Torts and Contracts II

1.
Introduction
As an introduction to the course and as a matter of considerable practical importance, we will consider the conceptual and practical distinctions between liability in tort and liability in contract. In some situations there may be concurrent or overlapping liability in both, while in other situations there may be liability in tort but not contract and vice versa. The theoretical foundations and rationale for liability Tort liability is imposed by law (but most things that attract tort liability are freely entered into. E.g. choosing a particular occupation which attracts legal obligations). Contract liability is freely entered into. Distinction between free choice in contract as opposed to torts is fairly illusory e.g. cant really negotiate terms with Qantas.
Rationales for and objections to concurrent liability in tort and contract The supremacy of contract was once the position the contract was the total of the obligations between the parties. Australia allows for an action in tort and an action in contract.
-In a two party situation, entering into a contract does not deprive the plaintiff
of remedies in tort.
-Tort also gives a remedy to injured third parties (who were not parties to the
original contract).
-But the contract is not irrelevant it sets the scene for the tort liability. E.g.
contract in which architects are commissioned by council to design a lookout for the weight of 20 people (relying on council to have a sign at the lookout stating this) whose responsibility is it when the lookout becomes overcrowded and collapses? The contract can limit the architects obligations in tort.
Professional services concurrent and coextensive duty to take care.
The extent to which contractual obligations regulate or limit obligations in tort
LAWS1017 Torts and Contracts II
Standard of the contractual obligation strict liability or duty to take professional care? A contract for professional services is in most circumstances merely to take care. E.g. doctors.
The role of legislation in overriding or supplementing common law principles The role of fault and strict liability Implications of concurrent liability which action is preferable? Need to argue it all at once (anshun estoppel). Considerations: Differing limitation periods
-Tort action is not complete until the damage is suffered (which can be many
years later). Contract action is complete on breach.
-Tort gives plaintiff much longer period to sue problem for many defendants
(e.g. negligent building work personal injury claims regardless of when the building was built).
-The breach of contract may have exposed one to a risk of damage is that
actual damage, or a loss of a chance of a better outcome? No. E.g. one may be exposed to asbestos or radiation but may not develop a disease. Damage occurs until the the risk comes home HC said exposure to risk is not enough in the common law (Wardley Australia v WA in HCA 1992).
Remedies
-Exemplary damages in tort, not contract. -Test for remoteness of damage in negligence (Wagon Mound No. 1)
reasonably foreseeable type of damage.
-Test for remoteness in contract natural and probable consequence. -Distinction is semantic test of remoteness has not been critical to a different
result in modern cases.
-Nominal damages available in contract but not for negligence because the
plaintiff must have suffered damage (in which case they would be entitled to compensation).
-Specific performance only for contract. -Injunction and compensation for tort and contract.
The effect of contributory negligence by a claimant and the operation of apportionment legislation such as the Law Reform (Miscellaneous Provisions) Act 1965(NSW).
-Important distinction. For co-extensive cases like professional liability, it

makes no difference in terms of contributory negligence whether the plaintiff sues in contract or tort. Strict contractual liability contributory negligence will not be a defence nor will it reduce liability.
-Reduction for damages in misleading and deceptive conduct case (s 82 1B)

Proportionate liability applies to liability for negligence in contract or tort for property damage and economic loss only does not apply to strict contractual obligation. Minors cannot be liable in contract unless it is for their benefit. Can be liable in tort, but not likely to have the deepest pockets. Choice of law: lex loci delicti and lex fori in torts; proper law of the contract.
2. Liability for interferences with goods

A. Trespass to goods, conversion, detinue, and the action on the case
Balkin and Davis, ch 4 Where the plaintiffs goods are destroyed or damaged by the defendants negligence, the defendants liability in tort is governed by the ordinary principles of negligence. In addition to the tort of negligence, there are several specific torts which provide a remedy for interference with goods: trespass (direct physical/forcible interference), conversion (wrongful exercise of dominion) and detinue (wrongful failure to return goods).
Four different torts/causes of action: trespass; conversion; detinue (tort of wrongful detention); action on the case negligence for damage to reversionary interest. Court only concerned with which party in dispute has better right not concerned with ius tertii (rights of third parties). Title to sue always based on entitlement to sue at time of tort. Depends on plaintiffs interest in the goods. Distinguish: ownership; actual possession control; immediate right to possession; reversionary rights; ownership with possession; ownership without possession; possession without ownership. Bailment: When an owner of goods hands over possession to another. Bailor to bailee. (Often involves money, e.g. hiring goods bailee pays bailor; e.g. goods into storage bailor pays bailee).
-Three types of bailment:

Bailment for a term.
- E.g. rent a car for a period of time.

Bailment subject to a condition.
- No set period, but until a condition is fulfilled.

Bailment at will (revocable bailment).
- Bailor can ask for goods back at any time. -All bailees have actual possession and the title to sue third parties that this
brings (The Winkfield).
-Whether the bailor has title to sue depends on the nature of the bailment.
Bailment for a term: owner gives up possession and right to possession for the term (and bailee has actual possession and right to possession for the term).
- When the term expires, bailor gets the immediate right to possession
back, so from then on it is a bailment at will.
- If bailee does a repugnant act, bailment term comes to an end and

the bailor gets back immediate right to possession.
Bailment subject to condition: owner gives up possession and right to possession until condition fulfilled (and bailee has actual possession and right to possession until condition fulfilled).
- When condition fulfilled expires, bailor gets the immediate right to

possession back, so from then on it is a bailment at will.
- If bailee does a repugnant act, the bailor gets back immediate right
to possession.
Bailment at will:
- Bailor retains immediate right to possession. - Bailee has actual possession, and, subject to bailors right to
immediate possession.
Nemo dat rule nemo dat quod non habet you cannot give what you do not have, e.g. good title.
-A thief cannot pass on good title. If you purchase stolen goods, even in good
faith without notice that they are stolen, you dont get good title.
-Historically, limited common law exceptions for trades in a market overt,

which is antiquated. Now subject to rules and principles like the Sale of Goods Act.
Limited self-help remedies for interferences with goods, but must be very careful.
-Entitled to take something back of yours if you see it.
-Some authority that you can enter premises to retrieve something (although
less able to break in, unless they broke into your premises).
(i) Trespass

Direct interference with goods without authority with fault (intent or possibly negligence). Title to sue: actual possession. Actionable per se (dont need damage).
*Hutchins v. Maughan [1947] VLR 131 (Cases on Torts, p 1) Trespass is the remedy for the direct/immediate application of force by defendant to plaintiffs person, land, or goods. Action on the case is the remedy for indirect/consequential injury caused by D to P. Complainant lost two sheep dogs because of poisonous baits placed by D. Laying of baits was unlawful. Herring CJ: Injury consequential of Ds actions, as baits laid before dogs were there etc therefore trespass not maintainable.
(a) Title to sue

*Penfolds Wines v. Elliott (1946) 74 CLR 204 (Cases on Torts, p 89) Title to sue for trespass to goods requires the plaintiff to be in possession of the goods at the time of the trespassory interference. P sought injunction to restrain D from any further dealings with the bottles, on basis of Ds alleged commission of trespass and conversion re Ps bottles, and apprehended repetition of these torts. D sold Ps wines at a hotel, but the bottles said that they remained property of P i.e. only the contents, not the bottles, were sold. D had allegedly been misusing the bottles for selling/delivering etc liquids not made by P. Filled branded bottles brought by his brother, also allegedly sold some to Moon. Admitted that had been filling branded bottles brought by customers for years.
-It was a bailment subject to a condition. Once condition was fulfilled, it

became bailment at will. Invoice said that when contents were used, bottle must be returned to Penfolds on demand, and must not be used in any other way etc.
HC upheld first instances finding that injunction should be refused, for various reasons. Dixon J: neither conversion nor trespass proved. Latham CJ, dissenting:
both proved. Others suggested trespass made out but no evidence of continuance, so injunction inappropriate.
-On question of trespass, majority found it was not made out (Dixon,
McTiernan, Starke, and Williams JJ), Latham CJ dissenting.
-Re: conversion, majority found it was made out (Latham CJ, McTiernan,
Starke, and Williams JJ), Dixon J dissenting.
Latham CJ (dissenting): When brother delivered branded bottles to D to be filled, his actions were repugnant to the express terms of the bailment. P as bailor at this point had an immediate right to the possession of the bottles.
-Clearly no trespass against the brother, but did D in taking the bottles from
the brother, who was unlawfully in actual possession, trespass against P? Because P became entitled to immediate possession of the bottles, authorities suggest P could sue in trespass (although logic seems to tend against this view).
Dixon J: Not trespass no infringement upon the possession of anyone by P. At the time he filled the bottles, he himself was in possession of them, into which he came without trespass (delivered to him by brother/customers).
-If someone is out of possession but has right to immediately resume

possession, they do not have right to sue for trespass for any unauthorised use of the chattel. Need actual possession to sue for trespass.
-Bailor at will could sue 3rd party for trespass done against bailee exception
to the general rule.
(b) As against a wrongdoer possession is title

*The Winkfield [1902] P 42 (Cases on Torts, p 87) As against a wrongdoer, possession is title. A bailee in possession of goods may recover full value of those goods from wrongdoer who interfered with them, but is also under obligation to account to the true owner. Collision between steamships The Winkfield and The Mexican, M sank, with the loss of lots of parcels and mail. W admitted limited liability, paid money to court. Postmaster-General filed motion claiming as bailee value of lost mail/parcels, which he undertook to distribute to senders or addressees. Motion dismissed, but successful on appeal. Collins MR: ius tertii not relevant. Possession is title.
(ii) Conversion
Wrongful, deliberate (not accidental) exercise of dominion over goods; relevance of defendants reasonable mistake or ignorance of the plaintiffs rights?; title to sue: actual possession or a right to immediate possession; dealings which may constitute conversion?
(a) Wrongful taking?

*Fouldes v. Willoughby (1841) 151 ER 1153 (Cases on Torts, p 86) per Lord Abinger CB It is a proposition familiar to all lawyers, that a simple asportation of a chattel, without any intention of making any further use of it, although it may be a sufficient foundation for an action of trespass, is not sufficient to establish a conversion. Conversion = intention by the party taking the goods to use them, or the destruction or consumption of the goods to the prejudice of the lawful owner. P came aboard ferry with two horses and misbehaved. D, the ferry manager, led the horses off the ferry to a hotel to try to get P to leave. When P went to get them, he was asked to pay for their keep; refused, they were sold to pay expenses. Lord Abinger CB: Jury should have been directed that what was relevant was not merely that D put the horses on shore, but his intention. If it was merely to induce the P to leave, then he was not exercising over the horses any right inconsistent with or adverse to the Ps rights in them.
-Taking the horses could be trespass, but if he does not do it to take them
away from P or to exercise any right over them, it is not conversion. Intention.
-If he had changed the quality of the chattel, e.g. thrown them into the water,
that would be conversion. But mere removal is not.
(b) Wrongful detention

Baldwin v. Cole (1705) 87 ER 964 per Holt CJ The very denial of goods to him that has a right to demand them is an actual conversion ... .
(c) Wrongful use?

