Copyright LexisNexis. Sample only. CHAPTER 25 Negligence. Key Learning Areas. Setting the Scene

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1 Key Learning Areas When you have studied this chapter, you should be able to: 1 define negligence and list its three elements; CHAPTER 25 Negligence 2 understand the impact of civil liability legislation on the law of negligence; 3 appreciate when a duty of care is owed and the role of reasonable foreseeability of harm; 4 recognise when a duty of care has been breached and the role that the standard of care plays; 5 understand the required causal link between a breach of duty and resulting damage; 6 outline the available defences to a claim of negligence; and 7 show how liability for negligent misstatement is established. Setting the Scene During their last university vacation Pete and his brother enrolled in a scuba diving course, the culmination of which was a dive trip to the outer barrier reef. The course was Pete s birthday present for his brother, and he expected to pay for it with the profits he hoped to make on a share investment in Blue Skys Mines Ltd, which he made after reading an article in The Canny Investor magazine saying that the company was about to announce a major minerals find. Unfortunately, that was not the case, and, instead of making a profit, Pete lost almost all his money. To make matters worse, the dive trip was a disaster. The dive company s instructor spent most of his time in the wheelhouse talking to the boat s skipper, so when Pete s brother refused to take the safety precautions that he should have taken before getting into the water, because it is all a waste of time and I don t see the point anyway, the instructor was not there to make him. As a result, Pete s brother was injured and the dive trip had to be cut short. Pete is pretty angry, and believes that Spi-Pentony et al - Understanding Business Law Ch.25.indd 1 28/08/ :13:12

2 Understanding Business Law the magazine, the dive company and the instructor should all be made to pay. He does, however, have a sneaking suspicion that his brother is at least partially responsible for the dive trip problems, and that this could have some impact on what he might be able to recover. 2 Spi-Pentony et al - Understanding Business Law Ch.25.indd 2 28/08/ :13:12

3 Chapter 25 : Negligence Introduction This chapter introduces you to the tort of negligence, and examines the three elements of that tort duty, breach and damage. It also considers the available defences and the specific rules that apply to negligent misstatements. Negligence Elements Negligence Defences Negligent misstatement 25.1 While there is a wide variety of torts, covering individual civil wrongs, by far the most important is negligence. Negligence defined 25.2 As a tort, negligence is a complex concept, which can involve both advertent and inadvertent acts and omissions. Someone will be negligent if they fail to take reasonable care to prevent loss, damage or injury to others whom they could reasonably have foreseen might be injured if that care was not taken. Lord Wright described the concept in Lochgelly Iron and Coal Co Ltd v M Mullen [1934] AC 1 at 25, saying: In strict legal analysis negligence means more than heedless or careless conduct, whether in omission or commission: it properly connotes the complex concept of duty, breach, and damage thereby suffered by the person to whom the duty was owing. Therefore, negligence requires proof of three elements: that the tortfeasor owed the victim a duty of care ; that there was a breach of that duty of care; and that loss, damage or injury resulted from the breach. Duty of care Elements of negligence Breach of duty Damage 3 Spi-Pentony et al - Understanding Business Law Ch.25.indd 3 28/08/ :13:12

4 Understanding Business Law The Civil Liability Acts 25.3 Negligence developed at common law but was substantially reformed by the passage of Civil Liability Acts in all states and territories in Unfortunately, those Acts are not uniform, but their broad structure is similar and they all do, effectively, two things: they modify the common law principles that govern how negligence can be proven and restrict, to an extent, the considerations that courts can take into account when determining whether the elements of duty, breach and damage have been established; and they limit or, in some cases, abolish a plaintiff s right to recover damages or cap the damages that can be recovered. Common features of nearly all of the Acts include: specifying the matters that courts can take into account when determining whether there has been a breach of duty; limiting claims for injuries sustained in the course of either criminal activities or obviously dangerous recreational activities, or where the use of drugs or alcohol is a contributing factor; protecting Good Samaritans, public authorities, volunteers and, in some cases, professionals (where they act in a way that is accepted by their peers as competent ); capping certain damages and abolishing others (in particular, abolishing exemplary, punitive and aggravated damages for personal injury); and removing the admissibility of saying sorry in subsequent court actions (so it cannot be treated as an admission of liability). The Acts are the Civil Law (Wrongs) Act 2002 (ACT), the Civil Liability Act 2002 (NSW), the Personal Injuries (Liability and Damages) Act 2003 (NT), the Civil Liability Act 2003 (Qld), the Civil Liability Act 1936 (SA), the Civil Liability Act 2002 (Tas), the Wrongs Act 1958 (Vic) and the Civil Liability Act 2002 (WA). Despite statutory reforms, the principles underlying the tort of negligence have remained essentially the same, and plaintiffs must still prove duty, breach and damage though they must now do so in the context of the statutes: see Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420 at 432; [2009] HCA 48. The duty of care 25.4 The modern doctrine of negligence originated in Donoghue v Stevenson [1932] AC 562, where the House of Lords accepted that a duty of care could exist in any situation where loss, damage or injury to one party was reasonably foreseeable and the relationship between the parties was sufficiently close to require one to take care not to put the other at risk. 4 Spi-Pentony et al - Understanding Business Law Ch.25.indd 4 28/08/ :13:12

5 Chapter 25 : Negligence Donoghue v Stevenson [1932] AC 562 The appellant s friend bought her a bottle of ginger beer. She drank some then poured the remainder onto a dish of ice cream. The decomposed remains of a snail floated out of the bottle. The appellant suffered shock and, later, severe gastroenteritis. She sued the manufacturer. Was the manufacturer liable? DECISION Manufacturers have a general duty to the entire consuming public to ensure that their products do not contain potentially dangerous defects that cannot be discovered on a reasonable inspection. The manufacturer was liable. Explaining the nature and extent of the duty of care, Lord Atkin said (at 580): You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, 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 Over the ensuing years, the courts have tried to develop a universal test to determine whether a duty of care exists in any given fact situation but they now seem to accept that to search for any single formula which will serve as a general test of liability is to pursue a will-o -the-wisp : per Lord Oliver of Aylmerton in Caparo Industries plc v Dickman [1990] 2 AC 605 at Indeed, as Kirby J said in Pyrenees Shire Council v Day (1998) 192 CLR 330; 151 ALR 147; [1998] HCA 3 at [242]: the search in this Court for exact precision and sure predictability should, I think, be taken to have failed. In these circumstances, it is preferable to adopt an approach which accepts honestly that exact precision and certainty are ultimately unattainable in this area of the law. The problem has been to find such an approach something made even more difficult because the duty of care in negligence is a legal duty to take reasonable care to prevent foreseeable harm. It is not a mere moral obligation, or social responsibility, but a legal duty of care, breach of which might result in liability in damages : per Gleeson CJ in Agar v Hyde (2000) 201 CLR 552; 173 ALR 665; [2000] HCA 41 at [10]. Therefore, the mere fact of foreseeable harm is not enough. The circumstances must be such that the law is prepared to impose a duty on potential tortfeasors to take care to prevent that harm occurring to particular plaintiffs (those whom Lord Atkin described as my neighbour ). This is, at least in part, to ensure that potential tortfeasors are not exposed to what Cardozo CJ described as liability in an indeterminate amount for an indeterminate time to an indeterminate class : see Ultramares Corporation v Touche 174 NE 441 (1931) at Spi-Pentony et al - Understanding Business Law Ch.25.indd 5 28/08/ :13:12

6 Understanding Business Law So, for example, in Agar v Hyde, the High Court held that members of the International Rugby Football Board had no legal duty to change the rules of the game to reduce the possibility of players being injured because finding otherwise would have meant that they owed a duty of care to each person who played rugby under those laws [which] strikes us as so unreal as to border on the absurd (at [67]). Therefore, to establish a duty of care, plaintiffs must show two things: that harm of the kind they suffered was foreseeable (that is, was a real possibility and not far-fetched or fanciful); and that, in the circumstances, it was not unreasonable to impose a duty on the defendant/s to take care not to do anything that would cause that harm. Reasonable foreseeability of harm 25.6 Before a duty of care can exist, it must have been reasonably foreseeable to the wrongdoer that others could be injured through his or her acts or omissions and plaintiffs must show that they belonged to the class of people whom the defendant should have regarded as being at risk. The precise loss, damage or injury that they suffered need not have been reasonably foreseeable just that they could have suffered some loss, damage or injury as a result of the defendant s acts or omissions: see Chapman v Hearse (1961) 106 CLR 112 at Limiting the duty of care 25.7 By itself, the reasonable foreseeability test is unacceptably wide, especially if more than direct personal injury or damage to property is involved. For example, if you make an off-the-cuff remark to a friend in a public place, it is reasonably foreseeable that it could be overheard and, possibly, passed on. However, it would be quite unreasonable if your duty of care to ensure that that remark was not misleading extended to everyone who subsequently became aware of it. Consequently, the law limits a defendant s legal duty of care to those, to use Lord Atkin s words, who are so closely and directly affected by my act that I ought reasonably to have them in contemplation when I am directing my mind to the acts or omissions which are called in question. Otherwise, a single tortfeasor could find himself or herself liable, directly or indirectly, to everyone in the world who suffers loss, damage or injury that can, somehow, be linked to his or her negligent acts or omissions: see again the concerns raised in both Ultramares Corporation v Touche and Agar v Hyde cited at [25.5] above. Establishing the existence of a duty of care 25.8 Therefore, the question is, to whom is the duty of care owed? Unfortunately, there is no clear answer (and a significant amount of dicta to the effect that finding a single test may not be possible), but the High Court s broad approach seems to involve the following steps: 6 Spi-Pentony et al - Understanding Business Law Ch.25.indd 6 28/08/ :13:12

