both parties had contributed to the injuries sustained by Ingram and the damages were reduced according to the degree to which each party had contributed to the resulting injury.

‹#›

TORT OF NEGLIGENCE: Elements
4.Defences

Other defences include:
Barristers’ immunity;
Volunteers’ immunity;
Emergency service providers’ immunity; and
Compliance by professionals with standard practice.

‹#›

TORT OF NEGLIGENCE: Occupier’s liability
Invitees
The issue as to whether an occupier of property owes a duty of care to those who enter it, is relevant in two circumstances:
Invitees
An occupier of premises owes a duty of care to all persons legally entering the premises to ensure that the premises are safe.
Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479

‹#›

TORTY OF NEGLIGENCE: Occupier’s liability
Invitees
Australian Safeway Stores Pty Ltd v Zaluzna
While shopping on a rainy day, Zaluzna slipped on a wet floor near the entrance.
Held: The owners of the store owed Zaluzna a duty of care according to the basic principles of negligence.
In other words, in addition to being a ‘neighbour’ under Donoghue v Stevenson, she was also owed a duty of care as an invitee onto the premises. The duty of care owed under either heading, was the same.
See also: Phillips v Daly (1989) 15 NSWLR 65

‹#›

TORT OF NEGLIGENCE: Occupier’s liability
trespassers
Trespassers
Does an occupier also owe a duty of care to people who are on their premises without their permission? The issue of whether the duty owed to invitees can be extended to trespassers was discussed in two cases:
Hackshaw v Shaw (1984) 155 CLR 614
A farmer suspected that his petrol was being stolen and caught the culprit in the act. The farmer, who was carrying a rifle, fired a shot at the tyres of the car to stop the culprit from leaving, but hit the front car passenger door. Unknown to the farmer, someone was hiding in the front section of the car and was hit by the shot.

‹#›

TORT OF NEGLIGENCE: Occupier’s Liability
Trespassers
The injured person sued the farmer and the issue was whether the farmer (occupier) owed the trespasser a duty of care.
Held: The farmer owed the trespasser a duty of care because it was foreseeable that there may be a passenger in the car and that firing the rifle at night could cause injury.

‹#›

TORT OF NEGLIGENCE: Occupier’s liability
trespassers
Bryant v Fawdon [1993] WASC 38
The plaintiff was walking home at the early hours of the morning and needed to use a toilet. She climbed a 1.8m high fence and trespassed on commercial premises to enter an unlocked toilet block. P used the toilet in darkness and attempted to flush it. She did not see the modern push button cistern but instead tried to flush a disused concrete cistern resting on timber beams overhead. The disused cistern fell on her causing serious injuries.

‹#›

TORT OF NEGLIGENCE: Occupier’s liability
trespassers
Held: No duty of care was owed by D to P because it was not reasonably foreseeable that P, as a trespasser attempting to use a toilet (without a chain) in darkness, would be harmed by D’s failure to remove the disused cistern.
So whether a duty of care is owed to a trespasser is dependent on the facts.

‹#›

Carelessly causing financial harm

‹#›

CARELESSLY CAUSING FINANCIAL HARM
Harm to the person or property of a third party
Where the plaintiff suffers pure economic loss as a result of harm caused by the defendant to the person or property of another person.
Defective products
The product or service is defective as a result of negligence and the plaintiff suffers pure economic loss as a result of the defect.

‹#›

NEGLIGENT MISSTATEMENT
When a person is giving advice they owe a duty of care if:
the advice is of a business or serious nature; and
they know or should know that the other person intends to rely on the advice; and
it is reasonable in the circumstances for the other person to rely on the advice.
The person giving advice may owe a duty of care even if they are not a professional adviser such as a lawyer or accountant.
The issue of whether financial loss incurred as a result of another’s negligent misstatement was actionable in a court of law was examined in the following case:

‹#›

NEGLIGENT MISSTATEMENT
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
HB were advertising agency. They had a client called Easipower for which they needed to take out some advertising space. Hedley Byrne asked its bank (National Provincial Bank) to get a report from Easipower’s bank (Heller & Partners) as to Easipower’s financial standing. Heller provided the report which contained a Disclaimer of Liability in the event that the information in the report was found to be incorrect.
The Nation Provincial Bank received the report and passed it on to Hedley Byrne – its client. Hedley Byrne relied on the report which proved to contain inaccurate information – Easipower was, in fact, in a bad financial state and was subsequently liquidated.
Hedley Byrne suffered financial loss. It could not sue Easipower because Easipower had no money. So it sued Heller on the basis of the financial report provided. The bankers denied any Duty of Care to a third party when purely economic losses were at issue.

‹#›

NEGLIGENT MISSTATEMENT
Up until that time, no duty care was owed to a defendant who suffers pure economic loss as a result of another’s negligent misstatement.
Held: Heller was not liable for the financial loss sustained by Hedley Byrne because of the Disclaimer clause contained in the financial report (Ratio).
But it added that if the Disclaimer had not existed, it would have found Heller liable for all the financial loss suffered by Hedley Byrne (Obiter).
The court said that where a special relationship existed between the parties, then a duty of care was owed to prevent the incurring of financial loss.

‹#›

NEGLIGENT MISSTATEMENT
The court explained that a special relationship existed where:
Advice was given by one who was either an expert
or held themselves out to be so.
That advice was given in a business setting.
It was either known or should have been known that the advice would be relied on.
It was relied on.
It was reasonable to rely on the advice.
The advice was given negligently.
As a result, economic loss is incurred.

‹#›

NEGLIGENT MISSTATEMENT
It should be noted that in Hedley’s case, the obiter of the court’s decision was extremely important because it was the first time that a court had acknowledged that financial harm incurred as a result of another’s negligent misstatement was a legitimate head of action in a court of law.
But note no such liability will attach unless the special relationship exists between the parties.

‹#›

NEGLIGENT MISSTATEMENT
The obiter in this case was subsequently adopted by the High Court of Australia in:

L Shaddock & Assoc Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225

‹#›

NEGLIGENT MISSTATEMENT
L Shaddock & Assoc Pty Ltd v Parramatta City Council
Shaddock bought a property in Parramatta to redevelop. Before doing so, it enquired with the Parramatta City Council as to whether the Council had any interest in the property which would impact on the developer’s proposed use of the land. The council said no, but that information was incorrect. In fact, the Council had a road widening proposal which affected the property.
Shaddock bought the property relying on the Council’s advice which it provided by way of a Council Certificate. It was only when Shaddock wanted to commence work on the property that it was discovered that the information provided by the Council was incorrect.
ISSUE: Did Council owe a duty of care to Shaddock not to provide this information negligently?

‹#›

NEGLIGENT MISSTATEMENT
Held: The council owed duty of care in relation to provision of info where:
A party carries on a business
Provides advice in course of business
That party knows or ought to know that recipient is relying on that information
The information is relied on and
The information is provided negligently
then a duty of care is owed by the defendant to prevent the incurring of financial harm.

‹#›

NEGLIGENT MISSTATEMENT
On the facts, these elements were those referred to in Hedley Byrne and which gave rise to the creation of a special relationship.
Since such a relationship existed between the parties, the plaintiff was successful in its action and was awarded substantial damages by way of compensation.
It should be noted that the obiter of Hedley Byrne has been adopted by the High Court and, as such, now represents the state of the law in Australia.
This is how the law actually changes – a court adopts an obiter and turns it into a ratio.

‹#›

Negligent Misstatement: Third Parties
What if the person harmed is not the person advised but a third party who also relies on the advice?

‹#›

Negligent Misstatement: Third Parties
A person giving advice will owe a duty of care to a third party if:
they give their client business or serious advice knowing that the client will communicate that advice to the third party; and
the advice is likely to lead the third party to enter into a particular type of transaction; and
It is likely that the third party will suffer financial loss if they enter into that transaction and the advice is wrong.
See: Esanda Co Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241

‹#›

Takeaways from today?
x

x

x

x

x

‹#›

62