*Model Dairy v. White (1935) 41 Argus LR 432 Vic SC (Web CT Materials)
The systematic wrongful (i.e. unauthorised) use of the plaintiffs goods by the defendant may constitute conversion where the use of the goods is with an intention to exercise permanent or temporary dominion over them. P and D milk vendors. D systematically and intentionally used Ps branded bottles to carry milk to Ds own customers. Gavan Duffy J: Use of Ps bottles in this way was sufficient deprivation of possession to constitute conversion they were subjected to risk of breakage, delayed/non-return.
-Evidence indicated that unrestrained the D would continue to act in this way,
so correct remedy is injunction (plus nominal damages). Merely awarding damages for each act of conversion would be a useless remedy.
*Penfolds Wines v. Elliott (1946) 74 CLR 204 (Cases on Torts, p 89) (See above for facts.) Title to sue for conversion of goods requires P to be in possession or have right to immediate possession of goods at time of wrongful interference. Wrongful use of anothers goods may constitute tort of conversion. Damage is essential, but deprivation of goods constitutes damage. The majority here found that use = conversion (although this will not be the case in all contexts). Latham CJ: Actual use of the bottles for the benefit of the D and his brother was conversion. Merely taking the bottles with no intention to exercise permanent or temporary dominion over them would not be. Dixon J (dissenting but classic judgment on conversion): not conversion, because P did not act and did not have intent inconsistent with Ds right to possession or destroy/impair it.
-Conversion: dealing with chattel in manner repugnant to owners rights, with

intent to deal in this way.
-Intent to do that which would deprive true owner of immediate right to

possession or impair it is essential ground of the tort.
-Re-delivery of bottles to people who left them not conversion purpose not to
confer any right over the property in the bottles, but merely to restore to person who left them there to be filled.
Howard E Perry and Co Ltd v British Railways Board [1980] 2 Al ER 579
Government shutting down steel mines. Steel and railway workers striking. Steel on board the trains. Workers argued that they were not denying title, just not delivering the goods. Court found that it was conversion, because Perry was denied goods to which it was entitled.
(d) Defendant treating the goods as its own

*Kuwait Airways Corp v. Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883 (Web CT Materials) 1990 Iraqi invasion of Kuwait. Iraqi forces seized 10 commercial planes from Kuwait Airways (KAC). At governments direction, Iraqi Airways (IAC) took the planes to Iraq, and used and treated them as its own e.g. painted in IAC livery, incorporated into fleet. KAC commenced proceedings vs IAC in England for conversion. HoL: had activity occurred in England [or Aust], would constitute conversion. Based on English private international law rules, IAC liable to KAC for conversion. Lord Nicholls of Birkenhead:
-Three basic features of the tort of conversion: 1. Ds conduct inconsistent with rights of owner/other person in
possession.
2. Conduct was deliberate, not accidental. 3. Conduct was so extensive an encroachment on owners rights as to
exclude him from use and possession of the goods.
-Whether owner is excluded from possession may sometimes depend on

whether D exercised dominion over goods. Then intention of D may be material.
-Mere unauthorised retention of anothers goods is not conversion. Mere

possession without title is not necessarily detrimental to rights of owner. For conversion, detention must be adverse to owner exclude him from goods. Must include intention to keep the goods.
Demand and refusal to deliver up goods is the usual, but not only way, to prove this intention.
(e) Contributory negligence as a defence?
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Heap v. Motorists Advisory Agency [1923] 1 KB 577 Wilton v. Commonwealth Trading Bank of Australia [1973] 2 NSWLR 644
(iii) Detinue
Wrongful failure to return goods after a proper demand, not necessarily involving wrongful exercise of dominion, as where a bailee negligently has lost the goods.
-Bailor must demand the goods.

Title to sue: a right to immediate possession Detinue is the cause of action tort is wrongful detention of goods (also: refusal to deliver).
Reeve v. Palmer (1858) 141 ER 33 Solicitor negligently lost some title deeds. Could be sued in detinue.
(iv) Action on the case for damage to the owners reversionary interest

Title to sue: reversionary interest. Requires permanent damage to goods. Often deals with negligence, but can be intentional.
*Mears v. London & South Western Railway Co (1862) 142 ER 1029 (Cases on Torts, p 105) The owner of goods with no immediate right to possession during term of lease or bailment of the goods may bring an action on the case against a third party who has caused permanent damage to the goods i.e. permanent damage to owners reversionary interest. P owned barge, let on hire to MR Russell. During the hire period, while barge in hirers possession, Ds employees negligently damaged the barge while raising a boiler.
*HSBC Rail (UK) v. Network Rail Infrastructure [2006] 1 All ER (Comm) 345 (Web CT Materials) Where during the term of a lease of goods the goods are destroyed or damaged by a third party, the owner has no action on the case for damage to the
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owners reversionary interest if the goods have been replaced or repaired in full by the lessee. In these circumstances, the owner has suffered no relevant loss.
Claimant leased out railway rolling stock to a train operating company. Ds negligence cause derailment, causing some damage and destruction of the stock. Under lease terms, lessee indemnified owner for destruction of stock and paid for repairs to damaged stock. Longmore LJ: distinguished Mears there the damage had not been repaired, so was permanent. Here, claimant had suffered no loss.
(v) Compensatory damages

*Butler v. Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 (Cases on Torts, p 435) General principle for damages applies for conversion, i.e. that injured party should receive sum of compensatory damages that will put it in money terms in the same position as if tort had not been committed. P (the Board) claimed damages for conversion of eggs they should have been given the eggs, but D sold them to third party instead. Should P be entitled to full value of eggs converted? Taylor and Owen JJ: Principle is not full value of the converted goods, but an assessment to put injured party, as much as money can, in the position that it would have been had wrong not been committed.
-Here, had D given eggs to P as required, P would have sold for 4000, but have
to pay D 2900, so loss from tortious act was 1100.
(vi) Extinction of title

Limitation of Actions Act 1958 (Vic) s 6 Cf Limitation Act 1969 (NSW) ss, 21, 63(1) and s 55.
B. Possession and finding

(i) Finders keepers?
*Armory v. Delamirie (1722) 93 ER 664 (Cases on Torts, p 97) As between the finder of goods and a person to whom the finder delivers the goods for valuation, the finder has title to the goods.
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P (chimney boy) found a jewel and took it to D (goldsmith), who did not give it back to P after P refused money for it. This was conversion. Finder does not acquire absolute property/ownership, but is enabled to keep it against all but the rightful owner.
(ii) Law of finding as between occupier and finder

Occupiers intention to exercise control over goods found on the occupiers premises. A distinction between land to which there is public access and private residential premises?
*South Staffordshire Water Co v. Sharman [1896] 2 QB 44 (Web CT Materials) P owned pool, employed D to clean it. D found two gold rings while doing so. P were freeholders, so had right to forbid people coming into the land or interfering with it, and had the right to direct how the pool was to be cleaned and what was to be done with things found in it. Possessor of land possesses everything within, even if ignorant of it. Therefore judgment for the P.
-Distinguished from cases in which a thing was in a public space. -Distinguished from Bridges v. Hawkesworth, in which shopkeeper could never
be said to be in possession of the goods (unaware, shop open to public).
Bridges v. Hawkesworth (1851) 21 LJQB 75 Bundle of notes dropped in a shop by someone. Shopkeeper unaware, did not in any way exercise control over them. Shop open to public. Customer gave notes to shopkeeper so as to advertise them to find the owner, but the owner was not found. It was held that the customer who found them was entitled to them.
Parker v. British Airways Board [1982] QB 1004 P found gold bracelet on floor of international executive lounge at Heathrow Airport. Donaldson LJ: The issue is about whether the occupier of a premises manifestly intends to assert control over all articles including those lost. There is a spectrum.
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E.g. in bank vault, bank would assert high degree of control finder would not have better title than occupier. In an unrestricted public park, no control so finder would prevail.
-Here, middle ground. No sufficient evidence of manifestation of intention to

control lost property before it was found, so finders keepers.
-Eveleigh LJ: the firmer the control of the premises (e.g. firm control over bank
vault, private home) the less the need to demonstrate independently an intention to possess all items.
*Chairman, National Crime Authority v. Flack (1998) 156 ALR 501 (Cases on Torts, p 98) As between the finder of goods and the occupier of private residential premises on which the goods are found, the occupier has title to the goods. Police searched Mrs Flacks house (she had residential tenancy agreement with NSW Dept of Housing, and was sole occupant) on suspicion that her son was involved in drug offences, but no prosecutions launched against him. In doing so, they found a briefcase with $433,000 in cash. Mrs Flack said she knew nothing about it. Heerey J: The fact that Flack had legal possession of the premises as tenant is sufficient in the circumstances to establish requisite manifestation of intention to possess all chattels on the premises.
-Doesnt make a difference that children of friend had keys to premises

inference is that they are for ease of access, not to confer possessory rights.
-Doesnt matter that someone obviously deliberately placed briefcase there.\ -True owner would have better title than Flack. -Police had rights to seize it, but right to retain it ceased once it was conceded
it was no longer needed for investigation/litigation. Government cant confiscate something just because it appears suspicious.
Tamberlin J: notion that a possessor of premises intends to control all items, even those of which they are ignorant, seems like a legal fiction, but should be considered a rebuttable presumption of fact.
(iii) Compare the crime of larceny by finding
(where the finder appropriates the goods reasonably believing that the true owner can be found).
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R v. Thurborn (1849) 169 ER 293
D finds a banknote and appropriates it. He discovers who the true owner is the next day. D cashes the banknote and gets caught out. o He must have reasonably believed that the true owner could be found [take reasonable steps to identify the true owner of the goods] at the time of the finding.
Ruled that he could not have reasonably believed.
Clifford, unreported, Downing Centre Local Court, Sydney, 11 October 2005 finds $263,000 in a backpack didnt take reasonable steps to identify owner o Because it was such a large amount of money, prospect of finding owner was quite high. Found for larceny by finding.
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3. Liability for negligence causing economic loss I
What is economic loss? Distinction between pure economic loss and consequential economic loss. -Consequential: flows from physical loss (as long as within bounds of causation and remoteness), e.g. car accident leading to costs of repairs, lost work as a result of no transport, etc. [Note: in contract, consequential is used to mean indirect, an antonym to direct damage, but that is not what it means in tort.] In Muirhead (UK), power cut off to shop which had live lobsters in tanks. As a result, lobsters died. Consequential economic loss property damage plus costs that flowed from that (value of lobsters, profits lost). -Pure economic loss is separate from physical damage.
-Distinction can sometimes be difficult. E.g. if lecture theatre ceiling was built
poorly, and tiles started to come loose, and uni has to pay to fix it, preventative damage. Courts have found that this kind of case is pure economic loss, not property damage (whereas if tiles fell causing damage, that would be property damage). Defective goods/structures is a particularly difficult category. -The distinction is important, as it affects the likelihood of duty of care arising. If it is purely economic loss, it is harder to prove existence of duty of care. This becomes biggest hurdle for P. Issue of remoteness less likely to come up, as that issue is essentially settled by identifying the purely economic loss instead, the question is whether the D owed a duty of care to the P or class of persons including P to prevent such loss. Distinction has in the past been drawn between negligent acts and words, although this is not so relevant most important distinction is between the type of damage that flows. -However, for negligent acts, easier to prove duty of care for pure economic loss than negligent words because of the issue of indeterminate damage. As Reid L said in Hedley, words can be relayed far and wide beyond initial recipient so need more factors to find a duty of care. Why (for what policy reasons) have courts historically been reluctant to allow recovery for pure economic loss? -Indeterminacy:
In Ultramares Corp v Touche 255 NY 170 (1931), Cardozo CJ, dealing with the liability of accountants to financiers of the accountants client company, stated: If liability for negligence exists, a thoughtless slip or blunder, the failure to detect a theft or forgery beneath the cover of
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deceptive entries, may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. -Reluctance to interfere with free enterprise, free competition. Acknowledgement that there is often zero-sum situation, that one persons gain is necessarily another s loss reluctant to get involved except for cases of deliberately unlawful behaviour. -Floodgates argument fear of opening up a whole new basis for claim, which might be quite broad and clog up courts. -Fear of putting unfair burden on D that interferes with their autonomous rights.
A. Negligent misstatements
*Hedley Byrne & Co v. Heller & Partners [1964] AC 465 (Cases on Torts, p 181) A duty of care may be owed re negligent misstatement on which the recipient reasonable relies to his/her financial loss. [Foundational case for this principle.] Involved bankers giving references re credit-worthiness of customers. P is advertising firm. D is bank. P ordered advertising time etc on credit on behalf of a company. Became personally liable for costs. Inquired through own bank re credit-worthiness of customers. Given satisfactory references, which turned out to be unjustified. P argues that based on this, it refrained from cancelling orders. P had begun request saying we want to know in confidence and without responsibility on your part, and bank had begun advice with with no responsibility on our part. -At first instance and Court of Appeal P failed because no duty of care was found for bankers. This appeal to HL also failed. -HL here went against an earlier decision Derry v Peek (1889), in which the directors of a company had made false statements in the prospectus. HL there found no liability for deceit because it did not intend to make false statements. This HL essentially redefined the ratio of that case to say that there is no liability for deceit without intent, but that it did not deny possibility of liability for false statements generally. Reid L: Merely a negligent misstatement gives no cause of action people do not necessarily have control over how their words will be spread or used, and take different level of care based on context. Something more required: -Expressly or by implication from circumstance speaker/writer must have undertaken some responsibility [element of voluntariness]. Situation in which the party seeking information intends to rely on it, it was reasonable to do this, and the giver of information knows or ought to have known of this reliance. -Here, banks statement shows it never undertook any duty to exercise care in their replies.
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Morris L of Borth-Y-Gest: If someone with a special skill undertakes, irrespective of contract, to apply the skill for the assistance of another person who relies on such skill, a duty of care arises. -If a person is in a sphere whereby others could reasonably rely upon his judgment/skill/ability to make careful inquiry undertakes to give info/advice to, or allows info/advice to be passed on to, someone who will rely on it, and he knows or should know this, a duty will arise. -Here, there was no contemplation of anything like a formal report after long inquiry etc. Banks statement effectively disclaimed any assumption of duty of care, so P fails. Hodson L: Agree with Morris L. Banker giving references in ordinary exercise of business should not be in worse position than trustee, who is under no obligation to do more than give honest answers based on actual knowledge and belief. Devlin L: Promise given without consideration to perform a service cannot be enforced as a contract. But if service is in fact performed and done negligently, promisee can recover in tort. -Difficulty arises when there is no express warranty of an undertaking to perform as if there is a contract (minus consideration) i.e., should it be implied? The existence of some sort of indirect award would be a good indication that such an undertaking is implied. Distinguish between formal and informal occasions. -Banks statement is fatal to P. A man cannot be said voluntarily to be undertaking a responsibility if at the very moment when he is said to be accepting it he declares that in fact he is not. Pearce L: Form of the inquiry and answer is important in determining whether there is liability. The form here clearly indicates there is not. MLC v Evatt (1968) 122 CLR 556 Mr Evatt relied on advice sent out by MLC re share trading in its newsletter. Consequently he suffered economic loss. When this case went further to the Privy Council, it put a limitation on Hedley, saying that damages for pure economic loss only available against professional in the field or one who holds himself to be a profession with some skill. MLC was just an insurer, not a share investor and didnt hold itself out to be, so no liability. HC set a broader principle (as below), which was adopted in Shaddock.
-Assumption of responsibility by speaker. -Reasonableness of reliance in circumstances. things that reasonableness of reliance is determined by include subject
matter, occasion of interchange, identity and relative position of the
Person can be liable for financial loss resulting from negligent misstatement of fact or opinion, even if misstatement honestly made, and no fiduciary or contractual relationship existed between parties. Barwick CJ: Features of the special relationship that give rise to duty of care:
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parties re actual or potential knowledge and relevant capacity to form or exercise judgment. -Speaker knew/ought to have known recipient would rely on statement.
-Reasonable for recipient to seek or accept and rely on speakers advice.