7 Chapter 25 : Negligence a) Determine whether there was a reasonably foreseeable risk of injury. Without that there cannot be a duty of care. More importantly, in appropriate cases, it may be enough, by itself, to establish that a duty exists. As Deane J said in Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 495; 60 ALR 1 at 53 54; [1985] HCA 41, Reasonable foreseeability of loss or injury to another is an indication and, in the more settled areas of the law of negligence commonly an adequate indication that the requirement is satisfied. b) Determine whether the case is closely analogous to other cases in which a duty of care has already been established. c) If not, look to the salient features of the case to determine whether they reveal a sufficiently close neighbour relationship to warrant finding a duty of care. d) Determine whether there are policy or other considerations that mitigate against finding that a duty of care exists. Reasonably foreseeable injury 25.9 If a plaintiff s injury was not reasonably foreseeable it would be unreasonable to impose a duty of care on the defendant (that is, to demand that he or she should have taken steps to avoid it). Tame v New South Wales (2002) 211 CLR 317; 191 ALR 449; [2002] HCA 35 The plaintiff had been in a traffic accident. She was tested and returned a nil blood alcohol level, which, by mistake, the police officer recorded as The mistake was later corrected and the plaintiff s solicitor informed her of the error, told her that it had been rectified and assured her that it would not affect her insurance. Despite that, she became obsessed, and ultimately developed a psychiatric disorder. She sued, arguing that her condition was a result of the police officer s negligence. Had the plaintiff s injury been reasonably foreseeable? DECISION It was not reasonably foreseeable that she would suffer a psychiatric injury as a result of an error in recording her blood alcohol reading. Consequently, the police officer had not been under a duty of care to avoid causing her psychiatric injury. The state was not liable. Similar reasoning can be found in Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317; 201 ALR 139; [2003] HCA 51, where Wilkins purchased bags of canola seeds known to contain some weed seeds that, at the time of importation and sale, had not been prohibited. When they were prohibited, Wilkins sued Dovuro in negligence. Dovuro was not liable. Because the seeds had not been prohibited when they were sold it was not reasonably foreseeable that buyers of the seed would suffer damage. Consequently, there was no duty of care and no breach. 7 Spi-Pentony et al - Understanding Business Law Ch.25.indd 7 28/08/ :13:12

8 Understanding Business Law See also Koehler v Cerebos (Aust) Ltd (2005) 222 CLR 44; 214 ALR 355; [2005] HCA 15, where the Court held that, because there had been nothing to alert an employer to a specific risk of psychiatric injury to an employee (the employee in question was a part-time sales representative who had complained that her sales area was too big to service within her assigned hours, but she had not told the employer that her health was being affected as a result), that risk was not foreseeable and the employer was, therefore, not liable. Similarly, in Sydney Water Corporation v Turano (2009) 239 CLR 51; 260 ALR 20; [2009] HCA 42, Sydney Water was held not liable for the death of the plaintiff s husband when a tree fell on his car during a strong wind storm. It had laid a water main beside the road some 20 years earlier that had affected local drainage, which, in turn, had damaged the tree s root system. The High Court held that injury to road users as the result of the tree s eventual collapse was not a reasonably foreseeable consequence of laying the water main. Consequently, Sydney Water had had no legal duty of care and was not liable for the death Reasonably foreseeable risk of injury is not only an element of the duty of care; it can also help to establish the element of neighbourhood : the concept that, if injury to a particular defendant was reasonably foreseeable, the tortfeasor should have had that person in mind when directing [his or her] mind to the acts or omissions which are called in question. Thus, manufacturers of foodstuffs should have consumers in mind when they develop their production and packaging processes; manufacturers of equipment should have those who will use or come in contact with that equipment in mind; and motorists should have all other road users in mind when they venture out onto the highway Reasonably foreseeable injuries now encompass not only physical injuries but also nervous shock and the psychiatric consequences that can result from seeing or hearing about injuries to those close to you: see, for example, Jaensch v Coffey (1984) 155 CLR 549; 54 ALR 417; [1984] HCA 52, involving injuries to a husband; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; 191 ALR 449; [2002] HCA 35, involving the death of a son; and Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 214 CLR 269; 198 ALR 100; [2003] HCA 33, involving the death of a father. Such injuries also include the risk of pure economic loss (loss that occurs independently of any personal injury to the plaintiff or damage to his or her property) resulting from either negligent misstatements (Hedley Byrne and Co Ltd v Heller [1964] AC 465) or other negligent acts: Caltex Oil v The Dredge Willemstad (1976) 136 CLR 529. Cases involving an established duty of care The law regarding relationships involving an established duty of care is simply an application of the doctrine of precedent. If the courts have already examined a particular relationship and found that it involves a duty of care, plaintiffs in similar relationships do not have to prove a duty of care in their cases; that will be presumed. As Gleeson CJ noted in Modbury Triangle Shopping Centre v Anzil (2000) 205 CLR 254; 176 ALR 8 Spi-Pentony et al - Understanding Business Law Ch.25.indd 8 28/08/ :13:12

9 Chapter 25 : Negligence 411; [2000] HCA 61 at [13], Most actions in tort arise out of relationships in which the existence of a duty of care is well established, and the nature of the duty well understood. Common relationships involving an established duty of care include those between: professionals and their clients; employers and their employees; teachers and their students; highway users and other highway users; occupiers of premises and their invitees, suppliers and consumers; bailees and bailors; and prison warders, police officers and the inmates in their care. Salient features Where a case involves reasonably foreseeable harm but is not one where there is an already established duty of care, the court has to look at its salient features (or, as Allsop P described them in Caltex Refineries (Qld) Pty Ltd v Stavor (2009) 75 NSWLR 649; 259 ALR 616; [2009] NSWCA 258 at [102] factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury ) to determine whether finding a duty of care is warranted. Those salient features include the victim s vulnerability, his or her reliance or dependence on the tortfeasor (which might simply be an indicator of that vulnerability), any assumption of responsibility by the tortfeasor and, more generally, the tortfeasor s ability to control whatever caused the harm. Perre v Apand Pty Ltd (1999) 198 CLR 180; 164 ALR 606; [1999] HCA 36 Apand Pty Ltd trialled seed potatoes infected with bacterial wilt on properties in South Australia. The Perres property was not affected, but they could not sell their potatoes into Western Australia (where prices were higher) because Western Australian law prohibited the importation of potatoes grown on or within 20 kilometres of land affected by wilt. They sued. Did Apand Pty Ltd owe the Perres a duty of care? DECISION The harm the Perres suffered was reasonably foreseeable, and Apand owed them a duty of care. They were particularly vulnerable (because they had not been in a position to appreciate the risk or to protect themselves against it), and the damage flowed directly from activities within Apand Pty Ltd s control. Further, because there were a limited number of growers affected by Apand s negligence (those farming within 20 kilometres of the trial property), a finding that Apand owed them a duty of care did not expose it to an indeterminate liability. 9 Spi-Pentony et al - Understanding Business Law Ch.25.indd 9 28/08/ :13:12

10 Understanding Business Law A defendant s ability to control whatever caused the harm is critical. Defendants who cannot control the cause of the harm should not be under a duty to prevent it. So, for example, in Agar v Hyde (2000) 201 CLR 552; 173 ALR 665; [2000] HCA 41, the members of the International Rugby Football Board did not owe the injured players a duty of care because they could not control the on-field conduct of the opposing players (the real and immediate cause of the plaintiffs injuries). Similarly, in Modbury Triangle Shopping Centre v Anzil (2000) 205 CLR 254; 176 ALR 411; [2000] HCA 61, the owners of a shopping centre were not liable for injuries the plaintiff sustained when three unknown individuals bashed him in the centre s car park late one night. They had a general duty not to expose the plaintiff to harm from, for example, a defect in the condition of their car park (such as an unmarked excavation), but they had no duty to ensure that he was not harmed by persons over whose actions they had no control. Policy considerations Policy considerations give the courts an opportunity to decide whether a duty should not be imposed despite proof of foreseeability and neighbourhood if there are good reasons for not imposing it. In practice this means that policy issues are normally only taken into account when it is unreasonable to expect a defendant to have done what was needed to prevent the harm in question. Stovin v Wise [1996] AC 923 Stovin was injured when his motorcycle collided with a car at a dangerous (though not abnormally hazardous) road junction. The defendant Council knew the junction was dangerous and intended to make changes to it to improve motorists visibility, but had not done so before the accident happened. Did the Council owe Stovin a duty of care requiring it to have removed the hazard? DECISION The Council did not owe Stovin a duty of care. Whether (and when) it did the required work was within its discretion and, on policy grounds, it was not appropriate for the Court to interfere. As Lord Hoffmann said (at 958): the creation of a duty of care upon a highway authority, even on grounds of irrationality in failing to exercise a power, would inevitably expose the authority s budgetary decisions to judicial inquiry. This would distort the priorities of local authorities, which would be bound to try to play safe by increasing their spending on road improvements rather than risk enormous liabilities for personal injury accidents. They will spend less on education or social services. I think that it is important, before extending the duty of care owed by public authorities, to consider the cost to the community of the defensive measures which they are likely to take in order to avoid liability. 10 Spi-Pentony et al - Understanding Business Law Ch.25.indd 10 28/08/ :13:12

