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Topic 3 – Tort of Negligence

Recommended Readings

Gibson & Fraser: Chapter 8

At the completion of this topic students should be able to describe the:

Origins of the tort of negligence

Elements of the tort of negligence

Development of liability for pure economic loss

Tort of negligent misstatement

Defences to an action in negligence

Vicarious liability of employers

Introduction The tort of negligence provides one the greatest independent causes of action outside contract law actions. Negligence means a breach of duty to take reasonable care to prevent damage or loss where the existence of such a duty has been legally identified. This topic describes the elements that must be established for a successful action in the tort of negligence.

Tort The Law of Torts is a branch of civil law that is concerned with civil wrongs, other than a breach of contract, which the law will usually redress through an order damages. Some torts include negligence, trespass, conversion, detinue, nuisance and defamation. The most litigated tort is the tort negligence. Negligence is defined as breach of a duty of care owed by the defendant to the plaintiff through the defendant’s failure to comply with an appropriate standard of care thereby causing the plaintiff loss or damage.

Origins of the tort of negligence

A decomposed snail in Scotland was the humble beginning of the modern English law of negligence. It all began with the House of Lords decision in Donoghue v Stevenson [1932] AC 562. The facts of the case are as follows:

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Mrs Donoghue and a friend were at the Wellmeadow Cafe. Mrs Donoghue’s friend purchased a bottle of ginger beer for her which she poured into a glass and drank. On pouring out the remainder, Mrs Donoghue also poured out the remains of a decomposing snail which had got into the bottle at the manufacturers. The bottle was described as opaque so that its contents could not be observed. As a result of the contamination Mrs Donoghue suffered nervous shock, severe gastro-enteritis and depression, and was no longer able to work. She sued the manufacturers for compensation; however, the lower courts rejected her claim since there was no direct contractual relationship between her and the manufacturer. Undaunted Mrs Donoghue appealed the matter to the House of Lords (as the highest court in the UK) where it was held by a 3:2 majority that a manufacturer owes a duty of care to the consumer to ensure that manufactured goods do not have hidden (latent) defects that are likely to cause injury upon use.

The duty of care concept forms the basis of the common law action for negligence and was established through the application by Lord Atkin’s ‘neighbour principle’ as follows: 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”.

The case is available online at: http://www.leeds.ac.uk/law/hamlyn/donoghue.htm So the general rule is that the defendant owes a duty of care to all persons who it is reasonably foreseeable will suffer loss or damage as a result of the defendant’s acts or omissions. The test of ‘reasonable foreseeability’ formed the basis for the extension by the courts of the duty of care concept to a range of other relationships, not just a manufacturer and consumer. For example, the courts soon acknowledged that a duty of care is owed by an employer to guard the safety of their employee in the workplace. Nowadays road users clearly owe a duty of care to other road users and pedestrians. An occupier also owes a duty of care to persons coming onto their property, including trespassers. Professionals owe a duty of care to their clients and patients; and any person giving advice in a business context owes a duty of care to the recipient of that advice where it was reasonable for the recipient to rely upon that advice or information. Some of these areas are now regulated by legislation; for example, driving laws, occupational, health and safety laws; in addition to the civil liability legislation and professional liability laws that exist in the various States, territories and in the Commonwealth.

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Negligence as a cause of action In a common law action for negligence the plaintiff must prove the following elements on the balance of probabilities:

1. The defendant owed the plaintiff a duty of care; 2. The defendant breached that duty of care by failing to comply with the

requisite standard of care; 3. The plaintiff suffered loss or damage as a result of the breach.