*L Shaddock & Associates v. Parramatta City Council (1981) 150 CLR 225 (Cases oT, p 186) Duty of care may be owed re negligent misstatement made re a serious matter. Not essential for maker of statement to possess or profess some special skill or competence in the subject matter of the statement. P had contracted to buy land, relying in info from D Council that it was not affected by road widening proposals. Such proposals had in fact been approved in principal by Council. Wrong info first given over phone by anon employee, then repeated in a certificate. -Trial and NSWCA found negligence but no DoC. This appeal to HC succeeded. It rejected the Privy Council decision of MLC, and reinstated the approach taken by Barwick CJ in HC. Policy reasons contributing to finding of liability:
-No indeterminate liability Shaddock personally identified to Council, and

amount at stake known. -D knew purpose for inquiry.
-D voluntarily gave info directly to recipient. -D had exclusive info. Gibbs CJ: Reasonable for P to interpret info as he did. Council ought to have
known that it would probably be understood in this way. Was there a duty to answer questions carefully? -Disagrees with Privy Council majority in MLC v Evatt for restricting to people whose business or profession includes giving the sort of advice or info sought and to persons claiming such skill. -Instead, it should extent to people who on a serious occasion give considered advice or info concerning business/professional transaction. -However, this distinction not needed in present. Public body in exercise of its public functions supplying info to which it has more access than others seems to fit the narrower criteria of MLC v Evatt. -P relied on Council exercising reasonable care in giving advice. Reasonable to do so, as Council was in best position to give info, and commonly followed practice of giving such info. Council ought to have known P would rely on it importance of the certificates for conveyancing purposes is obvious and well known. Nature of inquiry by solicitor etc underlined the gravity of situation. -Duty of care applied to written answer. Would not have been reasonable though to merely rely on unconfirmed answer given by unconfirmed person to phone inquiry.
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Stephen J: The narrow criterion of Privy Council MLC v Evatt was not a hard and fast rule, as the Lordships made clear in that judgment. Only saw it as one step in the step-by-step ascertainment of the limits of a new area of law, introduced by Hedley. -Council is possessor of special knowledge, with monopoly of info, has system for gathering that info, and holds itself out as providing that info to those who seek it. Should be subject to a duty, and this seems consistent with MLC v Evatt reasoning. -Agreed that the oral statement would not attach the duty, but written did.
Mason J: Prefers wider view presented by minority in MLC v Evatt whenever a person gives info or advice upon a serious matters in circumstance where speaker realises, or ought to, that he is being trusted to give best of his info/advice as basis for action, and it is reasonable for other party to rely on it, speaker comes under duty to exercise reasonable care. -Agreed that it would not be reasonable to rely on the oral statement, but reasonable re written. Murphy J: Info or advice must be on serious matters. Reflects reasoning of MLC v Evatt but departs from narrow criterion. Allowed appeal. San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 Could a person be liable to another where the latter has not sought the info or advice in question? Info relied upon contained in document setting out a planning scheme published to community at large, pursuant to a statute, without any assurance of continuous and certain application, and as a general guide only. Found no requirement that statements be made in response to request for information or advice i.e. no need for antecedent requests. Author may be known to possess or profess to possess skill and competence in the area that is the subject of the communication. May warrant correctness of what is said or assume responsibility for its correctness. May invite recipient to act on info/advice, or intent to induce recipient to act in certain way indeed, may have interest in doing so. Here no special relationship between parties. Misstatement (if any) not directed to a particular person, but class of persons. Only a proposal. P had other advisors on the matter e.g. town planners, not reasonable to rely on Minister. Caparo Industries plc v Dickman [1990] 2 AC 605 *Tepko v. Water Board (2001) 178 ALR 634 (Cases on Torts, p 196) Duty of care re negligent misstatement requires known reasonable reliance by recipient of statement, and an assumption of responsibility for statements accuracy by its maker.
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P took bank loan to finance proposed rezoning and subdivision of land they owned. P knew local council would not approve it unless arrangement was made with D to supply water to the land. P would have to pay for connection to water supply. Loan conditions required a costing for this. D provided estimate of $2.5 mil. Bank found this too high, put Ps companies into receivership. After commencement of receivership, D revised estimate to $1.7 mil. P sued D for negligently overestimating cost, causing economic lass. Trial and NSWCCA found no duty of care, upheld 4:3 by HC. Gleeson CJ, Gummow and Hayne JJ: Speaker must know or ought to know there will be reliance, and it must be reasonable in circumstances for recipient to rely on it. -P kept D in the dark about critical state of his special relationship with bank until it was too late D could not have known the implications of making an error. -Circumstances meant it was not reasonable for P to rely on Ds provisional ball-park figure to rely on banks demand for costings estimate. Look at identity and relative position of parties D a reluctant participant, did not want to give the info. P at all times had access to expert advice. Gaudron J: Test is reasonable reliance not actual reliance things that reasonableness is determined by include (quoting Barwick CJ in MLC v Evatt) subject matter, occasion of interchange, identity and relative position of the parties re actual or potential knowledge and relevant capacity to form or exercise judgment. -Many steps to be taken before work done, estimate given well in advance of any work, D had indicated the estimate could be discussed could not be expected to have known that it would be relied on for any, let alone serious, purpose. Indication that it was prepared to enter into further discussion means that it cannot be concluded that it assumed any responsibility re estimate. -Reliance not reasonable: D had position of advantage re info, but no reason to assume it was sole expert in costing P had its own experts. Also, must have been clear to P that estimate subject to change based on discussions or time of work. -Also unreasonable reliance because speculative nature of venture and their awareness of political and administrative processes at play lots of uncertainty involved. Kirby and Callinan JJ (dissenting): Espouse same principles but interpret facts differently. -D must have known that P trusted it to provide if not a precise sum, an estimate not negligently calculated or otherwise carelessly provided. D knew that one purpose for which P sought info was to make decisions about whether to develop the land, and how to do so. D knew this info would likely be put to practical use.
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-D had special capacity and opportunity to provide the info. Superior to info P
could have got from other professional consultants etc.
B. Professional negligence to contractual parties and third parties

Hawkins v Clayton (1988) 164 CLR 539 H got C to draw up will. C drew it up, kept will in safe for safekeeping and so it could be easily found (from lawyers perspective, also benefit of extra business as likely to be instructed to distribute the estate after clients death). H died, but had appointed an executor. C remembered H saying she would find a new executor because she had lost touch with current one, but H had never changed will to reflect this. C made a half-hearted attempt to locate executor, and when did not, put will back into safe. 7 years later new lawyer takes over after C retires, finds will in safe, and very easily locates the listed executor. Estate has by this time depreciated. Executor sued C on behalf of the estate so not a case involving third parties. HC found liability in both contract and tort parallel liability arising out of same facts; contract doesnt prevent tort. *Hill v Van Erp (1997) 188 CLR 159 Mrs Currey wanted to change will, using her solicitor Mrs Hill. Mrs Van Erp, her neighbour, was to get a half share in her house (her child(ren?) the other half). Mrs Currey asked Hill to draw up the will, Hill and VE had to go to Mrs Currey house as she was old, immobile. Mrs VE signed the will. Mrs Hill signed it as attending witness. Mr VE was also present, and he signed as witness. Under statute though, this was null and void as he was the spouse of the benefactor, so VE missed out. Clearly a breach of contract and DoC between Hill and Currey/estate, but Currey had not lost anything. It was VE that wanted to sue for negligence. HC found that VE had suffered loss, but there was no apparent remedy a legal black hole. -Some argue VE suffered no loss all she had was a hope of inheriting something. This attitude has been taken in other cases. HC found a number of salient features:
-H negligent. -H knew of VE as individual. -H knew exactly the value of the loss no indeterminacy. -Interests of client and beneficiary almost perfectly aligned. Gummow J: policy consideration reliance. Here not specific reliance, but
community reliance. I.e. we rely on lawyers to draw up will properly. Succession of property is an important community interest.
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I.e. Mrs Hill found liable to Mrs VE.
White v Jones [1995] 2 AC 207 Negligently failed to draft the will before client passed away.
HL came to a similar decision as Hill v Van Erp, and UK tends usually to be more conservative on issues of pure economic loss.
*Esanda Finance Corporation v. Peat Marwick Hungerfords (1997) 188 CLR 241 (CoT, 189) In the absence of reasonable reliance by recipient of statement (P) and assumption of responsibility by maker of statement (D), an auditor of a public company does not owe a duty of care to potential creditors or investors to produce an accurate report of the companys financial position. -Also relevant for negligent misstatement.
Esanda sued PMH claiming damages for pure economic loss due to PMHs negligence re auditing of account of Excel corporation. Esanda was financier, entered into transactions with Excel or associated corporations in reliance on the auditing, which resulted in economic loss. Issue: in an action for negligence for pure economic loss is it sufficient to plead that it was reasonably foreseeable by an auditor that creditors and financiers might rely on the audited account, along with an unqualified auditors report, in entering into financial transaction. Does duty of care arise which is owed to every member of the class of investors/financiers? If A gives advice to B and it is reasonably foreseeable it might be communicated to and acted upon by C, is there a duty? Appeal dismissed. The one bedrock principle from this case: for there to be a DoC, D must have known/should have known that the info would be reasonably relied upon by a known person/class of persons. Brennan CJ: in such cases mere reasonable foreseeability has never been enough. The elements that P has to prove: -D knew or ought to have known that the information would be communicated to P (as the third party C individual or class of persons) (not merely that there is possibility), -For a purpose that would likely lead to it entering into transaction like the one it did, -And that it would be very likely that the P would enter into such a transaction on reliance of the information. Note: likelihood, not might, foreseeability. Toohey and Gaudron JJ:
-Special relationship of proximity marked either by reliance of assumption of