11 Chapter 25 : Negligence Questions of resource allocation can be taken into account but so too can other policy considerations, involving the dangers of interfering (usually with the benefit of hindsight) in the exercise of properly conferred powers or discretions. Hill v Chief Constable of West Yorkshire [1989] AC 53; [1988] 2 All ER 238 The mother of the last of the Yorkshire Ripper s victims sued the Chief Constable of West Yorkshire arguing that, because he had not caught the Ripper earlier, he was liable for her daughter s death. Had the Chief Constable s actions been negligent? DECISION While police can be liable if injury results from their acts or omissions, they do not owe the public a general duty of care to identify or apprehend unknown criminals. Finding otherwise would impose unacceptable limits on their discretion to investigate and prosecute crimes as they see fit, would not take their limited resources into account and would detract from the overall concept of compensation by making it, at least in part, dependent on where one crime fell in the sequence of a series of crimes. The same principles apply when imposing a duty of care would be incompatible with the proper discharge of a defendant s other (especially public) duties. Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404; [2001] HCA 59 The Community Welfare Act 1972 (SA) required doctors and social workers to report suspicions of child sexual abuse. Doctors who examined the plaintiffs children concluded that they had been sexually abused. They reported the matter and the plaintiffs (the fathers) were accused of abuse. The allegations were subsequently withdrawn and the fathers sued the doctors, social workers and others involved in the investigation, arguing that they had had a duty to exercise reasonable care in how they conducted it. Had the doctors, social workers and others owed the fathers a duty of care? DECISION It would be inconsistent with the proper and effective discharge of the defendants professional and statutory responsibilities to subject them to a legal duty to also take care to protect the people they suspected of the abuse. They did not owe the fathers a duty of care (see especially at CLR ). See also D v East Berkshire Community Health NHS Trust [2005] 2 AC 373; [2005] 2 All ER 443; [2005] UKHL Spi-Pentony et al - Understanding Business Law Ch.25.indd 11 28/08/ :13:12

12 Understanding Business Law Breaching the duty of care To succeed in a negligence action, a plaintiff must prove not only that a defendant owed him or her a duty of care, but also that there has been a breach of that duty. Echoing almost exactly the test that Mason J used in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47, the Civil Liability Acts (except in the Northern Territory) all provide (with slight differences in wording) that: A person does not breach a duty to take precautions against a risk of harm unless a) the risk was foreseeable (that is, it is a risk of which the person knew or ought reasonably have known); and b) the risk was not insignificant; and c) in the circumstances, a reasonable person would have taken the precautions. See the Civil Law (Wrongs) Act 2002 (ACT) s 43(1); Civil Liability Act 2002 (NSW) s 5B(1); Civil Liability Act 2003 (Qld) s 9(1); Civil Liability Act 1936 (SA) s 32(1); Civil Liability Act 2002 (Tas) s 11(1); Wrongs Act 1958 (Vic) s 48(1); and Civil Liability Act 2002 (WA) s 5B(1). This means that there will only be a breach of the duty of care if the defendant does not do what a reasonable person would have done in the same circumstances. In other words, the duty of care is not an absolute obligation; the defendant need only exercise the same standard of care that a reasonable person would have exercised in the same circumstances. Consequently, in Flavel v South Australia (2008) 102 SASR 404; [2008] SASC 333 the defendant was held to have breached its duty of care when it allowed a group of school children undertaking sailboard lessons to race during their second training session. Flavel fell from her board, hit her head on the river bottom and became a tetraplegic. Allowing novices to race (when they were likely to focus on winning rather than safety) and to do so in shallow water involved a reasonably foreseeable risk of injury that was not insignificant and against which a reasonable person would have taken precautions. The state had breached its duty of care. On the other hand, in Department of Housing and Works v Smith (No 2) (2010) 41 WAR 217; 265 ALR 490; [2010] WASCA 25, the Department of Housing and Works was held not to have breached its duty to Mrs Smith, a tenant in one of its unit blocks, who was injured in a fall that, she alleged, occurred because the Department had not filled in a shallow depression in the lawn left when a birdbath was removed. Because the depression should have been obvious to anyone choosing to look where they were going (so there was no significant risk of injury to anyone exercising sufficient care for their own safety), the Court held that a reasonable person would not have done anything to rectify the situation. The Department had not breached its duty of care When determining what precautions a reasonable person would have taken, the courts look forward to identify what a reasonable person would have done, not backward to identify what would have avoided the particular injury or damage. For example, in New South Wales v Fahy (2007) 232 CLR 486; 236 ALR 406; [2007] HCA 20 a police constable suffered post-traumatic stress syndrome after being 12 Spi-Pentony et al - Understanding Business Law Ch.25.indd 12 28/08/ :13:12

13 Chapter 25 : Negligence left alone with an injured victim of an armed robbery. She alleged that the Police Service had breached its duty of care to her because it should have directed that officers working in pairs should remain together. While, in hindsight, that may have reduced the likelihood of her injury, it was not something that a reasonable person, looking forward, would have done. Similarly, in Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; 260 ALR 628; [2009] HCA 48, the Court found that a restaurant owner had not breached its duty of care by not supplying security on a night when two of its patrons were shot because the question had to be assessed before the function began, not by reference to what occurred that night. In a practical sense, to prove a breach of duty the plaintiff must prove two things: that he or she was owed a particular standard of care (this might be referred to as the scope of the duty of care and its extent is a question of law); and that the defendant failed to meet that required standard or failed to take the appropriate precautions (a question of fact). Establish the required standard of care Establishing breach of duty The standard of care and failing to meet it Establish a failure to satisfy that standard The standard of care always depends on what a reasonable man would do by way of response to the risk. As Kirby J put it in Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431; 151 ALR 263; [1998] HCA 5 at [128], there are: practical considerations which must be balanced out before a breach of the duty of care may be found [and] courts have both the authority and responsibility to introduce practical and sensible notions of reasonableness that will put a brake on the more extreme and unrealistic claims [emphasis added] What is reasonable therefore depends on a number of factors, including, as Mason J listed them in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47 48, the magnitude of the risk and the degree of the 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. The Civil Liability Acts mirror those considerations and provide (with slight differences in wording) that: In deciding whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (among other relevant things) a) the probability that the harm would occur if care were not taken; b) the likely seriousness of the harm; 13 Spi-Pentony et al - Understanding Business Law Ch.25.indd 13 28/08/ :13:12

14 Understanding Business Law c) the burden of taking precautions to avoid the risk of harm; d) the social utility of the activity that creates the risk of harm. See Civil Law (Wrongs) Act 2002 (ACT) s 43(2); Civil Liability Act 2002 (NSW) s 5B(2); Civil Liability Act 2003 (Qld) s 9(2); Civil Liability Act 1936 (SA) s 32(2); Civil Liability Act 2002 (Tas) s 11(2); Wrongs Act 1958 (Vic) s 48(2); and Civil Liability Act 2002 (WA) s 5B(2). The probability that the harm would occur if care were not taken Lord Neaves illustrated the importance of the probability of harm in Mackintosh v Mackintosh (1864) 2 Macph 1357, saying (at ) No prudent man in carrying a lighted candle through a powder magazine would fail to take more care than if he was going through a damp cellar. The High Court made much the same point in Swinton v China Mutual Steam Navigation Co Ltd (1951) 83 CLR 553 at , saying: The measure of care increases in proportion with the danger involved. Therefore, if a risk is remote and the occurrence unlikely, a tortfeasor will probably not be liable if loss, damage or injury does occur. As Miles CJ noted in Gillespie v Commonwealth (1991) 105 FLR 196 at 203: A life-threatening event (for example, the collapse of a factory roof in Canberra by an earthquake) might be so unlikely that reasonable care would require little or nothing to be done to avoid it. No one is expected to guard against remote possibilities of unlikely events. Glasgow Corp v Muir [1943] AC 448; [1943] 2 All ER 44 The Council allowed a church picnic party to take its tea in its public tea rooms. The tea urn was dropped as it was being carried in and children were scalded. Was the Council liable? DECISION Merely allowing someone to carry a tea urn into your premises would not normally create an unusual danger, so the injury to the children was not reasonably foreseeable. As Lord Wright put it (at ): the present case was not, in my opinion, per se dangerous That the men should be negligent in so simple an operation was a mere possibility, not a reasonable probability. [Accordingly], there was no reasonably foreseeable danger to the children. Dangerous activity On the other hand, if an activity that does result in injury is inherently dangerous, or if there is an above normal risk of danger, a proportionately higher standard of care is expected. 14 Spi-Pentony et al - Understanding Business Law Ch.25.indd 14 28/08/ :13:12

15 Chapter 25 : Negligence Dominion Natural Gas Co Ltd v Collins and Perkins [1909] AC 640 The Dominion Natural Gas Co installed a safety valve discharging excess gas into a building instead of into the open air. The gas exploded, killing Perkins and injuring Collins. Was the company liable? DECISION It was liable. The abnormal danger that its equipment posed meant that it should have exercised a greater standard of care than would normally be required. As Lord Dunedin noted (at 646): in the case of articles dangerous in themselves, such as loaded firearms, poisons, explosives and other things ejusdem generis, there is a peculiar duty to take precaution imposed upon those who send forth or install such articles Starke J explained the reasoning in Adelaide Chemical & Fertiliser Co Ltd v Carlyle (1940) 64 CLR 514 at 523: A reasonably prudent man would, no doubt, in the cases of such things exercise a keener foresight or a degree of diligence so stringent as to amount practically to a guarantee of safety, or a high degree of care amounting in effect to an insurance against risk, or the greatest care or consummate care. The duty is more imperious when things dangerous in themselves are being handled. In that case, the plaintiff s husband had been splashed with sulphuric acid when an earthenware jar came apart in his hands. He developed septicaemia and died. The defendant company was liable because it had supplied an inherently dangerous substance in a container that was unsafe and that a reasonably prudent person would not have used for that purpose Therefore, supplying dangerous substances imposes an obligation to exercise a proportionately higher standard of care, but so too does engaging in inherently dangerous activities. Burnie Port Authority v General Jones (1994) 179 CLR 520; 120 ALR 42; [1994] HCA 13 The Burnie Port Authority allowed some especially flammable insulating material to be stored close to where welding was being done. The material ignited, set fire to the building and destroyed three cold rooms containing the plaintiff s frozen vegetables. Was the Port Authority liable? DECISION Given the real and foreseeable risk that storing such highly flammable material close to welding posed, the Authority should have taken special precautions to guard against fire. It had not done so. It was liable. 15 Spi-Pentony et al - Understanding Business Law Ch.25.indd 15 28/08/ :13:12