Duty of care – ‘salient features’ approach The question whether or not a duty of care is owed is a question of law and has traditionally been determined with reference to the ‘reasonably foreseeability’ test as stated by Lord Atkin in Donoghue v Stevenson. Outside the established categories this test has since been rejected in Australia as too broad and an approach that looks to the ‘salient features’ is now to be preferred: see Perre v Apand Pty Ltd (1999) 198 CLR 180; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Caltex refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649 and Makawe Pty Ltd v Randwick City Council (2009) 171 LEGERA 165. A duty of care is owed with reference to other factors including the vulnerability of the plaintiff and control of the defendant. Relevant questions to ask are as follows:

1. Was the defendant in a controlling position through access to greater resources and knowledge than the plaintiff?

2. Was it reasonable for the plaintiff to be reliant on the defendant?

3. Did the defendant assume responsibility for the plaintiff?

4. Was the defendant in such a position that required them to be protective of the plaintiff?

Policy considerations also determine whether a duty of care is owed in the circumstances. This can include a wide range of factors such as the risk of creating unlimited liability amongst an indeterminate class, possible commercial or financial consequences, the impact on social or moral values, or even whether it is fair and equitable.

Breach of Duty The duty of care will be breached when the defendant fails to exercise the required standard of care. This is often the central issue in a negligence action and it is a question of fact to be decided by the court. The standard of care is objectively determined and is based on that standard which the ordinary, reasonable and prudent person would observe: Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48:

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In deciding whether there has been a breach of duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant’s position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk. The perception of the reasonable man’s response calls for a consideration the magnitude of the risk and the degree of probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have. It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of response to be ascribed to the reasonable man placed in the defendant’s position.

The factors that are relevant in determining the standard of care are as follows:

(a) The magnitude of the risk (b) Conformity with established standards (c) Professional conduct

As a general rule, the higher the magnitude of the risk, the more careful a reasonable person will be. There are two elements that affect the magnitude of the risk, namely: (1) the likelihood of the occurrence: see Bolton v Stone [1951] AC 850; and (2) the seriousness of the injury: see Paris v Stepney Borough Council [1951] AC 367. The magnitude of the risk – the likelihood of the occurrence

Bolton v Stone [1951] AC 850 Miss S lived opposite the northern end of the Cheetham Cricket Ground. She had just stepped from her garden gateway on to the pavement of the highway when she was struck on the head by a cricket ball and suffered injury. The fence surrounding the ground was 12 feet high and at the northern boundary, owing to a rise in the ground, was 17 feet above the level of the wicket. The distance from the wicket to the boundary was 78 yards. However, in the past 30 years, 6-10 cricket balls had been hit over the fence and onto the road. So the mere possibility that someone may be injured by the defendant’s action is not necessarily sufficient to render the defendant liable. There must be some probability of injury to the plaintiff. Although the owners of the cricket ground owed a duty of care to those living near and passing by the ground the surrounding fence was sufficiently high to minimise the risk of injury.

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The magnitude of the risk – seriousness of the injury

Paris v Stepney Borough Council [1951] AC 367

P lost his left eye during an air raid in 1941. In 1947, while working for the Council, he was welding something when a piece of metal flew off and hit him in the right eye. He lost the sight in that eye, so that he was now totally blind. He was not wearing goggles at the time of the accident. The provision of goggles was not part of the defendant’s system of work. The court held that the plaintiff’s employer had breached their duty of care by not providing eye protection where the risk of injury was apparent and in the plaintiff’s special circumstances the seriousness of the injury was higher than that for an employee with perfect vision.

Conformity with established standards

Conformity with the usual practice will generally go a long way towards rebutting an allegation of negligence. However, the fact that a defendant has behaved in the usual way will not necessarily absolve them from responsibility: see Mercer v Commissioner for Road Transport and Tramways (NSW) (1936) 56 CLR 580 Mercer v Commissioner for Road Transport and Tramways (NSW)

M was travelling in the leading tram of two trams coupled together when the driver collapsed and the coupled trams went out of control and crashed into the rear of another tram. M was injured. M argued that the accident would never have happened if a device known as the “dead man’s handle” had been installed. [This device must be held in position by the driver in order to drive the tram. If the driver releases the handle (e.g. if they collapse), it springs back, applying the brakes and bringing the tram to a stop.] Expert witnesses on behalf of the Commissioner gave evidence that Sydney trams were up-to-date in their equipment and that the provisions for stopping trams were in accordance with general practice in the case of trams carrying both a driver and a conductor. The witnesses had no knowledge of any two-person trams which used the “dead man’s handle”.