responsibility does not arise unless person providing info has some special expertise/knowledge/access to info. -Reliance must be reasonable, and it must be reasonable to rely for the purpose that the recipient does.
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-If these conditions are satisfied, doesnt necessarily means that special
relationship exists but they are minimum requirements. McHugh J: Factors relevant to existence of duty of care (or lack thereof in this case): -Increased standard of care argument. Not helpful for P here as there are legal and commercial incentives already for auditors, DoC wouldnt increase care. -DoC would likely reduce supply of auditing services insurance in this field not readily available (i.e. insurance for auditors against suits). -Reduce demand for auditing services because increased fees due to insurance costs. Cost cutting would cause lower standards. -Effect on administration of court system.
-Most third parties in these kinds of cases constitute a sophisticated group with
means to take steps to avoid risk of loss not certain the corrective justice demands that auditors, rather than this group, bear the losses. This group most efficient absorber of losses often. -Creditors etc have indirect remedy liquidator/receiver can bring action on their behalf. -Clients conduct main reason for Ps loss, auditors role only secondary.
-Difficult to determine whether auditors report really was main basis for action
many factors affect investors decisions. -Factual issues in such case make trial/settlement avoidable even when auditor not actually liable huge costs, delays. Gummow J: Regard a number of considerations:
-Often
in such cases, auditors corporate client will be insolvent/receivership/liquidation etc, so P seeking to raise itself about other stakeholders by going for solvent third party D. -Alleged negligence of auditor subsidiary to failures of the corporation.
-Auditing is more complex than mere fact (compared to zoning land) include
differences in professional opinion. -P seeks to render auditor liable as if it had given a guarantee, without reciprocal value for doing so. -P, as corporation, had power to deal from position of strength in commercial relationship, unlike consumers in product liability cases. BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 Civil Liability Act 2002 (NSW) s 5O and 5 P.
C. Economic loss arising from defective goods and structures
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*Minchillo v. Ford Motor Co of Australia [1995] 2 VR 594 (Cases on Torts p 126) A manufacturer of goods does not owe a duty of care to a consumer re pure economic loss attributable to defective quality of the goods. P got truck from D, which vibrated excessively at high speed. SC found D did not owe duty of care. Brooking J: When there is physical injury to person or property, jury can be asked, did manufacturer take reasonable care etc? But if no injury, what is the q for the jury? Cant be, did D take reasonable care to avoid reasonably foreseeable and real risk of economic injury to another. -Goods that are merely defective (as opposed to dangerous) are under no general duty of care. Ormiston J: Authorities thus far concerned only with physical injury and do not support general duty for econ loss. *Bryan v. Maloney (1995) 182 CLR 609 (Cases on Torts, p 128) The builder of a dwelling house owes a duty of care to a subsequent purchaser re pure economic loss attributable to defective quality of the building work. Bryan build house for Manion. Manion sold to Q, who sold to Maloney. Maloney inspected house before buying, found no defects. Later, cracks appeared, extensive damage. Built by Bryan with inadequate footings. M suffered loss of depreciated value of house. Mason CJ, Deane and Gaudron JJ:
-Policy considerations against liability for mere econ loss: Avoid imposing liability for indeterminate amounts, time, classes. Could go against community standards of competitive zero sum. -Only special cases therefore attract duty reliance and/or assumption of
responsibility. -Bryan and Manion had contractual relationship; did not preclude liability in negligence. This has also been found to extend to certain third parties, beyond scope of contract. Clear relationship of proximity re physical injury. More difficult q for pure econ loss. -In case of Manion-Bryan, recognition of relationship of proximity would not give rise to liability for indeterminate amount, for indeterminate time, to indeterminate class. Also, relationship characterised by assumption of responsibility. -Relationship between builder and subsequent owner has relevant degree of proximity. Connecting link of the house. Obviously foreseeable econ loss. Similar relationship to that with first owner, greater than differences.Vul Brennan J (dissenting): Contractual matter. Diff standard applied for relationship between builder and first owner and builder and subsequent. Wrong to impose transmissible warranty of quality. *Woolcock Street Investments v. CDG (2004) 205 ALR 522 (Cases on Torts, p 134)
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-Vulnerability Ps inability to protect itself from consequences of Ds want of
In the particular circumstances of this case, consulting engineers who designed the foundations of a complex comprising a warehouse and offices did not owe duty of care to subsequent owner who suffered pure econ loss due to settlement of the foundation/material below foundations absence of relevant vulnerability on part of subsequent owner to econ consequences of negligent design of foundation by engineers. Gleeson CJ, Gummow, Hayne and Heydon JJ:
reasonable care. -In this case, D did not owe first owe duty of care to first owner for the kind of damage suffered by P first owner refused to pay for geotechnical survey. No assumption of responsibility. -To impose duty to subsequent owners would require D to have done more work in contract than it needed re first owners. But other reasons for nor duty. -No vulnerability no warranty the building free from defects etc. Defects could have been discovered prior to purchase.
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4. Liability in negligence for purely economic loss

In this topic we will consider the circumstances where a person is liable for purely economic loss to another as a result of negligent conduct or omission. The essential element which will determine whether such a loss is recoverable is the existence of a duty of care to avoid such loss to such a claimant. In this topic we will consider some categories of those cases and the general principles for determining a duty of care.
A. Economic loss from damage to third party property

Cattle v Stockton Waterworks Co (1875) LR 10 QB 453 Only person that can sue for damage to goods is that who has possession or ownership, i.e. no recovery for PEL for damage to third party. Very influential in maritime law charter party issues etc. *Caltex Oil v The Dredge "Willemstad" (1976) 136 CLR 529 (Cases on Torts, p 201) As a matter of principle, a duty of care may be owed re pure economic loss suffered by another person as a result of Ds negligent act (as distinct from negligent misstatement). Dredge W fractured pipeline which connected oil refinery with oil terminal. Refinery and pipeline owned by Australian Oil Refining (AOR); terminal by Caltex. AOR and C had agreement whereby C supplied crude oil to refinery, and product then delivered to C via ship or pipeline. Product owned by C, but agreement was that risk or damage or loss rested with AOR. Dredge W following an incorrect map negligently drawn by Decca Caltex was clearly named, marked on this map. Cs loss purely economic because it did not flow from the loss of the product (risk of damage/loss rested with AOR). Cs loss was costs involved with pipeline being out of action. Trial judge found liability for negligence both with Dredge W and Decca, but did not allow damages for purely economic loss for C. Issue: Is C entitled to recover damages for economic loss?
Gibbs J:
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-Distinction between material and purely economic loss for third parties not
entirely illogical potential for unlimited claims if allowed to claim for all foreseeable pecuniary losses; this would also interfere greatly with ordinary affairs of life. -Not logical to say Hedley Byrne allows recovery for purely economic loss only arising from negligent misstatements for one, not always easy to distinguish acts and words (this was against a series of influential English cases that had limited Hedley Byrne as a narrow exception for negligent misstatement only). -Still right that as a general rule damages not recoverable for econ loss not consequential upon injury to Ps person or property. Fact that loss foreseeable not enough. -But in cases in which D has knowledge/means of knowledge that P individually (not just as member of unascertained class) is likely to suffer econ loss due to his negligence owes P duty to take care not to cause him such damage. -Dredge W and Decca knew/should have known of the pipeline, where it ran, its purpose, exclusively for C. C therefore should have been in contemplation as person who would suffer loss if pipeline damaged. Thus duty arises. Dredge W had particular obligation to take care to avoid damaging it, which was shown on drawing provided for very purpose of enabling them to avoid it. Decca had similar obligation to draw accurate. Stephen J:
-Purely economic loss should be recoverable for clear policy reasons, but
foreseeability not enough need a better control mechanism. The level of proximity required will come from gradual accumulation of case law, which identify relevant salient features. -Salient features in this case that provides sufficient proximity to entitle P to recover for reasonably foreseeable econ loss: Ds knowledge that property damaged was of a kind inherently likely to cause econ damage to those who relied upon it if damaged. Ds knowledge or means of knowledge that the pipeline existed there, leading to reasonable inference that it was used to transfer products from refinery to terminal. - So C was within reasonable contemplation as person likely to suffer damage if the pipelines cut. Ds infliction of damage on property of third party was conduct in breach of DoC owed to the third party. Nature of detriment loss of use. Nature of damages claimed reflect loss of use, i.e. direct consequence of detriment suffered (cost of using other means of transport), not lost profits. Mason J:
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-Now that damages can be recovered for econ loss from negligent
misstatements, no sound reason to deny it for econ loss from negligent acts. -Need to delimit duty of care in such a way as to avoid indeterminacy problem.
-D liable for econ damage due to his negligent conduct when he can
reasonably foresee that a specific individual (as opposed to general class of persons) will suffer financial loss due to his conduct. Jacobs J: Damages for immobilisation of goods. Wrong to concentrate on whether loss is purely economic, but should look at the circumstances of the loss. DoC owed to person whose property was in such physical propinquity to the place where the acts or omissions had their physical effects that a physical effect on the property of that person was foreseeable as a result of acts/omissions. -No one has really picked up on this judgment.
Candlewood Navigation Corp Ltd v Mitsui OSK Lines Ltd [1986] AC 1 (Privy Council) There can be no liability for negligently inflicting economic loss by causing physical damage to property in which the plaintiff has no proprietary or possessory interest. Preferred the maritime bright line rule of Cattle v Stockton.
What is meant by ascertainable class? Court found this a troubling concept.
*Canadian National Railway v Norsk Pacific Steamship Co (1992) 91 DLR (4th) 289 (SC of Canada) P had contractual arrangement to use 3rd partys bridge for railway lines and trains (80% of bridges use). Barge towed by tugboat owned by D damaged bridge, so it was closed for several weeks. P was able to recover damage for economic loss due to bridge being out of action (even though none of its property damaged). *State of Louisiana ex rel. Guste v M/V Testbank 752 F.2d 1019 (1985) ( Supreme Court of US) (extract from Schwartz, Kelly and Partlett, Prosser, Wade and Schwartz s Torts Cases and Materials, Foundation Press, 11th edition, 2005, on library electronic reserve) Found against recovery for purely economic loss.
MV Sea Daniel and MV Testbank collided. Chemical spill from Testbank. Claims for purely economic loss arising out of this. Higginbotham: Without limiting damages with a requirement of physical damage, the test of foreseeability would lose its ability to function as a rule of law.
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-Foreseeable consequences of the collision reveal wave upon wave of

economic loss. Where to draw the line? No apparent principle for drawing the line. -No damage for purely economic loss has virtue of predictability. Some unjust results at the edges inevitable. -What purpose of damages? At such huge amounts, no extra benefits of incentives for safety. Plus, economic losses will be covered by insurance. To impose damages in such cases would make insurance more expensive. Wisdom, Rubin, Tate, Johnson (dissenting): Should analyse on case by case basis whether pure economic losses were sufficiently foreseeable and proximate. -The clear line praised by majority leads to too much injustice and goes against clear tort principle of foreseeability and proximity. Christopher v. MV Fiji Gas (1993) Aust Torts Reports 81-202 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27 Fortuna Seafoods Pty Ltd v The Ship Eternal Wind [2008] 1 Qd R 429 *Perre v. Apand (1999) 198 CLR 180 (Cases on Torts, p 208); When determining whether a duty of care exists re pure econ loss caused by negligent act, account may be taken of factors such as indeterminacy of Ds potential liability, unreasonable interference with Ds commercial autonomy, Ds knowledge of and control over the risk, and Ps vulnerability to the risk. Farmers grew potatoes in rural SA, some for export to WA. D (respondents) negligently introduced a disease, bacterial wilt, onto the land of one farmer. WA prohibited import of potatoes grown on land or within a certain distance of land with this disease, and D knew about this ban. Ps (appellants) were involved in potato growing on such land and claim to suffer financial loss (pure econ loss land not damaged). Did D owe duty of care to all or any of them? Gleeson CJ:
1. No general rule that one person owes duty to prevent financial loss to
another, but as Dredge Willemstad and Hedley Byrne show, there are exceptions. 2.Considerations restraining acceptance of such duty in particular cases/categories of cases. Need some reasonable limits, otherwise too expansive.
May interfere with freedoms, controls, and limitations established by