16 Understanding Business Law Thompson v Bankstown Corp (1953) 87 CLR 619 Thompson, a 13-year-old boy, was electrocuted and injured while climbing a power pole to retrieve a bird s nest. Was the electricity authority liable? DECISION Given the serious consequences of electrocution and the likelihood that inquisitive, meddlesome and adventurous boys could be in the vicinity of their pole, the corporation should have taken special care to ensure that the earth wire (which had caused the electrocution) did not become charged. It had not done so; therefore it was liable. The likely seriousness of the harm A greater standard of care is also required if it is reasonably foreseeable that someone with a known vulnerability would suffer more serious harm than normal because of that vulnerability. Paris v Stepney Borough Council [1951] AC 367 Children A greater standard of care is also required if children are among those who might be injured. It has been accepted since at least Lynch v Nurdin (1841) 1 QB 30; 113 ER 1041 that children are especially vulnerable, so special care is required to ensure that they are not injured. Paris, a mechanic who had lost the sight of his left eye in World War II, lost the sight of his right eye when a chip of metal sheared off a bolt he was working on and struck it. He had not been provided with safety goggles. Had Paris employer met the required standard of care? DECISION While supplying safety goggles was not a standard practice, in this case, the employer had owed Paris a higher than normal standard of care because of the greater risk to him, not of an accident occurring but of serious injury if it did. Knowledge of the risk can work both ways especially where the victim is aware, before being injured, that the tortfeasor is not as skilful or capable as a reasonably competent person and that there are, therefore, additional risks or particular dangers involved. 16 Spi-Pentony et al - Understanding Business Law Ch.25.indd 16 28/08/ :13:12

17 Chapter 25 : Negligence In such cases there is no lessening of the required standard of care the tortfeasor still owes the victim the standard that would have been expected of a reasonably competent person in the same position but the damages the victim may receive can be reduced because the victim may be at least partially to blame, through either contributory negligence (see [25.48]) or voluntary assumption of risk (see [25.51]). Imbree v McNeilly (2008) 236 CLR 510; 248 ALR 647; [2008] HCA 40 While on a trip in the Northern Territory Imbree allowed McNeilly, a 16-year-old, to drive. He knew McNeilly was unlicensed and had little driving experience, so he supervised him from the front passenger seat. When they encountered tyre debris in the road, McNeilly did not straddle it but veered to its right. Imbree yelled at him to brake but, instead, McNeilly turned sharply to the left and accelerated. The car rolled and Imbree became a tetraplegic. What standard of care had McNeilly owed? DECISION The standard of care required of those who drive on the roads does not vary all drivers are expected to meet the same standard of care, that of a reasonably competent and careful driver. McNeilly had not met that standard and, therefore, had breached his duty of care. Imbree was entitled to recover. However, by not instructing McNeilly to straddle the debris in the road and by failing to advise him, as a learner driver, not to change direction suddenly or to speed on a dirt road, Imbree had been guilty of contributory negligence. His damages were reduced by 30 percent. Similar reasoning applies whenever a passenger accepts a ride in a vehicle being driven by someone he or she knows to be affected by alcohol. In such cases, the passenger s knowledge of the risk will at least reduce the damages he or she receives because of contributory negligence : see [25.48] and Joslyn v Berryman (2003) 214 CLR 552; 198 ALR 137; [2003] HCA 34. In extreme cases, it can even negate the duty of care. See, for example, Gala v Preston (1991) 172 CLR 243; 100 ALR 29; [1991] HCA 18, where the High Court held that the (drunken) driver of a stolen car owed no duty of care to a passenger who was involved in the illegal activity and who was clearly aware of the driver s intoxication. (See, however, Miller v Miller (2011) 242 CLR 446; 275 ALR 611; [2011] HCA 9, where the Court held that a duty of care can still apply in such cases, especially if the injured passenger has withdrawn from the illegal activity.) A number of jurisdictions now provide that if a plaintiff relies on the care and skill of a person who is intoxicated and, as a result, suffers harm, the plaintiff will be presumed to have been contributorily negligent provided he or she knew, or ought reasonably to have known, of the intoxication at the time, unless either it did not contribute to the breach of duty or the plaintiff could not reasonably have been expected 17 Spi-Pentony et al - Understanding Business Law Ch.25.indd 17 28/08/ :13:12

18 Understanding Business Law to have avoided relying on the defendant s care and skill: Civil Law (Wrongs) Act 2002 (ACT) s 96; Motor Accidents Compensation Act 1999 (NSW) s 138; Personal Injuries (Liabilities and Damages Act) 2003 (NT) s 15; Civil Liability Act 2003 (Qld) s 48; Civil Liability Act 1936 (SA) s 47; and Wrongs Act 1958 (Vic) s 14G(2)(a). The burden of taking precautions to avoid the risk of harm The required standard of care should bear a direct relationship to the risk that the defendant s acts or omissions might cause loss, damage or injury and to what he or she could and should have done to mitigate that risk. As Mason J put it in Wyong Shire Council v Shirt (1979) 146 CLR 40 at 47: In deciding whether there has been a breach of the 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. Therefore, if the risk is minimal and the defendant has done what is appropriate, he or she should not be liable if the unexpected happens. Bolton v Stone [1951] AC 850 The plaintiff was struck by a cricket ball that had been hit out of the defendant s cricket ground. It had been hit about 90 metres and had cleared a protective fence approximately 5 metres high about 72 metres from the batsman. Had the defendant met the required standard of care? DECISION Although there was a risk that balls would be hit out of the ground (six had been in the previous 28 years), that risk and the risk that someone would be struck was so minimal (no one had ever been hit before) that what the defendants had done was reasonable in the circumstances. They were not liable. See also Road and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330; 238 ALR 761; [2007] HCA 42, where the appellant was found not liable for injuries a 14-year-old boy sustained when he dived from a bridge under its control. There had been no similar incidents in the bridge s 39-year history, and the authority had erected No Diving pictograms to warn people against diving. In the circumstances it had done all that could reasonably be expected of it On the other hand, if there is a real risk and the defendant fails to take proper steps to counter it particularly if those steps would have been reasonable and not unduly burdensome the defendant will probably be liable. 18 Spi-Pentony et al - Understanding Business Law Ch.25.indd 18 28/08/ :13:12

19 Chapter 25 : Negligence Hilder v Associated Portland Cement Manufacturers Ltd [1961] 3 All ER 709 The defendant company allowed children to play football on land screened from a highway by a metre-high fence. The company knew that the ball was periodically kicked over the fence and onto the roadway. On this occasion a ball caused the plaintiff s husband to fall off his motorbike. He was injured and later died. Was the company liable? DECISION A reasonable person would have appreciated that there was a risk to highway users and would have taken steps to guard against that risk. The company had not done so. It was liable. See also Nagle v Rottnest Island Authority (1993) 177 CLR 423; 112 ALR 393; [1993] HCA 76, where the Authority was held liable for not warning the plaintiff of the dangers of diving in a popular swimming area where there were a number of submerged and not readily visible rocks. It had actively promoted the area for recreational purposes and knew about the rocks, but had not erected warning signs even though it could easily have done so. By not erecting those signs it had failed to meet the standard of care required of it in the circumstances. On the other hand, in Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431; 151 ALR 263; [1998] HCA 5 the Commission was held not liable for failing to fence a clifftop to prevent visitors falling. Unlike in Nagle s case, the danger of falling should have been obvious to all. Consequently, while the Commission had to consider the possibility that people visiting the site could act negligently, it was also entitled to assume that most would take reasonable care for their own safety. Requiring it to have erected a barrier fence was not reasonable. The same principle was used in both Vairy v Wyong Shire Council (2005) 223 CLR 422; 221 ALR 711; [2005] HCA 62 and Mulligan v Coffs Harbour City Council (2005) 223 CLR 486; 221 ALR 764; [2005] HCA 63, where the councils were held not liable for failing to erect signs warning of the obvious risks of diving into waters of unknown depth in creeks and along coastline under their control. The Civil Liability Acts now deal with obvious risks (except in the Australian Capital Territory and the Northern Territory). They provide that, in normal circumstances, a person is not required to warn others of obvious risks, and those who suffer harm from doing something involving an obvious risk will be deemed to have been aware of it and to have undertaken it voluntarily (see [25.51]): Civil Liability Act 2002 (NSW) ss 5F 5G; Civil Liability Act 2003 (Qld) ss 13 15; Civil Liability Act 1936 (SA) ss 36 38; Civil Liability Act 2002 (Tas) ss 15 17; Wrongs Act 1958 (Vic), ss 53 56; and Civil Liability Act 2002 (WA) ss 5F, 5N and 5O. 19 Spi-Pentony et al - Understanding Business Law Ch.25.indd 19 28/08/ :13:12

20 Understanding Business Law Pollard v Trude [2009] 2 Qd R 248; [2008] QCA 421 Pollard and Trude were playing golf. Trude mis-hit his ball, which flew in Pollard s direction. Trude called out Watch it Errol or Watch out Errol. Instead of taking cover, Pollard looked up and was struck. Was Trude liable? DECISION The risk of harm here was the risk that one player could be injured by a ball hit by another player. Under the Civil Liability Act that was an obvious risk. Pollard was deemed to have been aware of it and to have undertaken the risk voluntarily. Trude was not liable. The precautions required The precautions required are those that a reasonable person would take in the circumstances. If a particular measure is not practical, or if it would be unwarranted or unnecessary, it will not be demanded. So, for example, in Bolton v Stone a higher fence could have been erected, but was not really warranted given the nature of the risk the cricket club faced. Similarly, in Romeo v Conservation Commission of the Northern Territory, the risk of people falling could have been eliminated but only if the Commission had fenced off all potentially dangerous areas under its control. In both Vairy v Wyong Shire Council and Mulligan v Coffs Harbour City Council, the injuries might have been prevented if the councils had erected warning signs where the plaintiffs were injured (or as Gleeson CJ and Kirby J noted at CLR 426, by prohibiting swimming altogether ) but that would have meant that they would have to erect similar signs along all of the creeks and coastal areas under their control. That was neither practical nor warranted. Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540; 194 ALR 337; [2002] HCA 54 A group of consumers contracted hepatitis A after eating the appellant company s oysters. They had been contaminated when the lake in which they were grown was polluted by human faecal matter after heavy rain. When the company became aware of the problem, it temporarily ceased harvesting and implemented a testing program. Did those actions satisfy its duty of care? DECISION The company s only alternatives had been to cease selling its oysters for an unspecified and potentially prolonged time or to relocate its business to some unspecified waterway away from human habitation. Either would have involved significant expense and inconvenience. In the circumstances the risk did not warrant the company doing more than it had done. It had satisfied the required standard of care. 20 Spi-Pentony et al - Understanding Business Law Ch.25.indd 20 28/08/ :13:12