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Professional standards and industry codes In some circumstances a higher standard than that of a reasonable person is required. For example, where a person purports to have a particular skill, such as a builder, engineer and an architect, the standard will be increased to that of a reasonably competent member of that profession or calling. Failure to comply with an industry or professional Standard or Code may provide evidence of negligence. Professional advisers owe a duty of care that extends beyond avoiding negligent misrepresentations and includes a positive duty to make all relevant disclosures: see Pacific Acceptance Corporation Ltd v Forsyth (1992) 175 CLR 479. Pacific Acceptance Corporation Ltd v Forsyth A finance company successfully claimed damages from its auditors for losses caused by their failure to warn them of fraudulent and irregular features in loans made to a Mr Thompson and a group of companies with whom he was associated. Where there are doubts that the methods proposed will meet the client’s needs and there are realistic alternatives the safest course is to avoid the untried method: see Victoria University of Manchester v Hugh Wilson & Lewis Womersley (1984) 2 Con LR 43. Victoria University of Manchester v Hugh Wilson & Lewis Womersley

Architects designed a new building for the university recommending the use of imported Italian tiles as cladding to provide sufficient waterproofing as well as aesthetic appeal. This method was not widely used and eventually the tiles began to come off. The adhesive used for the tiles was not appropriate and the building had to be completely reclad using a more acceptable method.

Damage The plaintiff must establish that actual compensable injury, damage or loss has been sustained; that it was actually caused by the defendant’s breach and was not too remote. The cause of action in negligence (and tort generally) does not commence to run until actual damage has been sustained. This is in contrast to contract law where the cause of action is complete on the breach and immediately gives rise to the right to claim nominal (or token) damages. Sometimes the one incident can give rise an

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action both in contract and tort law but at different times: see Voli v Inglewood Shire Council (1963) 110 CLR 74. Voli v Inglewood Shire Council Voli had been injured when the stage in a public hall owned by the Inglewood Council collapsed. The architect engaged by the council to design the hall had specified joists of insufficient depth to support the normal floor loading on the stage. The architect was not only liable in contract to the Council for undertaking the design poorly, but also to third parties in tort, such as Voli, who were injured due to the negligent construction. Remoteness The plaintiff must establish that their loss was actually caused by the defendant’s breach and was not too remote. This involves a consideration of (a) causation in fact and (b) causation in law.

Causation in fact – the “but for” test The plaintiff must prove on the balance of probabilities that the damage was in fact caused by the defendant’s negligence. It must be shown that the defendant’s act or omission actually caused the damage that the plaintiff has suffered. This can lead to complexity where there is intervening or other acts of negligence. A simple way of determining if the act or omission materially contributed to (or increased the risk of) the injury to the plaintiff is to apply the “but for” test as stated in Cork v Kirby MacLean Ltd [1952] 2 All ER 402:

If you can say that the damage would not have happened but for a particular fault, then that fault is in fact a cause of the damage; but if you can say that the damage would have happened just the same, fault or no fault, then the fault is not a cause of the damage.

The “but for” test was applied in Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. Barnett v Chelsea & Kensington Hospital