common law and statute. Consequences of conduct may be governed by a contract between the parties. Pure econ loss can be indirect, difficult to identify or measure.
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3.In this case, duty owed. In this case, would not be indeterminate known
vulnerability of the Ps, only certain people in a position o use and own/enjoy land near enough to infected land, control exercised by P over activities on infected land. Gaudron J:
1.Policy considerations are just those, not rules of law. Indeterminacy and
reluctance to curtail commercial competition identified. 2.Special factors which give rise to a relationship of proximity such that liability for pure economic loss will be found D is in a position to control the exercise or enjoyment by another of a legal right. 3.This case is closely analogous. D knew there was a class of persons who availed themselves of right to sell potatoes in WA, knew that this would be impaired if the disease found within a certain distance, and that if the disease spread to that area these people were powerless to protect their own interests. So here, should be able to recover. 4.If D knows/ought o know that his/her acts or omissions may cause loss or impairment of legal rights possessed, enjoyed, or exercised by another, whether as individual or member of a class, and that that person is in no position to protect his/her own interests, there is duty of care to take reasonable steps to avoid foreseeable risk of economic loss resulting from loss/impairment of those rights. McHugh J: Incremental approach for novel cases, cf categories approach, proximity, etc. 1.Indeterminacy and conduct legitimately protecting or pursuing persons social or business interests are merely to be taken as factors that negative the existence of a duty. If these factors are absent though it doesnt necessarily mean a duty exists. 2.Vulnerability of P a central issues. How vulnerable was the plaintiff to incurring loss by reason of the defendants conduct? 3.Importance of Ds actual knowledge re risk and magnitude.
4.Other things may be relevant in various cases, but these four general
principles need always to be considered (indeterminacy, legitimate business conduct, vulnerability, knowledge). Gummow J: Salient features approach to determine whether sufficiently close relationship to give rise to a duty exists. With appropriate control mechanisms. Salient features of present case (that give rise to duty): 1.D knew/ought to have known that Ps grew commercial potato crops within the buffer zone, and the WA regulations. 2.D in control of the initiation and conduct of experimental activities (that led to infection) on the land. 3.Ps had no way of appreciating existence of risk to which they were exposed by these activities, and no way to protect themselves. Kirby J: Three-stage approach foreseeability, proximity, and policy.
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1.Was it reasonably foreseeable to D that particular conduct/omission on its

part would be likely to cause harm to persons who have suffered damage or person in same position? 2.Does there exist between D and P a relationship of proximity or neighbourhood? 3.If so, is it fair, just, and reasonable to impose duty?
Major policy considerations: indeterminacy, autonomy and competitive

operation of marketplace. Perre v. Apand note by Swanton and McDonald, (2000) 74 Australian Law Journal 17 (e-res) Disagreement between the justices is more apparent than real. Kirby J favours explicitly stating that policy considerations of fairness etc are a criterion, whereas other justices seem to think that this aim (fairness etc) is so obvious it goes without saying.
B. CAUSATION AND ASSESSEMENT ISSUES IN ECONOMIC LOSS CASES Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 (fall in the market) Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 (fall in the market) Gates v City Mutual life Assurance Society Ltd (1986) 160 CLR 1 (loss of opportunity) Kyogle Shire Council v Francis (1988) 13 NSWLR 396 (CA) (measure) Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 (loss of chance/opportunity) Daniels v Anderson (1995) 37 NSWLR 438 (contributory negligence)
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5. Prof. David Anderson: Recovery of Negligently Inflicted Purely Economic Loss in the US
There are lots of no duty rules where duty of care simply cannot arise, e.g. negligently inflicted emotional distress (many exceptions now) economic loss rule is one of them. It is one of the most durable no duty rules in the US, but not such an absolute rule in Aust. -Cf. Australian approach in Caltex and US approach in Corpus Christi.
-Cf. Lincoln Park West (US) and Bryan v. Maloney (Aus)

BP Gulf oil spill Greatest example of economic loss in history. BP had been warned of a danger of a blowout and insisted on proceeding with the drilling. Likely there will be some negligence. Who has suffered harm?
-Workers killed and injured and their relatives (personal injury) -Property damage drilling platform owned by Trans Ocean. -Clearly these categories of injury will be compensable without hesitation. The
pure economic loss rule is irrelevant. What about others who have suffered harm, where pure economic loss would be highly relevant? -1. Nearby drilling platforms in the deep water horizon that were immediately put out of business because of the cleanup operations. Platforms were not damaged but their business was interrupted. -2. Other platforms not in such close proximity, elsewhere in the Gulf, who had to shut down because of the moratorium that was imposed after the accident. Govt decided that it had insufficient control over the quality and safety regulations on deepwater drilling so suspended deep water drilling everywhere in the US until they could put in place more effective precautions. -3. Workers on the platforms, owners of fishing vessels, commercial fisherman, who had their jobs temporarily suspended.
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-4. Beach front businesses in Mississippi, Alabama, and Florida which suffered
from cancelled holiday reservations. Two classes of resort owners: Some resorts located where beaches were actually polluted.
But most resorts lost business because vacationers were worried.
Who can recover from BP in the face of an economic loss rule?
-1. Will be asking for lost profits. In the US, no recovery. In Aus, yes because
these losses are foreseeable and the economic loss rule is not necessarily absolute. -2. BP might well argue that the govt was the one who shut them down.
Foreseeable that there will be a spill of some sort, but BP might argue nothing of this magnitude is foreseeable. US court unlikely to accept this. The question is more abstract: was the consequence of BPs negligence foreseeable? Foreseeability is not going to foreclose these claims. But is the economic loss rule going to cut off liability? Uncertain.
-3 and 4. Clearly foreseeable that the workers would be unable to pursue their
livelihoods, could probably recover unless the economic loss rule cuts them off. Commercial fisherman can easily recover (see TESTBANK)
Oil Pollution Act 1990 which specifies a number of losses for which oil companies will be responsible for oil spills, incl. loss of livelihood as a result of damage to natural resources (fisherman and conceivably the resort owners).
How to deal with indeterminate loss? Confine liability to those instances in which the defendant knew that a particular interest of the plaintiff would be harmed if the defendant negligently cut the pipeline. E.g. Caltex Corpus Christi Oil & Gas Co. v. Zapata Gulf Marine Corp. 71 F.3d 198 United States Court of Appeals, Fifth Circuit, 1995. Basically the same as Caltex. The defendants knew who would suffer harm and the kind of harm, if they acted negligently. In Aust, Corpus would be allowed to recover. Two claims of damages
-Gas riser got damaged and CC had to voluntarily flare off gas they owned to
prevent loss to the wells. They were entitled to damages for the gas they lost (the court said it was property damage, the gas was damaged because of the defendants negligence), because the last thing the courts want to do is to discourage people from doing things to minimise the damage. -Recovery for loss of profits from being unable to use the pipe to produce and sell gas during the repair period.
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Majority held TESTBANK denies recovery for pure economic losses not associated with physical injuries. Gas remains in the ground, unaffected by the property damage suffered by CC. No reason for denying recovery except to preserve the pure economic loss rule, which has the virtue of predictability. Is the price that has to be paid to achieve predictability worth it? Untenable position in the long term. Why? -Exxon Valdez oil spill 1989. Exxon settled to pat USD 20m to Native Americans who had no property damage or personal injury for interference for use of waters for ceremonial and ancestral purposes. Not worth it for them in PR terms not to pay. -Congress passed the Oil Pollution Act 1990 which specifies a number of losses for which oil companies will be responsible for oil spills, incl. loss of livelihood as a result of damage to natural resources. Congress has abrogated the economic loss rule to a great extent rule not that popular among legislators compared to judges. -BPs response to Gulf spill. Said they would pay all legitimate claims. Personal injury and property damage claims would not come close to 20bn, so they are committing to pay lots of economic loss claims (some would be required under statute, but BP certainly giving impression that they wouldnt limit it to that). The laws says they do not have to pay, but BP knows they need to be generous for PR reasons. This suggests that in high visibility cases, defendants cannot rely on the economic loss rule for political reasons the rule is so unpopular. A case where the law collides with widespread expectations. The outcome of BP litigation is likely to put a lot of pressure on the economic loss rule in the US. 2314 Lincoln Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier, Ltd. 136 Ill.2d 302, 555 N.E.2d 346, 144 Ill.Dec. 227. Supreme Court of Illinois, 1990 One reason for the economic loss rule is that courts dont want to give people a tort liability when there is a contractual liability. All other things equal, instead of using tort law to adjust disputes, people should arrange between themselves to settle disputes in advance in contract (makes sense from a policy perspective). Problem in this case was that there was a contract between the developer and the architect, but the dispute is between the condo owners and the architect and they had no contract. Is there any reason why the architects should not be held liable to the condo owners? -The architect enters into a contract with the developer and whatever duties he owes he owes to the developer and not subsequent purchasers. The court told the plaintiffs to sue the developer, who should sue the architect. This is like a defective goods case. The architect was providing a product, a house, and the house wasnt as good as it was so there could be no recovery for economic loss without a contract. The seller has a remedy by making sure they get an express or implied warranty from the developer before buying the house.
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-Not really a good reason. It assumes that the condo owners had the capacity
to protect themselves. -If this were a lawyer who negligently drafts a will and thereby causes the intended beneficiaries to lose their inheritance, they could be sued for pure economic loss for professional negligence. Why are architects different from lawyers they purport to be professionals too?
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6. Vitiating factors: Misrepresentation

In this section we consider misrepresentations that induce one party to enter into a contract with another. It is about pre-contractual dealings designed to draw someone into a contract. The case law on misrepresentation, as it relates to contracts, is less significant in practice than it used to be role of statute. This topic is CL, incl remedies.
A. Establishing misrepresentation
3 elements of MR: 1.False statement of fact. 2.Make intends to induce the other party into the contract. 3.The other party is in fact induced (relies on the representation).
CLA [18-01]-[18-24]
(i) Representation is false

How to distinguish representation from mere puff? By saying it has to be a fact that is false, it must be about past or present facts that are demonstrably false. This leads to some problematic situations, which have been gotten around.
1.A makes a promise to B about the future, e.g., this house will appreciate by
15%. More a prediction about the future. 2.A sells house to B, A also owns house next door, says, I intend to stay here for the next 10 years, but in fact moves out, bogans move in. Statement of intent. 3.A sells B a car, B is a uni student and worried about popularity, A says, this car will make you really popular in my opinion. Statement of opinion. 4.A stays silent and fails to disclose something that could be important.
-1, 2, and 3 at face value cant be considered representations. But the law is
willing to sometimes infer an implied representation. -E.g. in the case of 2. Implied representation that the person honestly has that intention so B cant succeed just because A moves out in the end, but if B can show it was an outright lie by A, i.e. never really had that intention, then could. -Same approach used for opinion an opinion cant be true or false, but possible two kinds of implied reps.
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Maker of statement has some particularly knowledge or expertise compared with the other party court will sometimes (although not very commonly) imply a rep that the maker has reasonable basis for holding that opinion. Silence. General approach at CL is caveat empor i.e. couldnt do much about it. But some exceptions. Relevant to this course: -Present some statement of fact, but failing to provide the rest of the story a half truth. Normally difficult to recover, but there was one case in USA: Stambovsky v Ackley 169 AD 2d 254 (1991) (NY Appeals). Supposedly a haunted house, vendor had sold this story to magazines etc. Buyer didnt know about this though, and wasnt told. Court found that silence here was a MR. Proceeded on assumption that house was haunted (MR has to be false statement of fact) some logic that vendor had asserted it before so now estopped from denying. -If person deliberately conceals something, e.g. defect in buildings or goods, so as to cause prospective purchaser to gain a false impression, then silence can be MR fraudulent. -Situation whereby A is negotiating contract with B over a long period of time. A makes a rep in January which is true, but they dont sign until Aug, by which time it has become false, but A fails to update B. With v OFlanagan [1936] Ch 575 Sale of medical practice. In Jan, vendor repd that takings had been 2000 pa. By signing of contract in May, business had declined due to vendors ill health in 3 weeks until may had only made 15. Did not update buyer, they were not aware. Issue: actionable MR?
That maker of statement actually holds that opinion.
Court held that it was said that the representation continued from the time it was made until the point of contract. So not just a rep that it had made 2000, but that this is a 2000 pa business has effect until point of contract, when it was clearly false. Court essentially requires vendor to tell buyer about changed circumstances. Dimmock v Hallet (1866) LR 2 Ch App 21 vendor of estate represented that farms were full let; omitted to say that tenants had been given notice to quit held to be MR. In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, where negotiation for sale of property happened on particular footing, a rep that terms of the lease instrument were unaffected by other contractual arrangement was implied from failure to bring separate agreement with lessee to buyers attention.
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CLA: Non-disclosure, if combined with other elements, may amount to MR. -However in Arkwright v Newbold (1881) 17 Ch D 301 at 317-18 James LJ
cautioned against finding fraudulent MR based on omission, insisting on active misstatement of fact, or at all events, such a partial and fragmentary statement of fact as that the withholding of that which is not stated makes that which is stated absolutely false.
(ii) Statement induces the contract