21 Chapter 25 : Negligence In some cases, defendants may have to provide for the possibility that people will not always care for their own safety. So, in Nagle v Rottnest Island Authority, the authority was held liable even though the Court found that diving in the area in question was foolhardy and that it was reasonably unlikely that anyone would attempt it. The question the Court asked was Was the risk so unlikely as to be far-fetched or fanciful? (Though, as already seen, the Civil Liability Acts now require that the risks be not insignificant.) Clearly, the risk there was real. Therefore, the Authority was liable Consequently, if there is a real risk and if preventative measures could have been taken without undue effort or cost (as was the case, for example, in Miletic v Capital Territory Health Commission (1995) 130 ALR 591; [1995] HCA 13, where the cause of the plaintiff s injuries castors jamming on a hospital bed could have been eliminated by simply oiling them periodically), the tortfeasor may be found liable. The critical questions are always: could the measures have been taken and would a reasonable person have taken them? Haley v London Electricity Board [1965] AC 778 Haley was blind. He tripped over a long-handled hammer that the defendant s workmen had leaned against a rail to warn pedestrians away from a hole they had excavated in the pavement. Haley had neither seen nor felt it before tripping over it. Was the Board liable? DECISION It was liable. Its employees had failed to take elementary precautions (which they could have taken without undue effort) to avoid endangering people (including blind people) they might reasonably have expected to use the pavement before proper barriers were erected. On the other hand, if the cost and inconvenience of the required preventative measures is out of all proportion to the risk (as was the case in Graham Barclay Oysters Pty Ltd v Ryan), the defendant will not be liable just because those steps were not taken Finally, if, despite all reasonable precautions, some unavoidable risk still remains, the defendant will not be liable just because someone is injured. 21 Spi-Pentony et al - Understanding Business Law Ch.25.indd 21 28/08/ :13:12

22 Understanding Business Law Withers v Perry Chain Co Ltd [1961] 3 All ER 676 Withers had a history of dermatitis and sued her employer, arguing that it should not have allowed her to do work which involved a risk of aggravating the disease. The employer s defence was that it had given her the driest work available, she had requested and accepted it without protest and their only alternative would have been to dismiss her. Had the employer met the required standard of care? DECISION The company had done all that could reasonably be expected of it short of refusing to employ Withers at all. It could not be put in the position of having either to dismiss her or pay her damages when the inevitable happened. The social utility of the activity that creates the risk of harm Occasionally, defendants may have to accept an element of risk because of some greater or more pressing need. In such cases, the social utility of the activity that creates the risk of harm can justify a lower standard or care. In other words, in situations of emergency or necessity, exceptional risks can be acceptable. Watt v Hertfordshire County Council [1954] 2 All ER 368 Watt, a fireman, was injured when an inadequately secured jack rolled onto his leg. It was being transported using the only available means (a truck not equipped to carry it) to free a woman trapped under a heavy vehicle 300 yards from the fire station. He sued the fire authority. Had the fire authority failed in its duty of care? DECISION In the circumstances, the officer in charge had been justified in accepting the risk to those stabilising the jack on the back of the truck because the woman s life could have been in grave danger had those measures not been taken. The emergency warranted a lower standard of care. Other relevant matters The Civil Liability Acts expressly provide that courts have to take those four specific considerations into account when deciding whether a reasonable person would have taken precautions against the risk of harm, but they also note that they are to be considered among other relevant things. Some of those other things are dealt with in the Acts themselves they include obvious risks ; the standards required of professionals, public and other authorities, good Samaritans and volunteers; and the effect of incurring harm while involved in 22 Spi-Pentony et al - Understanding Business Law Ch.25.indd 22 28/08/ :13:12

23 Chapter 25 : Negligence Sibley v Kais (1967) 118 CLR 424 criminal behaviour or while intoxicated. Others come from the common law. One of the more important is the effect of established and accepted community standards. Established and accepted community standards Community standards can operate both for and against a defendant. If there is an accepted community standard (as, for example, in the occupational health and safety regulations) and the defendant has complied with it, there is an argument that he or she should not be liable if an injury happens anyway because the required standard of care will have been met. Derrick v Cheung (2001) 181 ALR 301; [2001] HCA 48 A motorist hit a small child who darted out from between two parked cars into the road in front of her. She was travelling within the speed limit, but was unable to stop or avoid the collision. Was the motorist liable? DECISION In the circumstances she had driven with the reasonable care that the law required of her. She was not liable. On the other hand, failing to comply with the usual practice can indicate a failure to satisfy the required standard of care. Worse, the defendant will not be able to argue that the measures were not reasonably practicable, because others in similar circumstances will have found them to be. However, merely failing to follow a statutory standard may not be proof of negligence. A defendant may have valid reasons for not doing what the statute seems to require. In any case, one party s failure to follow a statutory standard need not excuse the other party from his or her duty to take reasonable care. The defendant failed to give way to a car on his right and they collided. Did the failure to give way establish either negligence or causation of the collision? DECISION The defendant s breach of the traffic regulations was not enough, by itself, to establish that he had acted negligently. The other driver also had a duty to act reasonably, and he could not simply say that, because the defendant had failed to obey the regulations, he (the plaintiff), was completely free of blame. Liability was apportioned 25 per cent to the plaintiff and 75 per cent to the defendant. 23 Spi-Pentony et al - Understanding Business Law Ch.25.indd 23 28/08/ :13:12

24 Understanding Business Law Accepted practice as a defence Even where a defendant does conform to accepted practice, that may still not be an absolute defence especially if a higher than normal standard of care was warranted. That was the case, for example, in Paris v Stepney Borough Council [1951] AC 367, where the Court found that the employer had owed the plaintiff a higher than normal standard of care because he had already lost the sight of one eye. Similarly, the mere fact that a community standard applies to a particular practice does not mean that that standard is appropriate. If that acepted practice involves unnecessary risk, the standard itself might be negligent. So, for example, in Mercer v Commissioner for Road Transport and Tramways (NSW) (1937) 56 CLR 580, the Commission was held liable for failing to fit a dead man s handle to its trams to guard against the possibility of a driver collapsing at the wheel even though those devices were not standard in the industry. The High Court noted (at 593) that the general practice itself may not conform to the standard of care required of a reasonably prudent man. In such a case it is not a good defence that the defendant acted in accordance with the general practice. Proving the breach of duty In any litigation, he or she who alleges must prove. In negligence, this means that the plaintiff must prove not only that the defendant owed him or her a duty of care but also that the defendant breached that duty and the breach caused loss, damage or injury. These requirements are now reflected in the Civil Liability Acts provisions dealing with causation and onus of proof (in all jurisdictions except the Northern Territory): Civil Law (Wrongs) Act 2002 (ACT) ss 45 46; Civil Liability Act 2002 (NSW) ss 5D 5E; Civil Liability Act 2003 (Qld) ss 11 12; Civil Liability Act 1936 (SA) ss 34 35; Civil Liability Act 2002 (Tas) ss 13 14; Wrongs Act 1958 (Vic) ss 51 52; and Civil Liability Act 2002 (WA) ss 5C 5D. Res ipsa loquitur If the alleged tortfeasor and the negligence of his or her acts or omissions are obvious, the plaintiff may be able to plead res ipsa loquitur to avoid some of the problems of proving his or her case. Res ipsa loquitur means the thing speaks for itself. In other words, something has happened; it does not normally happen unless someone has been negligent; and, therefore, negligence can be assumed even though the exact act of negligence cannot be specifically identified. Res ipsa loquitur is a rule of evidence rather than a rule of substantive law. It allows negligence to be inferred but it does not mean that it will be found. The plaintiff still bears the onus of proving negligence, and, although, strictly, a defendant need not disprove negligence, if there is a plea of res ipsa loquitur, the defendant should try to adduce evidence to show that his or her actions were not negligent or that they were not the effective cause of the plaintiff s injury: see Mummery v Irvings Pty Ltd (1956) 24 Spi-Pentony et al - Understanding Business Law Ch.25.indd 24 28/08/ :13:12

25 Chapter 25 : Negligence 96 CLR 99 and Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; 170 ALR 594; [2000] HCA 18 (see below). Pleas of res ipsa loquitur were successful in: Byrne v Boadle (1863) 2 H & C 722; 159 ER 299, where the plaintiff was struck by a barrel of flour that fell from an upper window of the defendant s premises; Scott v London & St Katherine Docks Co (1865) 3 H & C 596; 159 ER 665, where a customs officer was struck by six bags of sugar falling from a jigger hoist lowering them from the upper levels of the defendant s warehouse; and Chaproniere v Mason (1905) 21 TLR 633, where the plaintiff broke a tooth on a stone in a Bath bun he had bought from the defendant bakers. In each case, negligence could be inferred (because those things do not normally occur without negligence), and it was also reasonable to infer that the person who had been negligent was the defendant who, in each case, had had the exclusive control of the thing that caused the injury (exclusive control is an essential component of the plea) A res ipsa loquitur plea is not proof of negligence. Defendants can still argue, for example, that the facts simply indicate that someone has been negligent, not that he or she was that someone. Alternatively, they can argue that, although their acts or omissions caused the injury they had done all that was reasonable to prevent it and, therefore, had met the required standard of care. Pearson v North Western Gas Board [1968] 2 All ER 669 Pearson s home was destroyed and her husband was killed when a gas main fractured, and gas escaped and exploded. The Gas Board showed that the main had broken because of a very severe frost, that there were no reasonable steps that it could have taken to to prevent it but that it had had work crews standing by to deal with problems as they were discovered. Essentially, they argued that no amount of care would or could have prevented the particular leak or the explosion. Was the Board liable? DECISION The Board had done all that could reasonably be expected of it in the circumstances. It was not liable. Defendants may also defeat a plea of res ipsa loquitur by showing that the plaintiff has not established a sufficient causal link between the alleged breach and the injury. 25 Spi-Pentony et al - Understanding Business Law Ch.25.indd 25 28/08/ :13:12

