week 6 the law of torts negligence negligent misrepresentation

Fundamentals of Law (BL502)

Week 6

The Law of Torts

Negligence

Negligent Misrepresentation


Negligent Misrepresentation Most often results in purely financial loss Recovery of “pure economic loss” was denied

by the courts for many years as: No duty of care Damage too remote Donoghue v Stevenson was confined to physical

damage Economic effects may be more extensive than

physical effects


Negligent Misrepresentation (cont.) Now allowed, but very narrow Difficult to Develop tests to avoid too onerous

a duty Hedley Byrne v Heller (1964)

A duty of care can be owed where a careless statement causes economic loss

To prevent too wide a duty being owed, it only applied where there was a “special relationship”


Negligent Misrepresentation (cont.) Special relationship where

the advisor had special knowledge, skill or ability

There was an assumption of responsibility by the advisor; and

Their was reliance on the advice by the person being advised

Effectively limited to professional advisors


Negligent Misrepresentation (cont.) Special relationship test not followed in

Australia (MLC v Evatt (1968) 122 CLR 556 at 723)

Overruled by Privy Council Reinstated by High Court in Shaddock &

Assoc. v Parramatta City Council (1981) 150 CLR 225


Negligent Misrepresentation (cont.) “Whenever a person gives information or advice to

another upon a serious matter in circumstances where a person realises, or ought to realise, that he is being trusted to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to act on the information or advice, the speaker comes under a duty to exercise reasonable care in the provision of the information or advice he chooses to give” per Barwick CJ in MLC v Evatt (1968) 122 CLR 556 at 723


Negligent Misrepresentation (cont.) Shaddock v Parramatta City Council (P p405)

Was advice given in respect of a serious business matter

Were the circumstances such that the advisor should have realised that he was being trusted to give correct advice

In the circumstances, was it reasonable for the person being advised to have relied on the advice


Negligent Misrepresentation (cont.) San Sebastian v Minister Administering

the Environment (P p 405) “Element of reliance” is the

“prominent” factor “special skill and knowledge” not a

factor No need for an antecedent request

for information


Negligent Misrepresentation (cont.) Duty can be owed where there is no contract

Esso v Mardon (S&OR p44)


Negligent Misrepresentation (cont.) Advice involving third parties

Lowe Lipman Figdoe & Franck v AGC (S&OR p47)

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 (P p406)

Emphasised proximity between advisor and person receiving advice


Negligent Misrepresentation (cont.)Important factors: Whether plaintiff requested the advice Whether defendant assumed responsibility for the

risk being taken by the plaintiff Where no request and no assumption of

responsibility: Whether defendant was aware that the plaintiff could be

injured by the defendant’s advice The degree of the plaintiff’s vulnerability The defendant’s knowledge of the plaintiff’s vulnerability Whether the defendant intended the plaintiff to rely on the

advice


The Law of Torts

Negligence

Vicarious Liability


Vicarious Liability Definition

The law holds a person liable for the wrongs of another even though the person has personally done no wrong

Examples Employer\Employee


Vicarious Liability (cont.) Rationale

EconomicThe employer is usually insured

SafetyProvides an incentive for employers to choose staff carefully and provide training

PolicyEmployers profit from their enterprise and therefore should be responsible for any loss it causes


Vicarious Liability (cont.) Indemnities

A contract can contain a clause requiring the employee to indemnify the employer

Some jurisdictions have abolished this right (e.g. s27C Wrongs Act (SA))

Employee is usually covered by employer’s insurance and insurer cannot recover against him (s66 Insurance Contracts Act)


Vicarious Liability (cont.) Requirements

Commission of a tort Not contract or other legal liabilities

By an employee A Principal is not liable for acts of an

Independent Contractor Acting in the course of his employment

What was the employee employed to do. Employer will be liable for acts in that area or incidental to it or if the employer otherwise authorised the wrongful act.


Vicarious Liability (cont.)Who is an Independent Contractor? Control test

Does the employer have the right to exercise control over what the employee does and how he does it?

Employer need only have power to control the employee’s work to the extent to which there is scope for such control


Vicarious Liability (cont.) Control test (cont.)

Factors Can the employer tell the employee

what to do, how to do it, when to do it etc.?

Does the employer have the power of dismissal

Does the employer provide equipment Does the employer pay holiday pay, sick

leave, workers compensation?



Integration testHow closely has the employee been integrated into the employer’s business



Multi-factor testA worker is likely to be an independent contractor and not an employee if he: Owns and maintains his own equipment Is paid by results Takes the chance of profit\loss Has the right to delegate work Has the right to work for others Is not entitle to sick pay, workers compensation, sick

leave or superannuation Does not have PAYE tax installments deducted


Vicarious Liability (cont.) Acting in the course of his employment

Wide meaning Employer is liable even when the employee does

something that is not part of his job Century Insurance Co Ltd v Northern Ireland

Road Transport Board [1942] AC 509 (P p417) Employer is liable even when the employee

commits an intentional or illegal act Poland v John Parr & Sons [1927] 1 KB 236 (P

p418) Lloyd v Grace, Smith & Co [1912] AC 716 (P

p417)


The Law of Torts

Negligence

Reforms


Reforms Why is there an “insurance crisis”? What are the alleged causes? What are the proposals for reform?

week 6 the law of torts negligence negligent misrepresentation

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