Mr Barnett went to hospital complaining of severe stomach pains and vomiting. He

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was seen by a nurse who telephoned the doctor on duty. The doctor told her to send him home and contact his GP in the morning. Mr Barnett died five hours later from arsenic poisoning. Had the doctor examined Mr Barnett at the time there would have been nothing the doctor could have done to save him. It was held that the hospital was not liable as the doctor's failure to examine the patient did not cause his death. Proportionate Liability Legislation The States and the ACT have codified the common law test for causation and require courts to apportion liability where the defendant is a concurrent wrongdoer. A “concurrent wrongdoer” is one of two or more wrongdoers, whose acts jointly or independently cause, and who is liable to the plaintiff in respect of, the same damage. The liability of the defendant is limited to the amount that the court considers “just” having regard to the extent of the defendant’s comparative responsibility for the damage or loss. (See Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) Pt 3) Proportionate liability only applies in a claim for economic loss or property damage, not claims arising from personal injury. Novus actus interveniens An intervening event that breaks the chain of causation between the defendant’s negligence and the plaintiff’s loss, injury or damage is described as a novus actus interveniens. It can take the form of either a natural event an intervening act of a third party: see Knightley v Johns [1982] 1 WLR 349.

Knightley v Johns

A car driver (the defendant) caused an accident in a tunnel. Consequently, a policeman sent his colleague down the wrong side of the tunnel to investigate having forgotten that he had not closed it off to traffic. The colleague (the plaintiff) was injured. Here the court decided that the policeman’s conduct constituted a new act which broke the chain of causation between the plaintiff and defendant.

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Causation in law

Not all damage which has in fact been caused by the act or omission complained of is recoverable. The general rule for causation in law is that the defendant is liable for the kind of damage that is reasonably foreseeable as a result of the breach (i.e. the act or omission complained of): see Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound (No 1)) [1961] AC 388 Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound (No 1))

The Wagon Mound was a ship from which furnace oil had been negligently spilled into Sydney harbour. The oil slick drifted 600 feet to the wharf where the wharf owner was carrying out repairs to another ship, the Corrimal. The wharf owner asked the ship owner about the danger and was told he could continue his work because the slick would not burn. The wharf owner allowed work to continue on the wharf, which sent sparks onto a rag in the water which ignited and created a fire which burnt down the wharf. In the ensuing fire, considerable damage to the wharf and the Corrimal occurred. The issue was whether the owner of the Wagon Mound was liable for all the damage that resulted from the fire. The matter went to the Privy Council and they held that to find a party liable for negligence the damage must be reasonably foreseeable. The council found that even though the crew were careless and breached their duty of care, the resulting extensive damage by fire was not foreseeable by a reasonable person.

Negligent Misstatement

It took some time for the courts to recognise negligence claims where the loss claimed was purely economic and attributable to incorrectly given advice and/or information. To succeed in a claim for negligence the plaintiff would need to show physical loss, such as damage to property or injury to the person. Any economic loss claimed would need to be consequential upon physical loss, such as loss of income or medical expenses as a result of the defendant’s negligence.

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The case of Spartan Steel & Alloy v Martin [1973] QB 27 (CA), 37 supported the traditional approach. The defendant had negligently cut a power cable leading to the plaintiff’s factory. As a result goods in production at the time of the power cut were destroyed. The plaintiffs sued for compensation for the damage to those goods and the loss of profit consequent upon that damage. They also claimed the loss of profit on goods that could not have been manufactured that day due to the power cut. The court refused to award damages for the last claim as this was pure economic loss. Claims for pure economic loss were recognised by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.

Pure Economic Loss Negligence claims for pure economic loss were recognised by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. Hedley Byrne was a firm of

advertising agents. A customer, Easipower Ltd, put in a large order. Hedley Byrne wanted to check their financial position and credit-worthiness and subsequently asked their bank, the National Provincial Bank, to get a report from Easipower’s bank, Heller & Partners Ltd., who replied in a letter that was headed, "without responsibility on the part of this bank". It said that Easipower was, "considered good for its ordinary business engagements".

The letter was sent for free. Easipower went into liquidation and Hedley Byrne lost £17,000 on contracts. Hedley Byrne sued Heller & Partners for negligence, claiming that the information was given negligently and was misleading. Heller & Partners argued there was no duty of care owed regarding the statements, and in any case liability was excluded.