26 Understanding Business Law Dulhunty v J B Young Ltd (1975) 7 ALR 409 The plaintiff was injured when he slipped on a grape in the haberdashery department of the defendant s shop. Was the defendant liable? DECISION As there was no evidence linking the presence of the grape to anything that the shop-owners had done (or not done) and no evidence about how long the grape had been on the floor or whether it was reasonable for the defendant to have cleared it away during that time, there was nothing to show (or to justify the inference) that the defendant had breached its duty of care. Finally, a plea of res ipsa loquitur cannot apply if the actual cause of the occurrence is known. Once the actual cause is known, the plaintiff must prove that it was the result of the defendant s negligence. Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121; ; 170 ALR 594; [2000] HCA 18 Schellenberg was injured when a high-pressure air hose detached from a handheld grinder he was using. He sued, pleading that the mere fact the hose had separated proved his employer s negligence. Did that fact prove negligence? DECISION The cause of Schellenberg s injury was known it was the detaching of the air hose. Therefore, he had to show that the detaching was the result of his employer s negligence. As Tunnel Holdings had not had the exclusive control of the hose and grinder when the incident occurred, there was no clear evidence that the separation was the result of their lack of care. They were not liable. Proving damage The third element required is proof that a plaintiff suffered loss, damage or injury as a result of a defendant s negligent acts or omissions. Without that, there is no action, because negligence is not actionable per se. A plaintiff must prove three things: that the loss, damage or injury they have suffered is recognised by the law; that the loss, damage or injury was caused by the defendant s negligence; and that the loss, damage or injury is not too remote in law to be recoverable. 26 Spi-Pentony et al - Understanding Business Law Ch.25.indd 26 28/08/ :13:12

27 Chapter 25 : Negligence The law recognises the damage Damage that the law recognises Proving damage It was caused by the negligence(factual causation) It is not too remote (legal causation) The requirement that the plaintiff s damage be damage that the law recognises means that it must be loss, damage or injury that the law is prepared to compensate. Harriton v Stephens (2006) 226 CLR 52; 226 ALR 391; [2006] HCA 15 The appellant was born with severe congenital disabilities after her mother contracted rubella during pregnancy. She sued the doctor, arguing that his negligent failure to diagnose the rubella had deprived her mother of the opportunity to seek an abortion and had resulted in her being born and having to live her life as a disabled person. Was the fact that the appellant was alive damage in the required sense? DECISION Proving damage requires an interference with a right or interest that the law will protect. Here the doctor s failure to diagnose the rubella did not cause the apppellant s disability the rubella caused it. The doctor s negligence merely deprived her mother of the opportunity to terminate the pregnancy. The damage the appellant suffered, therefore, was simply being alive. That was not legally recognisable damage because it required an impossible comparison between life with a disability and no life at all. The doctor was not liable. There are at least three instances where the law will not recognise damage: where the damage suffered is the termination of some benefit flowing from criminal or fraudulent activity: for example, in Burns v Edman [1970] 2 QB 541, the plaintiff sought compensation for the death of her husband, a thief killed in a car accident. Her claim failed because what she lost through his death was the proceeds of his future criminal activities; where the damage is too vague to be legally recognised; if the loss, damage or injury cannot be quantified in money (as was the case in Harriton v Stephens, where assessing the quantum of damages would have been impossible); and where the plaintiff cannot prove that any loss, damage or injury was suffered at all: in such cases, damages cannot be awarded because there is nothing to compensate. 27 Spi-Pentony et al - Understanding Business Law Ch.25.indd 27 28/08/ :13:12

28 Understanding Business Law The causal link between the breach and the damage A plaintiff must also show that his or her loss, damage or injury was caused by the defendant s negligence. The Civil Liability Acts in all jurisdictions (except the Northern Territory) now require proof that (with slight differences in wording) the breach of duty was a necessary condition of occurrence of the harm (what they call factual causation ): Civil Law (Wrongs) Act 2002 (ACT) s 45(1)(a); Civil Liability Act 2002 (NSW) s 5D(1)(a); Civil Liability Act 2003 (Qld) s 11(1)(a); Civil Liability Act 1936 (SA) s 34(1)(a); Civil Liability Act 2002 (Tas) s 13(1)(a); Wrongs Act 1958 (Vic) s 51(1)(a); and Civil Liability Act 2002 (WA) s 5C(1)(a). To establish factual causation a plaintiff has to show, on the balance of probabilities (that is, that it is more probable than not), that the defendant s negligence was a necessary condition of his or her loss, damage or injury (see Strong v Woolworths Ltd (2012) 285 ALR 420; 86 ALJR 267; [2012] HCA 5 at [20]). What those words mean was considered in Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; 260 ALR 628; [2009] HCA 48, where (at [45]) the High Court held that [factual causation] is determined by the but for test. The but for test works by asking the question, but for the acts or omissions complained of, would the plaintiff have sustained the loss, damage or injury actually suffered? If not, it is safe to say that the required causal link (the factual causation ) between the breach of duty and the loss, damage or injury has been established. Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; 260 ALR 628; [2009] HCA 48 A New Year s Eve function was being held at the defendant s restaurant. A fight broke out and a patron was hit in the face. He left the restaurant, but returned with a gun. He shot one customer in the kitchen and then went back into the dining area and shot the person who had hit him. There were no security personnel on the premises. The two injured patrons sued, alleging that the restaurant s failure to employ security was a breach of its duty of care and had caused their injuries. Had the failure to provide security guards caused the patrons injuries? DECISION Even if the restaurant had breached its duty of care, the plaintiffs had not shown that it was more probable than not that the restaurant s failure to employ security guards had caused their injuries. They had not shown that but for security guards not being there, the shootings would not have occurred. They may have occurred anyway. Unfortunately, the but for test does not always produce a clear answer to the question of causation particularly if the defendant s negligent acts or omissions were only part of what caused the plaintiff s loss, damage or injury. 28 Spi-Pentony et al - Understanding Business Law Ch.25.indd 28 28/08/ :13:12

29 Chapter 25 : Negligence Cork v Kirby Maclean Ltd [1952] 2 All ER 402 The plaintiff s husband, Cork, was killed when he had an epileptic fit and fell from a painting platform. The platform was unsafe, but the plaintiff s husband had not informed his employer that his doctor had forbidden him to work at heights. Did the failure to maintain the platform cause Cork s death? DECISION Cork s death was caused, in equal measure, by his own negligence in not informing his employer of his medical condition and the employer s negligence in not complying with the required safety standards Because of this the courts before the advent of the civil liability legislation used a number of alternative tests. One was to ask whether, on the balance of probabilities, the defendant s acts or omissions caused or materially contributed to the plaintiff s loss, damage or injury. Bonnington Castings Ltd v Wardlaw [1956] AC 613 Wardlaw, a steel dresser, contracted pneumoconiosis by inhaling silica dust at his workplace. Inhalation of some dust was inevitable given the technological standards of the time, but the danger could have been reduced if the dust extraction ducts on the swing grinders had been kept free from obstruction. Was the employer s failure to keep the dust extraction ducts clear the cause of Wardlaw s injury? DECISION On the balance of probabilities, inhaling the dust from the swing grinders had caused or materially contributed to the plaintiff s disease. That cause could have been removed if the employer had kept the extraction ducts clear. Their failure to do so had therefore caused his injury. The upshot of all of the pre-civil liability legislation judicial discussion in this area was acceptance that causation is a question of fact that has to be determined by applying a common sense approach. 29 Spi-Pentony et al - Understanding Business Law Ch.25.indd 29 28/08/ :13:12

30 Understanding Business Law March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506; 99 ALR 423; [1991] HCA 12 Stramare parked its truck across the centre line of a six-lane street while unloading it by forklift. It was night and, although the truck s hazard and parking lights were on, March collided with it. He was drunk and had been speeding. He sued. Did Stramare s actions cause March s injuries? DECISION The real cause of the accident was Stramare parking its truck in the middle of the street. That created a situation of danger with a real risk that a careless driver would act just as March had done. Therefore, it could not escape liability simply by asserting that but for March s intoxication and the fact he was speeding the accident would not have occurred. As Mason CJ said (at CLR 515; ALR 429): The common law tradition is that what was the cause of a particular occurrence is a question of fact which must be determined by applying common sense to the facts of each particular case. [Emphasis added.] AQ: as the report acknowledges, the second clause ( which must ) comprises the words of Lord Reid in Stapley v Gypsum Mines Ltd [1953] AC 663. Note this? March s damages were, however, reduced by 70 per cent because of his contributory negligence (see [25.48]). In Adeels Palace Pty Ltd v Moubarak, the High Court did refer briefly to the approach taken in March v Stramare, and (at [44]) simply noted that: It is not necessary to examine whether or to what extent the approach to causation described in March v Stramare might lead to a conclusion about factual causation different from the conclusion that should be reached by applying [the statutory provision]. It is sufficient to observe that, in cases where the Civil Liability Act or equivalent statutes are engaged, it is the applicable statutory provision that must be applied. Therefore, it seems that the common sense approach can now only be used to determine factual causation if it shows that the negligent act or omission was a necessary condition of the occurrence of the harm One instance where factual causation will not be established is where the loss, damage or injury was inevitable and not a result of the defendant s acts or omissions. Barnett v Chelsea & Kensington Hospital Management Committee [1969] 1 QB 428 The plaintiff s husband went to the hospital complaining of vomiting. He was told to see his own doctor the next day and sent home. A few hours later he died of arsenic poisoning. 30 Spi-Pentony et al - Understanding Business Law Ch.25.indd 30 28/08/ :13:12

