Reasonable person is someone of normal intelligence, credited with such perception of the surrounding circumstances and such knowledge of other pertinent matters as a reasonable person would posses.
Foreseeability test is a question of fact based on an objective test of whether a reasonable person would have foreseen the likelihood of injury. To succeed in establishing a duty of care the plaintiff must prove that the defendant ought to have foreseen that negligence on part of the defendant could lead to the plaintiff being injured. It has to shown that a reasonable person in the position of the defendant would have foreseen that the situation amounted to a real risk. In this case it reasonable foreseeable to Lucy that if the wrong type of shutters were used then it could become harmful and could directly affect anyone within the premises.
Occupiers, because of their control over their premises, owe a duty of care (which in some cases is non-delegable) to anyone (even trespassers) who come on their property to ensure that they are not exposed to danger and risk of injury.
Occupiers of premises owe a duty of care to people coming on to their premises to ensure the premises are not dangerous. This form of liability which can be non-delegable in certain circumstances, arises because of the occupier’s control over the premises, and includes anyone who enters the premises, including guests, those who enter by express or implied permission (e.g. visitors) and those who are uninvited, such as trespassers.
Has there been a breach of the duty of care?
The defendant breaches a duty of care by failing to satisfy a reasonable standard of care. In effect the court asks the following questions:
- Was the risk of injury to the plaintiff reasonably foreseeable?
As it was proved earlier it is reasonable for a person to foresee the likelihood of injury being caused by not installing heavy duty shutters
- Did the defendant fail to do what a reasonable person ought to have done to prevent this foreseeable risk?
Yes, Lucy failed to install heavy duty shutters. Therefore, putting her self and others involved with the guesthouse in danger.
Has breach of duty of care caused the damages?
The plaintiff must show that some loss or damages was suffered as a result of the defendant’s breach of duty. In this case Kim suffers form severe cuts, a broken arm and has developed a phobia to wind, while John suffers from head injuries and is off work for six weeks. Both have suffered as a direct result the breach of duty owed by Lucy.
In negligence, causation determines not only the extent of the damages recoverable, but also whether the action succeeds at all. There is no cause of action unless the plaintiff proves that the damages suffered were caused by the defendants’ breach.
The general test used by the courts is the ‘but for’ test. Here the assumption is that the defendant’s fault is a cause of the plaintiff’s harm. Therefore the harm would not have occurred to the plaintiff ‘but for’ the defendant’s actions.
Defences
Contributory negligence must be pleaded by the defendant and the burden of proof rests with them. It has to be established that plaintiff failed to take reasonable care for their own safety or for the safety of their property and that this failure to take care contributed to the accident which caused the damage.
Result
It is clear that Lucy is negligent to Kim and John for her breach of duty of care but, to what extent? She may claim contributory negligence which will then place the blame on King or even Malcolm.
Can Lucy claim compensation in negligence from King?
Negligent Misstatement
Whenever a person gives information or advice to another upon a serious matter in circumstances where the speaker realises or ought to realise, that he is being trusted to give the best of his information and advice as a basis of action on the part of the other party to act on that information and advice he chooses to give, a duty of care may arise.
Negligence has been extended to cover negligence in relation to statements of advice and information provided that the circumstances met the legal standards. Restrictive circumstances in which liability would attach to advice are:
- The advisor must hold him self as possessing some special skill or ability.
- The circumstances of giving advice must be as such that the advisor reasonably knows it will be relied upon
- The advice must actually be relied upon and it must be reasonable in all the circumstances to have relied upon it.
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The advice must concern a serious or business matter: Mutual Life and Citizen’s Assurance Co. Ltd v. Evatt HC (1968), PC [1971]
If each of these elements is satisfied the plaintiff will receive damages for the harm caused. The following argument will attempt to advice Lucy of any rights she may have in a claim against King.
Identifying the Issues
- Does King owe a duty of care to Lucy?
- Is there proximity between the parties?
- Is there reasonable foreseeability?
- Does King have special skills?
Relevant legal authority
Firstly all elements which give rise to duty of care must be proven to establish if King owes a duty of care to Lucy. The following components will be discussed respectively: Reasonable reliance, special skills, request, reasonable foreseeability and proximity.
Reasonable Reliance:
No statement can cause loss unless and until it is relied upon. Factors considered when determining the reasonableness of the acceptance and the reliance of the recipient upon speaker includes the position of parties, occasion of interchange and nature of subject matter: Mohr v Cleaver. In this case there is no doubt that the situation and the nature of subject matter is on a serious note, the principal based on this came from Mutual Life and Citizen’s Assurance Co. Ltd v. Evatt HC (1968), where Barwick CJ expressed, The speaker must realize or the circumstances must be that the recipient intends to act upon the information or advice for some serious consequences such as property or business. Hence it evident that Lucy relied upon the statement given by King. She made her choice of which shutters to buy after receiving advice from King.
Special Skills:
It is enough to hold that liability extends to those whose professions or business it is to give advice or information, whether gratuitously or not: L. Shaddock & Associates Pty Ltd v. Parramatta City Council (No 1) (1981). The principals of special skills can be enforced in this case as King a local builder, there are strong grounds for saying that it would be reasonable for Lucy to rely on King’s expertise rather then trusting her own judgment. King has more knowledge then an average person in the fields of Lucy’s enquire and hence Lucy has every reason to rely on King’s expertise.
Request:
The existence of an antecedent request for information or advice certainly assists in demonstrating reliance, which is a cornerstone of liability for negligent misstatement: San Sebastian Pty Ltd v Minister Administering Environmental Planning, and Assessment Act 1979 (1986). In order to prove there is a duty of care, there must be a request for information. It is evident that Lucy had discussed her thoughts with the local builder King to install appropriate shutters to her guesthouse.