NB: It must also be intended to induce. -This is not normally a problem; its usually clear that the vendor is trying to
draw the buyer in. More difficult to show that it in fact did induce reliance. Strictly speaking, it is for the party alleging it was induced to prove that this was in fact the case. But a presumption might apply in practice to help misled party.
*Holmes v Jones (1907) 4 CLR 1692, CMCLA 18-13 via CLR Sale of a pastoral property as a going concern. Defendant sellers wrote to plaintiff buyers giving them incorrect figures for cattle on property (20 Nov). Buyers sent third party to investigate property. Third party received correct (updated) figures from sellers. Third party made report to buyers. Sellers also provided updated figures in separate letter (9 Dec). Buyers instructed agents to make offer to purchase property (19 Dec). Issue: Were the plaintiffs induced to enter the contract in reliance on the defendants misrepresentation? 1st statement (20 Nov) was clearly a false statement of fact, and it could be said that it was intended to induce. HC found that buyer not induced by 1st statement got correct figures by itself and from the vendor. Griffith CJ: D should have known original statements false doesnt mean its fraudulent might be careless etc. -Clearly relied on its own investigations.
OConnor J: if fraud, then presumption that it was made with intention to induce. But rebuttable. Facts here rebut inference that original MR was cause of contract. -Doesnt matter that he claims the MR induced him it was not reasonable to do so. -If no fraud, look at acts as a reasonable businessman would. In all the circumstances, can it be reasonably inferred that buyer was induced no. Contract changed post-Nov 20, inspection etc. Isaacs J: even if the statement were fraudulent (which is it wasnt), presumption isnt the end of it if in fact the buyer wasnt induced by it, then no case.
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*Redgrave v Hurd (1881) 20 Ch D 1, CMCLA 18-20 H advertises to arrange sale of legal practice upon retirement. H represents to R that takings of practice are about 300 per year. H produces records showing income of about 200 per year. H tells R that evidence of the balance of takings can be found in some other documents/papers. R looks at documents briefly. If R had looked carefully, R would have found that these only accounted for a few more pounds. R enters agreement. Pays deposit and takes possession of Hs house. Discovers the practice is worthless. H sues for specific performance; R claims misrepresentation. NB: vendor made a statement, buyer could have easily found out it was clearly wrong. NB: in most cases, misled party is the P. Here, buyer had paid deposit, then discovered problems. Vendor sued for specific performance, MR used in defence. But principles the same. Court found in favour of the buyer there had been actionable MR.
Opportunity to investigate? -Court rejected this argument. Not a defence to say that if misled party had
paid more attention they wouldnt have fallen into trap. Only look at whether statement was intended to and did in fact induce buyer. Presumption? Generally for misled party to prove it was induced. But court found that presumption in misleds party favour exists if it can show two things: -Statement was calculated to induce.
-Entry into contract. -The middle step of inducement is then inferred. -What is calculated to induce? Doesnt come out clearly in this case.
Generally understood as: statement that is of a kind that would induce a reasonable person.
(iii) Other points about common law MR
In many cases, the adjective material is used, e.g. material MR and material inducement. Very hard to understand quite what material means. -One possible meaning deals with the degree of the disparity between the facts and what was represented. In the past could not sue unless there was a bit disparity. But in practice not a big issue. -Second sense of material inducement is what role did it play in the decision? Doesnt need to be sole consideration. Probably doesnt even need to be dominant consideration. But does need to play some part. State of mind of the person making the rep:
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-For most principles the state of mind doesnt matter whether it is fraudulent,
negligent, or an honest mistake. -Sometimes matters though idea of material. Seems that if there is a fraudulent MR, there is no need to worry about materiality in the sense of degree of disparity. Also in fraud the threshold for inducement is pretty low.
B. Rescission
The innocent party can rescind the contract ab initio, but that right may be lost due to a variety of factors. Rescission is like pressing rewind try to restore parties as much as possible to their positions prior to the contract. -Cf termination, which only stops the future, keeps everything from the past.
-There must be clear, unequivocal conduct so that the other party knows not
If there has been an actionable MR, contract is voidable, not void. I.e. misled party can choose to rescind the contract; its not automatic. Limits to this discretion. One not mentioned below, but that courts have also recognised estoppels can limit right to rescind, as in termination so if rep, reliance, detriment, unconscionability, could prevent rescission. (Mentioned in Coastal Estates v Melevende [1965] VR 433, CMCLA 18-70). For rescission to be effective:
to proceed with the contract. -Usually need to communicate it Scarf v Jardine (1882) 7 App Cas 345 at 360, 361. But some exceptional cases (see Caldwell below).
(i) Affirmation

If an innocent party affirms the contract after becoming aware of the falsity of the representation the right to rescind is lost. Affirmation may be express or implied. Election to affirm must, like rescission, have unequivocal words or conduct. Actions that are inconsistent with right to rescind give rise to inference of affirmation. Representee must know that representation was false.
-Entitled to believe representation at least until there is some cause for
suspicion, and usually beyond that stage Rawlins v Wickham (1858) 3 De G & J 304. -Partial information giving some cause for suspicion is insufficient Drozd v Vaskas [1960] SASR 88 at 95-6. -Melevende says also need knowledge of right to rescind. This seems wrong. Can be conceded that in absence of this knowledge, particularly in case of
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fraud, conduct suggesting affirmation needs to be more convincing but this is a matter of proof, not principle. CLA: illustration of affirmative conduct might be found when representee, rather than rescinding, has been negotiating for payment of compensation re deficiencies in property bought or treated and dealt with subject matter of contract in ways consistent only with ownership.
*Coastal Estates v Melevende [1965] VR 433, CMCLA 18-70 Sale of eight allotments of land by CE to M. CE made fraudulent misrepresentation to M. Dates: -Contract entered in Sept 1960.
-M was certain the reps were lies by Jan 1962. -Paid interest until March 1962; principal until June 1962. -M decided to get out of contract in April/May 1962. -Consulted solicitor in Sept 1962 and learned of right to rescind. Issued
summons soon after. Had M affirmed? CE argued that all you need for affirmation is knowledge that MR is untrue (Jan 1962) and unequivocal conduct after that time continuing the contract (interest until June 1962). M argued need something more he said he had no idea what to do when he found out about the MRs, it was only when he saw his lawyer did he know of his right to rescind. Trial judge had found no affirmation because didnt know full facts at the time. Court disagreed, said, if the party was shown to have assumed correctly re falsity of the reps, even if without full knowledge, and then acts on this assumption, cant say no affirmation. Court found that M had not affirmed, i.e. allowed rescission.
Controversial case. Court went for Ms formulation need knowledge of MRs falsity; need knowledge of right to rescind; need unequivocal conduct. Scholl J: if misled party doesnt know he has a right to rescind, he is not bound by actions which seem to be an affirmation. -Unless they are adverse to the other party (e.g. misled party takes control of others property under contract) form of estoppel. -If misled party does acts which suggest affirmation but not necessarily, such as payments made to him by other party, do not prove affirmation, but can add up to suggest it and even shift onus i.e. P might have to prove he didnt affirm. Adam J: once a representee has, by discovery of the truth, been put to his election, he will lose his right to rescind once he had elected not to rescind. Must know right, and actions must be unequivocal. -If dont know what options are open to you, you cant be said to have chosen one alternative.
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Never settled by HC, but highly likely that in all sorts of other areas, e.g. termination for breach, CEs two-step formulation would be accepted. -Maybe this case is wrong.
-Maybe it should be confined to fraudulent MR, not other forms of election

though logically hard to see why. CLA: this case rests on distinction between right to rescind coming from law in general and from express term of contract. In latter, just need to know facts that trigger that. But in former, must know of right to rescind. CLA: this isnt though logical, to say that in general need knowledge of right. (ii) Restitutio impossible Rescission is only possible if the parties can be placed in their original positions. Precise restitution is not needed, and the court can use its power to impose terms to do substantial justice. Can make orders in favour of both parties to achieve satisfactory restitutio. -Court more likely to help misled party where MR was fraudulent.
Balfour v Hollandia Ravensthorpe NL (1978) 18 SASR 240 house bought on basis of MR. House had deteriorated. This was not a bar to rescission. However, to the extent that deterioration caused by buyers act, they had to make compensation for it.
*Alati v Kruger (1955) 94 CLR 216, CMCLA 18-63 A sold fruit business to K. A made a fraudulent misrepresentation about the takings of the business. The representation was also included as a term of the contract (cl 21). Took possession of business on 16 June. Issued writ claiming rescission on 29 June. Once K learned that the trial judge had made findings of fact in his favour, K closed down the business and left the premises. (This was before the handing down of judgment.) A did not attempt to revive business. Business had made a loss and ultimately closed down. Issue: was rescission possible?
HC found that in the past, there were two rules of rescission (1) could only do it if contract could be precisely unwound (CL rule) (2) Substantial restitutio enough (equitable rule). Equitable rule now prevails. Court tries to do what it can in the circumstances. In this case, A had to hand money back to K, but it was adjusted to take account of things like lost stock etc after K abandoned it (before the judgment handed down).
Vadasz v Pioneer Concrete (1995) 130 ALR 570 18 Court made a declaration for partial rescission.
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A creditor represented that a guarantee would apply only to future debts, i.e. incurred by the company after its signing. However, applied both to future and past. Creditor sought rescission of guarantee in toto, but HC granted partial rescission so that guarantee stood for as much of the debts as guarantor had been willing to guarantee.
(iii) Third parties
If a third party in good faith has acquired rights under the contract for value, rescission is not possible.
Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525 C sells Jaguar car to N on 12 Jan 1960. C was induced by fraudulent misrepresentation by N. On 13 Jan, the cheque provided by N is dishonoured and C informs police and Automobile Association. C does not communicate with N. On 15 Jan, the vehicle is sold to G&C. Vehicle eventually sold to C&UF (passing through about 6 people). Issue: Had C rescinded in time to prevent title passing to G&C and, eventually, on to C&UF? C had to rescind, i.e. get goods back, because suing for damages would have been fruitless fraudster has no money. Court said that it can be treated as fraudulent MR. Contract is voidable, not void. So when contract is complete, N gets ownership. -As soon as 3rd P bought car in good faith, it was too late to rescind.
When did N rescind? -C&UF argued that decision to rescind was never communicated. -Court said, generally need communication, but absurd to demand this in this
case N had disappeared. -C went to Auto Assoc and the police clear enough that he intended to rescind.
(iv) Lapse of time

Lapse of time can be evidence of affirmation. There is no rule that decision to rescind must be prompt courts have seemed to suggest that delaying right to rescind probably doesnt end right to rescind. But the longer you wait, the more likely that something else will occur to prevent you, e.g. you will have been inferred to have affirmed, or 3rd partied become affected. So not a limitation per se, but may trigger others this comes from Coastal Estates v Melevende [1965] VR 433, CMCLA 18-70. -Scholl J: election need not be made in any particular time frame.
-Adams J: lapse of time may mean it becomes unjust to rescind re others. Other cases have taken view that delay is limitation per se, but rule from
Coastal Estates is probably right.
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General principle then is that must elect within a reasonable period of time determined by whether delay is sufficient to constitute unequivocal conduct amounting to affirmation.
Leaf v International Galleries [1950] 2 KB 86 Art bought, it was represented as genuine. Years later buyer went to sell it, found out it wasnt genuine. English Court of Appeal said that buyer waited too long to rescind. -This was a difficult case because of the time periods involved. Probably remains right to say delay is not a bar per se.
(v) Rule in Seddons case

1. Must be innocent MR, not fraudulent. 2. Applied to contracts to convey title to something. 3. If 1 and 2, then once contract has been fully formed by conveying title, it is
too later to rescind. Also called executed contract restriction execution = contract discharged by complete performance in all respects. What sort of title conveyance did it refer to?
-Originally developed re sale of land makes sense in this context because

before the contract is completed the buyer has an intervening period in which to make sure everything is in order. -Courts began to say it should apply to other transactions too:
Seddon v North Eastern Salt Co [1905] 1 Ch 326.
- Found that the rule also applied to shares.