The court found that the relationship between the parties was "sufficiently proximate" as to create a duty of care. It was reasonable for them to have known that the information that they had given would likely have been relied upon for entering into a contract of some sort. This would give rise, the court said, to a "special relationship", in which the defendant would have to take sufficient care in giving advice to avoid negligence liability. However, on the facts, the disclaimer was found to be sufficient enough to discharge any duty created by Heller's actions.

Tort of Negligent Misstatement in Australia

The Privy Council’s decision in MLC v Evatt [1971] AC 793 sought to limit the Hedley Byrne “special relationship” to circumstances where the defendant was carrying on business of a kind calling for skill or competence or claimed such expertise: e.g. an accountant or an investment adviser.

The High Court’s decision in Shaddock & Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225 rejected the Privy Council’s view in Evatt that liability should be limited

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to those engaging in activities involving skill or competence. In that case a developer sued a local council for damages for the loss he sustained upon relying on incorrect advice given by the council on two separate occasions regarding proposed road widening plans. The Court stated that a person who gives advice to another in circumstances where the adviser knows, or ought reasonably to know, that the person is likely to rely on the advice (i.e. where a “special relationship” exists), owes a duty of care not to be negligent in giving such advice and will be liable for economic loss if the advice is given carelessly.

The High Court also held that the duty of care extended to those supplying advice or information in the course of discharging a government or administrative responsibility, and was not limited to commercial business activities; and that the plaintiff may be seeking mere factual information, as opposed to an expert opinion.

Unreasonable Reliance The High Court’s decision in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act (1986) 162 CLR 340 stressed the significance of reasonable reliance when assessing the proximity of the parties in a claim for economic loss based on negligent miss-statement.

San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act

The appellants were developers who acquired land in Woolloomooloo relying on a redevelopment plan, which was published in 1968 by the State Planning Authority and the Council of the City of Sydney. The plan allowed high density development and encouraged developers to acquire and consolidate properties. It was adopted and followed by the Council until 1972, when it was abandoned. The appellants sued for their resulting financial loss, and claimed that the plan had not been prepared with due care, because there had been a failure properly to investigate and to discover that the transport system lacked the capacity to accommodate the projected workforce, resulting in the plan not being feasible of implementation. They succeeded at first instance in the Supreme Court of New South Wales, but the Court of Appeal held that the respondents were not under a relevant duty of care to the appellants. The matter was appealed to the High Court.

The appeal was dismissed. The court stated that if the appellants’ case was to succeed they

must establish at least:

(1) that the alleged representation was made;

(2) that the Authority and the Council made the representation with the intention of inducing

members of the class of developers to act in reliance on the misrepresentation.

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They had failed to establish matter (1), since the documents offered no assurance about the

ultimate level of development or the continuing application by the Council of the proposed

maximum space ratios.

Brennan J summarised the law of negligent misstatement as follows:

Where a representor gives information or advice on a serious or business matter, intending thereby to induce the representee to act on it, the representor is under a duty of care in giving that advice or information if three conditions are satisfied:

(1) if the representor realises or ought to realise that the representee will trust in his

especial competence to give that information or advice;

(2) if it would be reasonable for the representee to accept and rely on that

information or advice;

(3) if it is reasonably foreseeable that the representee is likely to suffer loss should

the information turn out to be incorrect or the advice turns out to be unsound.

In the present case, even if the documents carried by implication a representation that the plan was feasible in a planning sense, the circumstances did not give rise to a duty of care, since it was unreasonable for a person contemplating a course of action which involved a risk of loss if a public authority did not exercise its discretion in a particular way to rely on the feasibility of a policy affecting the discretion when the discretion was one which must be exercised in the public interest.

Duties Owed to Third Parties

The High Court’s decision in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 set out the test of when a duty of care is owed by a defendant to a third party. Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 The appellant, Esanda Finance Corporation, loaned money to a corporation in reliance on a report prepared by a finance company, Peat Marwick Hungerfords. When the borrower defaulted on the loan, Esanda turned to the finance company to recover claiming it had acted in reliance on audited accounts which breached mandatory auditing standards in relation to their preparation. Central to this argument was that Esanda had suffered a loss which would not have occurred if not for reliance on the finance company’s audited accounts, which were prepared in breach of auditing standards.

