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Law for New Zealand

Business session 3

Overview of the New Zealand law


of torts

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Tort: what is it?
Civil wrong in the absence of contract
So what do they entail and why do we
recognise them?
 Commission of an act that offends against
society’s idea of “rightness”
 Social harmony and “ethics” assume certain
boundaries to behaviour- reaction when breached
 Does not necessarily (although it may) involve a
crime or direct act

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What categories do we have?
Basically two:
 Trespass
 Categories are closed
 Normally related to malicious action or intent

 Includes assault and trespass

 Actions on the case


 Categories are NOT Not closed but evolve depending on
changing societal expectations and standards
 Do not require malicious action or intent

 Includes a range of torts that does change over time

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So what about actions on the
case?

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So what about actions on the
case?
negligence

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So what about actions on the
case?
negligence

defamation

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So what about actions on the
case?
negligence

defamation

libel

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So what about actions on the
case?
negligence

defamation

libel slander

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So what about actions on the
case?
negligence

defamation
nuisance
libel slander

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So what about actions on the
case?
negligence

defamation
nuisance
libel slander

private
nuisance
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So what about actions on the
case?
negligence

defamation
nuisance
libel slander

private public
nuisance nuisance

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What is the most significant
category?
Without a doubt: negligence
Why?
 Relatively recent recognition
 Continuing development through common
law
 Reacting to societal, economic and
scientific change

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So what does Negligence
involve?
Leading case: Donoghue v Stevenson
 See here: Donoghue
v Stevenson, UK Law Online
 We can extract four requirements:
 Duty of care
 Breach of that duty of care

 Injury or damage to the plaintiff

 Connection between that breach and the injury

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How have these requirements
been applied?
Based on the connected concepts of
foreseeability- that is, both the plaintiff
and his/her injury must be reasonably
foreseeable, and reasonableness- the
defendant (tortfeasor) must have acted
unreasonably

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Various cases have reinforced
that concept
Donoghue v Stevenson
Bourhill v Young
Re the Wagonmound

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And negligence has been
expanded to include:
Property loss
Nervous shock (notion of secondary
victims)
Pure financial loss- the tricky one!

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Particular case study
Negligent misstatement by
professionals- particularly auditors

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What is the role of the
auditor?
Accounts of companies are required to be
audited unless (in limited circumstances) the
members agree otherwise- why?
 Auditors can provide independent judgment on the
validity and completeness (the truth and fairness)
of the financial reporting
 Auditors have the professional expertise to assess
the financial records and control systems

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So how are they expected to
act?
Professionally-collect information and
investigate matters that concern them- Re
Thomas Gerrard and Son Ltd (1967), Dairy
Containers Ltd v NZI Bank (1995)
Report on relevant matters
“Watchdog not a bloodhound” (Re Kingston
Cotton Mill (1896) per Lopes L.J.)- standard
of skill, care and caution expected of a
reasonably competent, careful and cautious
auditor- expectations have increased
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What are their relationships?

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What are their relationships?

Contract- to the company

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What are their relationships?

Contract- to the company To outsiders

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What are their relationships?

Contract- to the company To outsiders

Shareholders

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What are their relationships?

Contract- to the company To outsiders

Shareholders

Creditors

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What are their relationships?

Contract- to the company To outsiders

Shareholders Society

Creditors

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The problem: how far should
the non-contractual
responsibility extend?

To shareholders?

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The problem: how far should
the non-contractual
responsibility extend?

To shareholders?

To creditors and
investors or potential
investors?
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The problem: how far should
the non-contractual
responsibility extend?

To shareholders? To society?

To creditors and
investors or potential
investors?
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This is a contentious issue:
Traditionally:
 Auditors could only be considered liable in
the tort of negligent misstatement where:
 Held out as having special skill and knowledge
 Was in a special relationship with the recipient

 Knowledge of reliance on report

 Actual reliance on the report causing loss


 Hedley Byrne v Heller (1964)
 Dimond Manufacturing v Hamilton (1969)

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But moves from there to widen
the test
Nb- a reflection of a more general move
in the development of the tort of
negligence
 Anns v London Borough Council of Merton
(1967) and other cases
 Reasonable foreseeability of damage?
 Degree of appropriate proximity giving rise to a

duty of care?
 Public policy- questions of society standards

and expectations?
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This was reflected in:
Scott Group v McFarlane (1978)- two of
three judges (CA) considered
reasonable foreseeability of both
damage and plaintiff was an adequate
measure of proximity
There were no public policy reasons for
refusing to recognise that liability
However, the auditors were not found
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This can be compared to the
House of Lords
Caparo Industries Plc v Dickman (1990)
 Foreseeability of damage
 Proximity must be more than foreseeability
of the plaintiff
 Must be public policy reasons for imposing
liability

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So what did you have?

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So what did you have?

Scott Group-
Provided there was proximity,
giver of advice or report could be
liable unless contrary to pp

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So what did you have?

Scott Group- Caparo-


Provided there was proximity, Must have close
giver of advice or report could be proximity and
liable unless contrary to pp pp reasons in favour

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What has happened since?
South Pacific Manufacturing v NZ
Security Consultants and Investigations
(1992)
Jagwar v Julian (1992)
Boyd Knight v Purdue (1998)

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Likely conclusion
The trend is towards a more limited
scope of liability for givers of advice
Concern with:
 the potentially indeterminate scope of
liability
 the increased tendency for litigation

 balance between the need to have


assessment (audits) and costs involved in
high levels of liability
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But on the other hand:
What should an auditor be doing?
What is the point of an audit and public
availability of reports if third parties are
not expected to rely on them?
American tendency has been to widen
the liability rather than limit
Remains a vexing issue

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Finally- statutory modification
to negligence
New Zealand accident compensation- under
the Injury Prevention, Rehabilitation and
Compensation Act 2001- see
Accident compensation legislation
 Concept of a no-fault, state- driven compensation
system for personal injury by accident
 Arose out of recommendations of the Woodhouse
Report
 Been fiddled with by those with political agendas
ever since

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Up-side
No suing for compensation
Available to all, not just those with deep
pockets
Cheap relative to alternative systems
Covers non-work and non-vehicle
accidents
Spreads the risk
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Down-side
Limited compensation- no lump-sum
Claimed lack of motivation for personal
safety
Claimed costs for business
Claimed lack of right to sue
Claimed risk-bearing for those with no
responsibility
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summary
Tort law, particularly negligence is still
developing
Some statutory modification and
negation to some principles
Some gaps evident in treatment across
common law countries

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