Reasonable Foreseeability
According to Chapman v Hearse it is not necessary that the precise sequence of events be reasonably foreseeable; it is sufficient if it can be showed that there was foreseeable risk as a consequence. In the present case it is reasonable foreseeable that the false statement of King could potentially hazardous to people involved with Lucy’s guest house. Because King knew that his advice was relied upon and also knew the consequence hence there is reasonable foreseeability.
Proximity
In Jaensch v Coffey (1984) 155 CLR 549 proximity is defined as the directness of the relationship between the particular act or the cause of action and the injury sustained. When adopting proximity approach in this current case it is obvious that there is proximity between King and Lucy as King is a professional providing advice and service to which Lucy is his client.
Defence
Once again, contributory negligence may paly a part, in this case for King. King may be able to claim that he only sold Lucy the shutters but was not involved in installing them. Therefore bringing Malcolm into the picture and shifting part of the blame on him. He may claim that Malcolm failed to notify Lucy of the disclaimer on the back of the instruction booklet. Hence he is also partly to blame.
Result
It can be gathered that King owes Lucy a duty of care and can be liable for economic losses incurred on the basis of loss of business in drop in the occupancy rate, cost of replacing the shutters and damages paid to Kim and John.
Misleading or deceptive conduct
Section 52(1) provides that ‘a corporation [which includes a person or organisation] shall not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.
To succeed in an s 52 action, the plaintiff must satisfy the following three criteria:
- The defendant’s behaviour amounted to ‘conduct’. Conduct is defined under the TPA as ‘doing or refusing to an act’. Conduct has been found by the courts to cover a very wide field, including:
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Concealment of relevant information. This infringement could be committed where the defendant fails to disclose, or only partly discloses, relevant information. As the case Henjo v Collins indicates, silence could amount to misleading or deceptive conduct.
It is clearly evident in the current situation that King has failed to fully disclose that the shutters’ he was selling was not suitable for high wind areas.
- The defendant’s conduct was connected with trade or commerce. This test has a very broad reach and appears to extend to any business dealing that is involved with a profit motive.
King owns and operates a hardware shop which suggests it has profit motiv.
- The defendant’s conduct was misleading or deceptive. Obviously because of King’s deceptive conduct Lucy bought the shutters, otherwise she would not have purchased them.
Remedies
The main remedies for the breach of the TPA are:
- Pecuniary penalties (i.e. fines) of up to $200 000 for a corporation and $40 000 for an individual. Presumably King is a sole trader, therefore he may liable for the $40 000 fine.
- An order to disclose information or to take out corrective advertising, such as statements in local and national newspapers that apologise for the contravention and advice the public of any corrective action taken being taken by the trader (s 80(A)).
- Damages (s 82). Plaintiffs ( including traders in some cases ) who successfully prove that they have suffered direct financial losses because of defendants contravention are entitled to damages. In this case Lucy may be entitled to amounts which she liable to pay to Kim and John as well the loss business indicated by the drop of the occupancy rate.
- Ancillary (subordinate or extra) orders (s 87). These are available where the court finds that other remedies are inadequate in the circumstances. Ancillary orders include the following:
- To void a contract
- To order money refund
- Order repairs
In addition to other remedies the courts may also order King to pay for repair or replace cost that Lucy has encountered when replacing the shutters.
Defences
Under s 85 (1) the defendant must prove that the contravention arose form one or more of the following:
- A reasonable mistake,
- Reasonable reliance on information supplied by another person,
- The act or default of another person, an accident or some other cause beyond the defendant’s control.
Result
King may be liable under s 52 of the Trade Practices Act 1974, or s 42 (NSW) of the Fair Trading Act. He may be liable for a number of remedies but he may also have a defence. Once again he may be able to point to Malcolm to reduce the severity of his own conviction.
Table of Cases & Legislation
Hedley Byrne and Co. Ltd v. Heller and Partners Ltd [1964]
Mutual Life and Citizen’s Assurance Co. Ltd v. Evatt HC (1968), PC [1971]
L. Shaddock & Associates Pty Ltd v. Parramatta City Council (No 1) (1981)
Alexander v. Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Donoghue v Stevenson [1932] AC 562
Jaensch v Coffey (1984) 155 CLR 549
Henjo Investments P/L and Ors v. Collins Marrickville P/L (1988)
Reference List
Latimer, P, Australian Business Law, CCH, 20th ED, 2001
Gibson, A, Commercial Law, Longman, 2001
Vickery, R, Australian Business Law, Prentice Hall, 1998
Terry, A and Giugni, D, Business Society and the Law 3rd edition, Thomson.
Carter J W & Harland D J, Contract Law in Australia, 4th edition, Butterworth, Australia, 2002
Cusumano S, Wiseman L & Christensen S, Butterworth Tutorial Series: Contracts, 2nd edition, Butterworth, Sydney, 1999
Latimer, P, Australian Business Law, CCH, 20th ED, 2001, p64
Gibson, A, Commercial Law, Longman, 2001, p99
Gibson, A, Commercial Law, Longman, 2001, p117
Vickery, R, Australian Business Law, Prentice Hall, 1998, p61
Alexander v. Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Business Society and Law, p 191
Hedley Byrne and Co. Ltd v. Heller and Partners Ltd [1964],
Mutual Life and Citizen’s Assurance Co. Ltd v. Evatt HC (1968), PC [1971]
L. Shaddock & Associates Pty Ltd v. Parramatta City Council (No 1) (1981)
Butterworth Tutorial Series, p208
Henjo Investments P/L and Ors v. Collins Marrickville P/L (1988)