The Court held that there was no cause of action successfully pleaded by the appellant and that the appeal should be dismissed with costs. Although this order was unanimous, there were four different judgments emanating from the Court to explain why. This case is generally seen as authority for the proposition that auditors do not owe a duty of care to third parties. However, the case was decided using the multi-factorial approach with reasons against finding a duty being: that Esanda, as a corporation, was not vulnerable as it could have made its own enquiries regarding the financial position of the borrower; and that allowing the appeal may have given rise to indeterminate liability to the auditor.

To be successful a plaintiff/third party must prove the following factors:

(i) that the defendant/adviser knew, or ought reasonably to have known, that the

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information or advice given to their client would be communicated to a third party

or to the class of which the plaintiff is a member;

(ii) That the information or advice would be so communicated for a purpose that

would be very likely to lead a third party to enter into a transaction of a kind that

the third party does enter into; and

(iii) That it would be very likely that the third party would enter into such a transaction

in reliance on the information or advice from the defendant and thereby risk

incurring economic loss if the defendant’s statement should be untrue or the

advice should be unsound.

Defences to Negligence

There are two main defences to an action in negligence. The first, volenti non fit injuria, is a complete defence and will totally absolve the defendant from liability where it can be shown that the plaintiff voluntarily agreed to accept the risk of injury or loss. The second defence, contributory negligence, does not operate as a complete defence, however, allows responsibility for the loss to be apportioned between the plaintiff and the defendant where it can be shown that the plaintiff contributed towards the loss.

Volenti non fit injuria

This is a complete defence to an action for negligence and is available where the plaintiff voluntarily accepts the risk of damage at their own expense.

Voluntary assumption of risk occurs where the plaintiff: (i) has full and complete knowledge of the risk;

(ii) a sufficient appreciation of the danger associated with the risk; and

(iii) freely and voluntarily accepts the risk.

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Morris v Murray [1991] 2 WLR 195

The plaintiff and the defendant had enjoyed a prolonged drinking session before the defendant piloted a plane with the plaintiff as passenger, and negligently crashed it causing his own death and seriously injuring the plaintiff. Contributory negligence

Contributory negligence means that the plaintiff has not been sufficiently careful in looking out for their own safety/property so that, in part, their omission to do so has given rise to the damage that has been suffered. In order to rely on a defence of contributory negligence, the defendant must show that the plaintiff failed to take reasonable care in relation to their own safety/property and that this failure contributed to the damage suffered. Courts generally apportion the damages payable when contributory negligence is proved, therefore, it is only a partial defence.

In Connors v Western Australian Government Railways Commission [1992] Aust Torts Rep 81-187 the plaintiff was hit by a train while crossing the tracks at Perth’s Loch St Station and had therefore contributed to his injuries.

Vicarious liability

Vicarious liability involves a person being liable for the negligent acts or omissions of another. Cassidy v Minister of Health [1951] 1 All ER 574 C went to hospital for an operation on two stiff fingers, but emerged with four stiff fingers. It wasn’t possible to determine which hospital employee’s negligence had caused the damage. The Court held that there was negligence by the hospital’s

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employees in the course of carrying out their duties and that the hospital was therefore vicariously liable for their actions. The reason that the employer is held responsible arises as a consequence of the employment relationship, which has the effect of making the employer an insurer of the employee. The action of the employee must be connected with their contract of employment which was not the case in Deatons Pty Ltd v Flew (1949) 79 CLR 370 where a hotel barmaid threw a glass of beer at an offensive customer which caused serious injury. The customer brought an action for assault against the barmaid’s employer. The High Court held that the barmaid’s actions were outside the scope of her employment. She was employed to serve drinks, not to carry out security; therefore her employer was not vicariously liable for her actions.

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