31 Chapter 25 : Negligence Had the hospital s failure to diagnose and treat the husband s condition caused his death? DECISION Although the hospital had been negligent in not examining him, their negligence had not caused his death. Even if he had been treated, he would still have died because the effects of the poison could not have been reversed. Similar reasoning can be found in Tabet v Gett (2010) 240 CLR 537; 265 ALR 227; [2010] HCA 12, where a child who had been admitted to hospital was observed, two days later, to be staring and unresponsive but was not given a CT scan until she suffered a seizure the following day. A brain tumour that had been growing for over two years was discovered. She was operated on but suffered irreversible brain damage, partly as the result of the seizure, partly as the result of the tumour and partly as the result of her treatment. Her action failed. Even if the doctor had been negligent by not ordering a CT scan earlier, there was no clear causal link between that omission and her brain damage. It may have occurred anyway. The damage must not have been too remote A defendant is not liable for all possible consequences of his or her negligence; only for reasonably foreseeable damage. In other words, there must be a causal link between the negligence and the damage not only in fact but also in law. With slight differences in wording, the Civil Liability Acts (except in the Northern Territory) all provide that it must be appropriate for the scope of the liability of the person in breach to extend to the harm so caused : Civil Law (Wrongs) Act 2002 (ACT) s 45(1)(b); Civil Liability Act 2002 (NSW) s 5D(1)(b); Civil Liability Act 2003 (Qld) s 11(1)(b); Civil Liability Act 1936 (SA) s 34(1)(b); Civil Liability Act 2002 (Tas) s 13(1)(b); Wrongs Act 1958 (Vic) s 51(1)(b); and Civil Liability Act 2002 (WA) ss 5C(1)(b). This requires consideration of the reasonable foreseeability of the harm, but other considerations may also be relevant. The reasonable foreseeability of harm The test of reasonable foreseeability (could the defendant have reasonably foreseen the kind of loss, damage or injury that the plaintiff suffered?) was laid down in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound No 1) [1961] AC 388 and discussed in Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound No 2) [1966] 1 NSWR 411; [1967] 1 AC Spi-Pentony et al - Understanding Business Law Ch.25.indd 31 28/08/ :13:12

32 Understanding Business Law Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound No 2) [1966] 1 NSWR 411; [1967] 1 AC 617 The appellants negligently allowed a large quantity of bunkering oil to escape into Sydney Harbour. It drifted to a wharf where two of the respondent s ships were undergoing repairs. Hot metal from welding and cutting work fell onto cotton waste floating in the oil, it ignited, the oil was set alight and the respondent s ships were damaged. Did the negligent discharge of oil into the harbour cause the damage? DECISION The Court held that something will be reasonably foreseeable if a reasonable man in the defendant s position would recognise it as a real possibility and not brush it aside as too far-fetched. A reasonable person in the ship s chief engineer s position should have known that there was a real risk that the oil would catch fire and should have taken steps to prevent that happening. The appellants were liable. The eggshell skull rule A major qualification to the requirement that the damage must have been reasonably foreseeable before the defendant will be liable is the eggshell skull rule, under which you must take your victim as you find him. If the victim has a condition that makes the consequences of a particular injury more serious than normal, the defendant cannot plead that to limit or escape liability. If the injury inflicted was foreseeable, the tortfeasor will be liable for all of its consequences whether they were foreseeable or not. For example, in Smith v Leech Brain & Co Ltd [1962] 2 QB 405, the plaintiff s husband was burnt when he was accidentally splashed with molten metal. The burn caused cancerous tissues to turn malignant, and he died. Because the burn was a foreseeable consequence of the defendant s negligence and because the husband s death resulted directly from it, the defendant was liable even though the death was not a reasonably foreseeable consequence of failing to prevent the burn. Novus actus interveniens A novus actus interveniens defence (literally a new intervening act ) can be used if a defendant s negligence was not the proximate cause of the loss, damage or injury. That is, if the loss, damage or injury was caused by something that happened after the negligent act or omission the defendant will not be liable. 32 Spi-Pentony et al - Understanding Business Law Ch.25.indd 32 28/08/ :13:12

33 Chapter 25 : Negligence Knightley v Johns [1982] 1 All ER 851 The defendant overturned his car in a traffic tunnel. A police constable sent to close the tunnel collided with an oncoming motor vehicle and was injured. He sued, alleging that his injuries were the result of the defendant overturning his car. Was the defendant liable? DECISION The constable s injuries really resulted from his inspector ordering him to close the tunnel and the route he took to do so (riding against the one-way flow of traffic). They constituted a novus actus interveniens without which he would have not have been injured. In other words, because neither his orders nor his chosen method of carrying them out were foreseeable as a natural and probable consequence of the defendant s negligent act, the defendant was not liable. (The inspector was, however, found liable for failing to ensure that the plaintiff was not exposed to unwarranted risk.) Not all intervening acts break the chain of causation. The intervening act itself must not have been reasonably foreseeable. For example, in Stansbie v Troman [1948] 2 KB 48 a decorator who was alone in the plaintiff s house left to get some wallpaper. He failed to lock the door, and a thief entered the house and stole the plaintiff s property. The decorator was liable. Although his negligence was not the direct cause of the plaintiff s loss, the chain of causation had not been broken by the entry of the thief that was a likely and foreseeable consequence of his negligence. Defences to negligence Defendants can always defend an allegation of negligence by arguing that the plaintiff has not proved the necessary elements. That is, they can argue that the plaintiff was not owed a duty of care, or that there was no breach of that duty, or that, if there was, the plaintiff did not suffer recognisable damage. They can also limit or even eliminate their liability by pleading either contributory negligence or volenti non fit injuria. Elements not proven Defences to negligence Contributory negligence Volenti non fit injuria 33 Spi-Pentony et al - Understanding Business Law Ch.25.indd 33 28/08/ :13:12

34 34 Understanding Business Law Contributory negligence If a plaintiff is in any way responsible for his or her own loss, damage or injury the damages awarded will be reduced proportionately to recognise the shared fault: Civil Law (Wrongs) Act 2002 (ACT) s 102(1)(a); Law Reform (Miscellaneous Provisions) Act 1965 (NSW) s 9(1)(a); Law Reform (Miscellaneous Provisions) Act 1956 (NT) s 16(1)(a); Law Reform Act 1995 (Qld) s 10(1)(a); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) s 7(1); Wrongs Act 1954 (Tas) s 4(1); Wrongs Act 1958 (Vic) s 26(1); and Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) s 4(1). Those provisions (except in Western Australia) are modelled on s 1(1) of the United Kingdom Law Reform (Contributory Negligence) Act 1945, which provides that: Where any person suffers damage as a result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant s share in the responsibility for the damage. Therefore, to establish contributory negligence a defendant must prove that the plaintiff was at least partially at fault and that that fault contributed to the loss, damage or injury. To determine whether a person has been contributorily negligent, the courts use the same tests they use in negligence actions to determine whether a defendant has breached a duty of care: Civil Liability Act 2002 (NSW) s 5R; Civil Liability Act 2003 (Qld) s 23; Civil Liability Act 1936 (SA) s 44; Civil Liability Act 2002 (Tas) s 23; Wrongs Act 1958 (Vic) s 62; and Civil Liability Act 2002 (WA) s 5K. (There are no equivalent provisions in the Australian Capital Territory or the Northern Territory.) Therefore, matters such as the probability that the harm would occur, the likely seriousness of the harm, the burden of taking precautions to avoid the risk of harm and the social utility of the activity that created the risk (among others) all have to be taken into account. In practice though, a defendant can prove contributory negligence by showing that the plaintiff: a. breached a duty owed to the defendant; or b. failed to exercise reasonable care for his or her own safety. An example of the former is when job applicants tell employers that they have skills they do not have. If they are later injured performing tasks they should have been competent to perform, they will be guilty of, at least, contributory negligence and their damages will be reduced accordingly. For example, in Kerry v Carter [1969] 3 All ER 723 the damages awarded to an 18-year-old apprentice whose hand was injured by a circular saw were reduced by two-thirds because (inter alia) he had misled his employer about his previous experience with and competence to use circular saws Contributory negligence from failing to take care for one s own safety is a little more complex. Generally, if people act without considering their own safety they must bear at least a proportion of the blame for any resulting injury unless they can plead justification. Spi-Pentony et al - Understanding Business Law Ch.25.indd 34 28/08/ :13:12

35 Chapter 25 : Negligence Sayers v Harlow Urban District Council [1958] 2 All ER 342 Sayers was trapped in a public toilet cubicle because the door handle was missing. She tried to climb out by placing her right foot on the toilet roll. It rotated; she fell and was injured. Was Sayers guilty of contributory negligence? DECISION Sayers action succeeded but her damages were reduced by 25 per cent because of contributory negligence. She had not taken reasonable care for her own safety, and that failure could not, at least in this case, be excused on the grounds of justification. On the other hand, in Caterson v Commissioner for Railways (1973) 128 CLR 99 the plaintiff, who was injured when he leapt from a slowly moving train, was found not guilty of contributory negligence. The train had started moving without warning and, because the next stop was 80 miles away, the train was moving slowly and his 14-yearold son was waiting for him on the platform, he decided to jump. Weighed against the degree of inconvenience to which he would have been subjected had he not jumped, the risk he had taken was justified The Civil Liability Acts now also include a presumption of contributory negligence (and provide for a statutory minimum reduction in damages) where a plaintiff was intoxicated or relied on a defendant he or she knew or should have known was intoxicated unless the intoxication did not contribute to the cause of the harm. The statutory minimum reduction is increased in cases involving motor vehicle accidents where the defendant driver was under the influence of alcohol or a drug: Civil Law (Wrongs) Act 2002 (ACT) ss 95 96; Motor Accidents Compensation Act 1999 (NSW) s 138; Personal Injuries (Liabilities and Damages Act) 2003 (NT) ss 14 17; Civil Liability Act 2003 (Qld) ss 47 49; Civil Liability Act 1936 (SA) ss 46 50; Civil Liability Act 2002 (Tas) s 5; Wrongs Act 1958 (Vic) s 14G; and Civil Liability Act 2002 (WA) s 5L. Volenti non fit injuria Volenti non fit injuria means the willing cannot be injured. The defence operates by asserting that the plaintiff freely and voluntarily assumed the risk that caused the injury so should not be allowed to blame someone else. Unlike contributory negligence, volenti is a total defence. That is, if it succeeds the plaintiff gets nothing at all. However, to succeed, the defendant must show that the plaintiff consented to the actual risk to which he or she was exposed either expressly or by inference. Defences based on express consent are relatively rare, but they do occur. For example, in Bennett v Tugwell [1971] 2 QB 267; [1971] 2 All ER 248, the plaintiff was denied compensation for injuries he suffered in a motor vehicle accident, 35 Spi-Pentony et al - Understanding Business Law Ch.25.indd 35 28/08/ :13:12