Some other cases even applied it to chattels. Courts usually try to get around it, it seems unfair in many contexts. The rule is probably still right for land transaction because of the structure of those deals, but considerable doubt about its application elsewhere. s 4(2A)(b) of the Sale of Goods Act 1923 (NSW)
-Makes it clear that the rule doesnt apply for sale of goods.
Svanosio v McNamara (1956) 96 CLR 186, CMCLA 20-17, 20-19, 20-35 via AustLII
C. Damages
Now under CL: -Fraudulent damages in tort of deceit. -Negligent damages for negligent misstatement (Hedley Byrne). -Innocent cant get damages, but can at least rescind (but orders for
payment of money may be made as incidents of rescission). The right of damages differs according to whether the misrepresentation is fraudulent, negligent or innocent. Until 1964, if not fraudulent, could not get damages
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The distinction can have a big practical effect.
E.g. A sells B a car. A says it is a 2009 model, but it is a 2001. Fraudulent MR. B pays $10000. A 2001 is worth only $7000. Had it been a 2009, it would have been worth $12000. Three scenarios: -B rescinds contract. = A pays B $10000.
-B keeps car, but sues for damages in deceit. = A pays $3000. The question is how much has the innocent party lost, how much worse
off? Here, paid $10000 for a $7000 car. -B keeps car. But the statement about it being a 2009 model was also a term of the contract. Sue for damages for breach of contract. = A pays $5000. In contract, ask where should you have been had the contract not been breached? B would have had a $12000 car; instead has a $7000 one.
(i) Fraudulent misrepresentation

Derry v Peek (1889) 14 App Cas 337, CMCLA 18-34 -Fraudulent MR if:
Believe it is not true (know it is a lie); or Do not believe it is true (lack affirmative belief in truth); or Make it recklessly (dont care whether true or not).
Gould v Vaggelas (1984) 157 CLR 215; CMCLA 18-37 via AustLII
(ii) Negligent misrepresentation

CLA [18-29]-[18-36] See the material under Week 3, section A.
(iii) Innocent misrepresentation

Common law provides no right to damages for innocent misrepresentations. Courts have therefore sometimes stretched other rules to provide remedies. (The statutory rules discussed in Week 7 effectively impose strict liability for innocent as much as fault-based misrepresentation). CLA [18-37]-[18-38] Dick Bentley Productions v Harold Smith (Motors) [1965] 1 WLR 623, CMCLA 101019
D. Reform
CLA [18-74]-[18-78] CMCLA 18-83 Allan The Scope of the Contract (1967) 41 ALJ 274
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Considering the Trade Practices Act and Fair Trading Act, do you think that NSW should adopt legislation concerning misrepresentations as in the UK or South Australia?
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7. Statutory liability for misleading conduct

Many actions concerning misleading conduct are brought under s 52 of the Trade Practices Act 1974 (Cth) and its State equivalents, such as s 42 of the Fair Trading Act 1987 (NSW). These provisions prohibit misleading or deceptive conduct by corporations or persons respectively, in trade or commerce. Injunctions (s 80), damages (s 82) and discretionary relief (s 87) are available for contraventions of s 52. There is an enormous number of decided cases on s 52. The object of this topic is not to examine the provision exhaustively, but rather to give a sense of the ambit and operation of s 52, and to consider how it compares with the common law on misrepresentations.
A. The statutory prohibition

TPA governs conduct by corporations. FPA for conduct by persons. Both require: -Trade or commerce. -Engaging in conduct.
Trade Practices Act 1974 (Cth), s 52 Misleading or deceptive conduct (1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1). Fair Trading Act 1987 (NSW), s 42 Misleading or deceptive conduct (1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1). CLA Chapter 19 Balkin and Davis, ch 22 Harland, The statutory prohibition of misleading or deceptive conduct in Australia and its impact on the law of contract (1995) 111 LQR 100
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(i) Scope of the statutory prohibition

(a) trade or commerce Makes the provision significantly narrower than CL. Usually this requirement
isnt problematic, but there are some hard cases. Another case mentioned in the lecture: registrar of uni told student that his claim would be dealt with expeditiously, it wasnt not trade/commerce. Some aspects of an activity might be trade/commerce, while others arent.
-E.g. person selling private property generally not trade and commerce. But
real estate agent advertising it etc, would be. Pending David Jones sexual assault case one argument by victim is under s 52 and s 42 of TPA and FPA she was told it was a great place to work. -Does a statement made in offering a job amount to trade/commerce?
Sale by a corporation of its only capital asset may be conduct in trade or commerce (so selling the business has been found to be trade/commerce). Selling an individual non-business asset, e.g. family home, is not trade/commerce.
*Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 via AustLII Mr Nelson a workman at a site. Foreman said that certain grates on a shaft were attached. They werent, so N fell and was injured. Issue: could he claim for contravention of s 52?
-Was is trade or commerce? 4:3 decision: -Not trade or commerce. -But s 52 is not limited to consumer protection. Court found that trade or commerce refers to the core or central
concepts of trade and commerce must be essential to the activity, not just something in the course of it. -[E.g. pizza delivery guy in car, indicates incorrectly, causes an accident not trade/commerce. E.g. pizza delivery van from Pizza Hut painted as Dominos, that could be trade/commerce.] Bevanere v Lubidineuse (1985) 7 FCR 325 Company selling its beauty salon held to be acting in trade/commerce, even though it was not in the business or buying and selling such assets. E v Australian Red Cross Society (1991) 27 FCR 310 Red Cross provided blood that was contaminated with HIV.
Victim argued it was in trade/commerce.
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Judge found it was not gratuitous supply of blood.
(b) conduct In this respect it can be broader than CL could be found to have engaged
in conduct thats misleading when wouldnt have been guilty of MR under CL. *Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470, CMCLA 19-29 AS2000 developed software products based on certain underlying software. Neither AS2000 nor AS2000 (D) (a related company) owned the copyright in the underlying software. Under one agreement, AS2000 (D) purported to assign to CD copyright in the developed software. (CD then licensed the software to CCH). -Under cl 3.1 of the contract, AS(D) warranted: (b) that it was entitled to assign the copyright in the software, and (c) that there were no claims or potential claims for infringement. -Owner of IP in underlying software upon which the developed software was based had a potential claim for infringement. Issue: was the giving of the warranties in cl 3.1(b) and (c) of the contract, conduct under s 52? CCH argued that the relevant conduct was putting these provisions into the contract not relying on any pre-contractual conduct blurring the traditional distinction between representations and conduct. Court held it was misleading conduct.
-Whereas under CL need pre-contractual acts for MR.

*ss 4(2)(a) and 4(2)(c) of the Trade Practices Act 1974 (Cth) (a) reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the requiring of the giving of, or the giving of, a covenant (c) a reference to refusing to do an act includes a reference to: i. refraining (otherwise than inadvertently) from doing that act; or
ii. making it known that that act will not be done;

(c) consumers or the public at large? Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 via AustLII Brought action under s 52.
-I.e. anyone on the receiving end of misleading conduct can bring an action
under 2 52/42 often see big businesses use it against each other.
Issue: Consumer protection do TPA provisions only apply for consumers or for all? (s 52 appears under heading Consumer Protection.) Court found it is not restricted to consumers.
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(ii) Meaning of misleading or deceptive or is likely to mislead or deceive

(a) Intention not relevant Intention is completely irrelevant.
Generally accepted that deceptive doesnt add anything to misleading enough that conduct is misleading.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 via AustLII (b) Assessment of what is misleading or deceptive or likely to mislead or deceive There are two approaches that can be taken when evaluating this, depending on the nature of the action. Directed at public at large see Taco.
Directed at particular individual. -Assess conduct standing in the shoes of that individual.
*Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 TB operated business known as Taco Bells Casa in Bondi since 1976, and under similar names (Taco Bills) since 1970. In 1981, TCA (US chain) opened two Taco Bell restaurants in Sydney one in Granville, one in George St. TB alleged breach of s 52 by TCA; TCA alleged breach of s 52 by TB Court used the following method to determine whether it was misleading or deceptive conduct when aimed at a class of people (cf individual). -Identify the relevant class and members of that class.
-Pick an average member of that class average/slightly below average

intelligence, but not especially dim. -Assess conduct in reference to this person.
-Must ask, would this person be led into error by the conduct? Not enough that they would just be confused. This test is objective, so whether someone actually was misled is not
decisive, although it could be influential. Using this method, the court found that Aust companys (TB) conduct not misleading. -Identified the relevant section of society as those in Aust who would have known there was also a Taco Bell in US. Would these people be misled? -Court said no. US company didnt have presence in Australia at the time, so people wouldnt have thought the Aust company was affiliated with it. Court also found that the US company was misleading.
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-Relevant class: People aware of Aust co. Would they be misled? -Yes geographically near enough to be misled. Time factor Aust co was first on the scene, no confusion until US co came
on the market, by then there was an existing customer base that could be misled. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
(c) Silence, failure to disclose, literal truths and half-truths Courts have been reluctant in attaching duty to disclose where nondisclosure would not be MR under CL. *Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, CMCLA 19-23 Sale of a restaurant business by HI to CM. Premises licensed to seat 84. Actually seated 128. HIs agent said that the restaurant was licensed, but did not assert that it was licensed to seat 128. Door sign said fully licensed. CM instructed solicitor to check licensing but solicitor did not. Solicitor would have discovered the problem if proper investigations had been conducted. Was this misleading in breach of s 52?
Vendor argued that it never said it was fully licensed for 128. Buyer argued that you cant say its fully licensed and then fill it with excess seating and not say that that exceeds the license. Court found it was misleading.
-Telling a half-truth or being silent may amount to misleading conduct under

TPA. -Used the phrase duty of disclosure quite novel step, no such duty at CL.
-Fact that misled party failed to make own enquiries not necessarily a defence -Vendors agent had given the purchaser to understand the limitations upon
seating capacity/arising from licensing were less restrictive than was in fact the case, while the manner in which the business was conducted at time of sale supported this understanding therefore duty to disclose truth. -No answer to say victim should have made on equiries. for D. Lockhart J:
Henjo was quite an old-school approach. More modern approach is to ask whether there was reasonable expectation of disclosure (result in Henjo would have been the same).
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*Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Failure to reveal facts not misleading unless circumstances give rise to reasonable expectation that if some relevant fact exists it would be disclosed. Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 (d) Predictions and promises as to the future At CL, not generally a representation need to find some other implied rep.
S 51A TPA (and s 41 FPA) establishes that if you make rep as to future, it implies you have reasonable grounds for it more plaintiff-friendly. -I.e., the onus is on maker of statement to show there were reasonable grounds for making it (whereas at CL, plaintiff has to show no reasonable grounds). -If there is a reasonable ground for the statement, its not misleading.
*s 51A of the Trade Practices Act 1974 (Cth) Interpretation (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 A statement involving the state of mind of the maker ordinarily conveys the meaning, expressly or by implication, that the maker of the statement had that state of mind when the statement was made and a basis for it. Holt v Biroka Pty Ltd (1988) 143 NSWLR 629
(iii) Effect of exclusion clauses and disclaimers
At CL can exclude liability for MR except for fraud. *Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, CMCLA 19-23 Clause 7 of the contract:
-the agreement constitutes the whole of any promises, representations,

warranties and undertakings
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-no promise, representations, warranties undertakings shall be deemed

to arise. by reason of anyrepresentation made on or prior to the making of this agreement. There was some doubt as to whether this was really aimed at s 52, but even assuming it was, court said it was ineffective for public policy reasons. Cant exclude liability for contravention of s 52/42.
-As intent is irrelevant under statute, cant even exclude for innocent MR.
Outright exclusion clauses dont work. Disclaimers usually dont work.
But they can work sometimes court conceptualises it as: disclaimer goes to whether conduct could be said to be misleading in the first place. -Disclaimer is no magic bullet. Must look at it in context of other conduct.
*Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 via AustLII Sale of residential property by H to B and another. Brochure produced by agents contained diagram with dimensions, and the boundaries, including the high water mark. Diagram was provided by H. B inspected property before auction with designer and builder. Intended to reconfigure backyard. The high water mark was not recorded accurately. The backyard could not be reconfigured as planned. Disclaimer in the brochure said: All information contained herein is gathered from sources we deem to be reliable. However we cannot guarantee it's [sic] accuracy and interested persons should rely on their own enquiries. Could not sue the vendors because not trade/commerce, so normal practice is to go after realtors. HC majority said no misleading conduct the disclaimer was one factor the agents were trying to make it clear they were just passing on info from another source as much as they reasonably could. -Also strong vibe that purchasers were well informed, sophisticated players. Had engaged construction experts to check out property even before they had bought it. -In such cases, not fair to assign blame to realtor who is just passing on info and says so. -Legitimate here to talk about things like experience of the purchaser because it concerned individual so in the shoes of the individual. Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41-601 via AustLII21
B. Remedies for contravention
s 52 doesnt refer to consequences of breach, just sets out the standard. Have to look elsewhere in Act. For damages s 82.
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(i) Damages
Trade Practices Act 1974 (Cth), s 82 (1) Subject to subsection (1AAA), a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. (a) Causation of loss Courts have taken a few different approaches.
Law in this area is still developing no majority has said Wardley was wrong, but there have been signs of dissent.
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Just applied March v Stramare, i.e. common sense causation. Travel Compensation Fund v Tambree (2005) 224 CLR 627 via AustLII Suggested that common sense causation unhelpful. Henville v Walker (2001) 206 CLR 459 via AustLII H planned to develop property. In assessing the feasibility of the development, he considered: -(1) Costs of development;
-(2) Value at which the completed properties could be sold. The project made a significant loss (> $300k) for two reasons: -H had badly underestimated (1). -W, whom H had engaged to advise on (2), had overestimated value of
property. (expected: $750k; actual: $545k) If either (1) or (2) had been assessed correctly, H would not have proceeded with the project. Issue: had Ws misleading conduct caused the loss for the purpose of s 82? Can say, but for valuers mistake, no loss. But equally: but for Hs own error, no loss. HC said, Ws misleading conduct did cause Hs loss.
-Under s 82, defendants conduct doesnt need to be sole or even dominant