36 Understanding Business Law because he had accepted a ride in a motor vehicle with a sign clearly warning passengers that they travelled at their own risk. Where a plaintiff s consent to undertake the risk is to be inferred, the defendant must show both that the plaintiff was aware of the risk and that he or she freely consented to it. Woods v Multi-Sport Holdings Pty Ltd (2002) 208 CLR 460; 186 ALR 145; [2002] HCA 9 The plaintiff was injured when a ball struck him in the eye while he was playing indoor cricket. He sued, alleging that the defendant should have warned him of the risk of eye injury. Should Woods should have been aware of the risk without having had specific warning? DECISION The nature of the sport was such that injury by being struck by a ball was (or should have been) obvious to all. Accordingly, the defendant was not required to warn players of those risks. It was not liable. See also Pollard v Trude: [25.26] However, just participating in something known to be generally dangerous does not establish that a plaintiff willingly undertook the particular risks that gave rise to the injury. For example, as Gleeson CJ said in Agar v Hyde (2000) 201 CLR 552; 173 ALR 665; [2000] HCA 41 at [14] (a case dealing with football injuries): Voluntary participation in a sporting activity does not imply an assumption of any risk which might be associated with the activity (emphasis added). Rootes v Shelton (1967) 116 CLR 383 The plaintiff was injured while waterskiing when he collided with a boat moored in the water. He alleged that the defendant had been negligent in steering the ski boat too close and in not warning him of the other boat s presence. The defendant denied liability, arguing that the plaintiff had voluntarily assumed the risks of waterskiing. Had the plaintiff voluntarily assumed the risk of injury? DECISION While the plaintiff had voluntarily assumed the normal risks associated with waterskiing (including the risk of colliding with obstructions in the water), he had not voluntarily undertaken the risk that the defendant would negligently fail to warn him of obstructions or fail to exercise due care in steering the ski boat. The defendant was liable. 36 Spi-Pentony et al - Understanding Business Law Ch.25.indd 36 28/08/ :13:12

37 Chapter 25 : Negligence Volenti and obvious risks The Civil Liability Acts all provide (except in the Australian Capital Territory and the Northern Territory) that, if volenti is raised in cases involving an obvious risk, the plaintiff is deemed to have been aware of the risk unless he or she proves otherwise. It is, however, still up to the defendant to show that the plaintiff appreciated and freely consented to that risk: Civil Liability Act 2002 (NSW) s 5G; Civil Liability Act 2003 (Qld) s 14; Civil Liability Act 1936 (SA) s 37; Civil Liability Act 2002 (Tas) s 16; Wrongs Act 1958 (Vic) s 54; and Civil Liability Act 2002 (WA) s 5N. Negligent misstatement Liability for negligent misstatement is simply a variation of liability for negligence generally. Plaintiffs must still show that the defendant owed them a duty of care, that he or she breached that duty and that there was a resulting loss. The Civil Liability Acts also apply to negligent misstatements just as they do to negligence generally. The major difference between the two is whether the person making the misstatement owed the plaintiff a duty of care : see [25.4] and following. Assumption of responsibility by the adviser Negligent misstatement Assumption of responsibility and reliance Reasonable reliance by the advised In Australia the question is resolved by asking whether the maker of the statement assumed responsibility for its accuracy and whether the plaintiff reasonably relied on it. If so, anyone giving advice can be liable, and liability can result from even off-thecuff advice given in circumstances where the adviser could reasonably have foreseen that the other person would act on it. Shaddock and Associates v Parramatta City Council (1981) 150 CLR 225; 36 ALR 385; [1981] HCA 59 The Parramatta City Council was asked by a developer whether land he intended to acquire was affected by a road-widening proposal. It advised him that it was not. In fact it was. Was the Council liable? 37 Spi-Pentony et al - Understanding Business Law Ch.25.indd 37 28/08/ :13:12

38 Understanding Business Law DECISION A special relationship had arisen between the parties when the Council gave the developer information or advice in circumstances where it should have realised that it was being trusted to give it accurately. That relationship was sufficient to create a formal duty of care. The Council was liable The critical importance of both assumption of responsibility and reasonable reliance was well illustrated in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340; 68 ALR 161; [1986] HCA 68. San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340; 68 ALR 161; [1986] HCA 68 The New South Wales State Planning Authority developed a number of study documents for redeveloping Woolloomooloo and they were placed on public exhibition. The plan was later abandoned but in the interim the plaintiff allegedly relying on the plan purchased land in the area. It sued the Government, alleging that it had been negligent in publicising the plan. Was the New South Wales Government liable? DECISION The study documents were not a firm representation that redevelopment would occur they were only a guide to what might occur; an expression of present intention and future expectation. In other words, there had been no assumption of liability by the Government nor any reasonable reliance by the developer. The Government was not liable That reasoning was confirmed in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241; 142 ALR 750; [1997] HCA 8, where the respondent auditors (Peats) were held not liable for Esanda s losses when a company to which it had lent money (allegedly relying on its published accounts and Peat s audit report) could not repay the loans. Esanda argued that Peats knew that loan providers and creditors were likely to be the prime users of audited financial statements and that Peats therefore owed them a duty to ensure that the accounts and audit report were reliable. The High Court held that the mere fact that it was reasonably foreseeable that creditors might rely on the report was not enough. Esanda also had to show that Peats had owed it a specific duty of care. That would only be the case if it had assumed responsibility for the accuracy of the information when it was, or should have been, clear that Esanda would access the information, would act on it for a serious purpose and would suffer loss if it was inaccurate. As Brennan CJ put it (at CLR 252; ALR 757): 38 Spi-Pentony et al - Understanding Business Law Ch.25.indd 38 28/08/ :13:12

39 Chapter 25 : Negligence In every case, it is necessary for the plaintiff to prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and thereby risk the incurring of economic loss if the statement should be untrue or the advice unsound. If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice. Therefore, to establish liability for negligent misstatement there must be an assumption of responsibility by the defendant (in the knowledge or expectation that the advice or information will be acted on) and reliance by the plaintiff (in the reasonable expectation that the plaintiff will take due care in providing him or her with that information or advice). See also Tepko Pty Ltd v Water Board (2001) 206 CLR 1; 178 ALR 634; [2001] HCA Spi-Pentony et al - Understanding Business Law Ch.25.indd 39 28/08/ :13:12

40 Understanding Business Law Summary This chapter set out to explain: Key terms the proof required to establish the tort of negligence; what must be shown to establish that a duty of care exists; what must be shown to prove a breach of the duty of care; when a defendant will not be liable for a breach of the duty of care; the three main defences to a negligence action; and what negligent misstatement is. Breaching the duty of care failing to meet the required standard of care Contributory negligence negligence by a plaintiff that contributes to his or her own loss, damage or injury Duty of care the duty owed to prevent foreseeable harm to others Negligence failing to take reasonable care to prevent foreseeable harm to others Res ipsa loquitur The thing speaks for itself Volenti non fit injuria The willing cannot be injured Practice questions 1. Define negligence. 2. What tests would you use to determine whether one person owes another a duty of care? 3. How would you determine whether there has been a breach of that duty of care? 4. How would you establish that the breach caused the defendant s loss, damage or injury? 5. When will a person be liable for negligent misstatement? Websites and further reading Balkin, R P and J L R Davis Law of Torts (4th ed, LexisNexis, Sydney, 2009). Barker, K, P Cane, M Lunney and F Trindade The Law of Torts in Australia (5th ed, Oxford University Press, Melbourne, 2012). Blay, S Nutshell: Torts (6th ed, Lawbook Co, Sydney, 2010). Clarke, A, J Devereux and J Werren Torts: A Practical Learning Approach (LexisNexis, Sydney, 2011). 40 Spi-Pentony et al - Understanding Business Law Ch.25.indd 40 28/08/ :13:12

41 Chapter 25 : Negligence Davies, M and I Malkin Focus: Torts (6th ed, LexisNexis, Sydney, 2012). McGlone, F and A Stickley Australian Torts Law (2nd ed, LexisNexis, Sydney, 2008). Payne, T LexisNexis Questions and Answers: Torts (3rd ed, LexisNexis, Sydney, 2012). Richards, B, K Ludlow and A Gibson Tort Law in Principle (5th ed, Lawbook Co, Sydney, 2009). Sappideen, C and P Vines Fleming s The Law of Torts (10th ed, Lawbook Co, Sydney, 2011). Shircore, M Torts (Pearson Education, Sydney, 2008). Stewart P and A Stuhmcke Australian Principles of Tort Law (3rd ed, Federation Press, Sydney, 2012). 41 Spi-Pentony et al - Understanding Business Law Ch.25.indd 41 28/08/ :13:12

42 Spi-Pentony et al - Understanding Business Law Ch.25.indd 42 28/08/ :13:12