cause, just has to materially contribute to the loss. -It was realised this was quite unfair, so contributory negligence provisions were added later (see below). But principle about material contribution still good law. (b) Measure of loss *Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, CMCLA 19-15
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M and others borrowed money from GIO. GIO represented that the interest rate would be a base rate + 1.25%. Contract actually allowed for GIO to vary rate upon notice. GIO then increased the rate to base rate + 2.25%. This rate was still the best on the market. GIO offered M and others the opportunity to refinance without penalty. M sought variation of contract (s 87) or damages (s 82). What loss had M suffered for s 82? He wanted it to be equal to 1% over the course of the loan. Gummow and Gaudron JJ GIOs conduct did not cause any loss to M. When GIO realised they had probably misled, they gave option to refinance i.e. go to someone else. M chose not to this was the real cause of any loss. Other judges a loss isnt suffered under TPA simply because of a broken promise. What P needs to show is what they would have done had it not been misled compare where they are now with where they would have been. -GIO was still the best on the market so couldnt have got a better deal elsewhere. Evidence was that even if not misled, would still have gone to GIO. Would have been in same position, so no loss. HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 via AustLII (c) Contributory negligence and proportionate liability Henville v Walker (2001) 206 CLR 459 via AustLII At time of this case, TPA didnt provide for contributory negligence, so W stuck for whole loss, which seemed unfair. Law developed in response. ss 82(1B) and 87CB-87CI of the Trade Practices Act 1974 (Cth) See the material below for Week 12.
(ii) Other remedies

Broader than CL, but rescission still most common. -Injunction s 80. -Other relief s 87. Declaring contract void in whole or in part. Varying contract. Refusing to enforce any or all of the provisions of a contract Refunds or return of property. Not constrained by common law / equitable principles. ss 80, 80A, 87, 87A
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80: Injunctions. 80A: no 80A? 87: declare contract void ab initio or from other time; vary contract; refuse to enforce contract provisions; order refund; order compensations; order repair of goods; order supply of services; order execution of an instrument creating/transferring interest in land. 87A: Power of Court to prohibit payment or transfer of moneys or other property.
*Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, CMCLA 19-23 *Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, CMCLA 19-15 Henjo and Marks both said that when court exercises s87 power it is not limited by CL it might provide guidance, but is not binding.
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8. Vitiating factors: Mistake and Duress

A. Mistake

Often the same facts can be analysed as mistake or misrepresentation, the issue being which provides a better remedy. Mistake deals with circumstances preceding the formation of the contract, doctrine of frustration deals with events after formation of contract. Note: difference void and voidable.
(i) Common mistake
The parties are under a common misapprehension: eg, Angela agrees to sell a house to Belinda. Both are unaware the government resumed the property the day before. Exists in common law and equity. Divergence in English and Australian approaches.
*McRae v Commonwealth Disposals Commission (1950) 84 CLR 377, CMCLA 20-06 Sale of oil tanker lying on reef by CDC to M. M went looking for it. No tanker actually existed. M claims damages for wasted expenditure. CDC sought to get out of the contract. Issue: Was the contract void for common mistake?
HC held that the contract was valid and that it was not affected by common mistake. HC preferred the view that common mistake at common law operates by the implied condition precedent approach at common law, there is no particular doctrine dealing with common mistake. Rather, need to ask whether there was there some sort of implied contingency or condition precedent in the contract, such that if it failed, the contract failed as well? E.g. If the ship does not exist, is the contract void (a nullity from the start)? On the proper construction of the contract, CDC has promised that a ship exists. That is inconsistent with any implied condition precedent. Even on the assumption that there is a common law principle of common mistake, the CDC were at fault and had no reasonable grounds in entertaining in the belief that the ship existed cant then rely on it as a basis for getting out of the contract.
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*Svanosio v McNamara (1956) 96 CLR 186, CMCLA 20-17, 20-19, 20-35 via AustLII Sale by M to S of hotel and land (on which it was thought hotel stood), together with licence and goodwill. Price of 5,000 apportioned 800 to premises, 4,200 to licence and goodwill. After conveyance of title, S discovered that about one-third of the hotel building stood on Crown land. No suggestion of fraud. Issue: Was the contract void for common mistake?
-1. The contract was effective notwithstanding the mistake the vendor still
From the plaintiffs point of view, could not have run a misrepresentation case. As a purchaser they would be stuck with the property because of the rule in Seddons case (cannot rescind for innocent misrepresentation). Purchaser had to rely on mistake. HC held that the mistake did not affect the validity of the contract.
sold a plot of land and the purchaser still got two thirds of the hotel. -2. A contract for the sale of land contains clauses dealing with errors or misdescriptions allowing the buyer to pull out of the contract after exchange or a provision for compensation. This contract contained such a clause. The contract itself therefore directly deals with common mistake. HC thought there was no room for operation of common mistake. *Solle v Butcher [1950] 1 KB 671, CMCLA 20-11 Common mistake in equity. Approved in Australia but rejected by the HoL in the UK. B and S were partners in a real estate business styled Godfrey and Charles. B took a long lease of a building containing five flats. Spent a considerable sum repairing them. B and S discussed the applicable rent for the flats once the work was done. Thought that flats were not subject to rent-control by statute (standard rate was 140l pa). B let one flat to S at 250l pa for seven years. Parties fell out. S claimed that the lease was subject to the rent-control. B sought rescission. Issue: If the flat was subject to rent-control, could B rescind for a common mistake? At common law, the contract would have been effective and common mistake would not have applied. Denning elements of common mistake in equity.
-Parties entering under a common misapprehension as to their rights or facts. -That misapprehension needs to be fundamental (in a broader sense than CL).
Here the mistake was fundamental in that it significantly affected the price. -Party who seeks to set aside the contract for mistake must not be at fault.
-Possibly a fourth element discussed in later High Court cases some degree
of unconscionability that affects the party wanting to get out of the contract. Contract was set aside in equity. It was a voidable contract. Limits to granting the remedy of rescinding the contract:
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-The same principles that would apply in misrepresentation apply for rescission
in mistake in equity. -Did not apply Seddons rule essentially said, it has been rubbished so I dont have to follow it! (Dubious!) If both parties innocent, surely best analogy would be with innocent MR so Seddons should have applied. Alternative remedy: to allow the tenants stay on the premises but only on the proviso that they pay the market price (unusual relief). *Sale of Goods Act 1923 (NSW), s 11 Goods which have perished Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.
Common mistake is clearly very narrow. There have been few successful common mistake cases in CL. Some egs: -Coronation cases.
-Line of cases in which A sold B goods, neither realising that B already owned
them. -A sold B goods, neither realised they had already perished. Some cases found this to be common mistake, but in McCrae HC cast doubt. But now enshrined in statute. Wider scope under equity (Solle). Equitable rule prevails.
(ii) Mutual mistake
The parties are at cross-purposes about the contract: eg Alan offers to sell his car, meaning his VW, to Brian for $5000 and thinking that Brian believes he is offering his VW. Brian accepts thinking Alan means his Porsche. Not a separate legal doctrine. Dealt with as an issue of formation of contract where subjective intention is irrelevant. Court looks at whether it can give any meaning the phrase that caused mistake, e.g. Alans car if it cant give it any meaning, contract is uncertain and falls over. -But if it can give it a meaning, e.g. the VW, that interpretation prevails and the contract continues. Error of interpretation no basis for rescission. Goldsbrough Mort v Quinn (1910) 10 CLR 674, CMCLA 20-24 via CLR Grant by Q (def) to GM (pl) of option to purchase land. Price was 1 10s per acre calculated on a freehold basis. Q claimed that he thought this meant he would receive 1 10s per acre, clear. GM claimed that it meant that if the land was not conveyed as freehold, GM could deduct from the purchase price the amount it would have to pay the Crown to convert the land to freehold. GM sought an order for specific performance.
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If Qs construction was incorrect, could Q rely on this mistake? No, if the court cant give an essential term any meaning, the contract is void. But if it can assign a meaning, that meaning prevails and the contract is valid a mistake in interpretation the contract is no basis for rescinding the contract.
Raffles v Wichelhaus (1864) 2 H & C 906
(iii) Unilateral mistake
One party enters a contract under a misapprehension of which the other is aware: eg, Alice offers to sell her car, meaning her VW, to Bella for $5000. Bella accepts thinking Alice means her Porsche. Alice knows of Bellas mistake. One party is mistaken about:
-Identity -Terms of the contract and quality of the subject matter of the contract.
Identity.
-Generally concerned with a particular type of case of sale of goods. Seller

Rogue (First buyer) Second buyer. First buyers cheque bounces for e.g. -Seller could sue for damages in fraud, but difficult because Rogue usually doesnt have money and has gone missing. -If 1st contract valid, then Rogue acquires title to goods, which it can pass to 2nd buyer, so 2nd B owns the goods, seller loses out. -If 1st contract is void, no title can pass to Rogue nemo dat quod non habet. R cant pass on title to 2nd B, so between seller and 2nd B, seller wins.
*Cundy v Lindsay (1878) 3 App Cas 459, CMCLA 20-42 Sellers: L. Rogue: Blenkarn. B wrote to L to order goods (linen). He gave his address but signed the letter with the name of a reputable firm Blenkiron & Co. L delivered the goods without payment. Second buyer: B then sold some of the goods to C. L sued C for conversion. HC found that the first contract was void, therefore no title passed to B or C.
Akin to an offer and acceptance problem. No correspondence between the parties to the contract in terms of offer and acceptance. B wanted to buy goods from L but L wanted to sell goods to Blenkiron & Co, no face to face dealings. Therefore no formation of contract.
*Lewis v Averay [1972] 1 QB 198, CMCLA 20-49 Seller: L. Rogue: Claims to be Richard Greene, TV actor. Pays for car with a fraudulent cheque. Second buyer: A. L sues A for conversion. Was the first contract void? Unlike in Cundy, the parties were face to face. The first contract was valid and the rogue passed title to the car to A.
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Denning LJ: when parties deal face to face there is a rebuttable presumption that they intend to deal with the person physically present. In this case, there was nothing to rebut the presumption. L intended to deal with the rogue. -The presumption operates because this kind of mistake situation is no different from fraudulent misrepresentation. Therefore the contract is voidable and the appropriate remedy is rescission. -The seller usually loses unless they act quickly to rescind before the goods are sold on. -Presumption might be rebutted if the rogue understood if the innocent person was intending to contract with someone other than the rogue though Wayne thinks this is a bit silly, as do some Js.
*Smith v Hughes (1871) LR 6 QB 597, CMCLA 1-41 Unilateral mistake at common law. Seller sold oats to the buyer. Court drew a distinction between two things: -(1) The seller believed that the buyer believed that the seller was selling old oats. A mistake as to the quality of the subject matter. -(2) The seller believed that the buyer believed that the seller was promising the oats were old. A mistake as to a term of the contract. Seems that the court acknowledged that if (2) were the case, the contract would be void for unilateral mistake. -The judgment is confusing though. Would have to be a serious mistake. Superseded by later cases. *Taylor v Johnson (1983) 151 CLR 422, CMCLA 20-32 via AustLII J granted option to T to purchase 10 acres of land. Price - $15k total was specified in the option. When J executed the option, she believed that the price was $15k per acre. At time of contract, land value estimated to be $50k, but land might increase in value to $195k after rezoning. T knew correct price. Appears to have known that J was probably mistaken as to price. Took steps to inhibit Js discovery of correct price avoided mentioning price; pretended not to have copy of option with him. Could the contract be rescinded? Test applies to written contracts.
1. Concerned with a serious mistake about a fundamental term of the

contract. 2. Element of unconscionable conduct.
Here, the non mistaken party were aware of circumstances that indicated that the seller was mistaken. The non mistaken party deliberately set out to prevent the mistaken party discovering their mistake. Not easily reconciled with Smith which also dealt with an oral contract.
(iv) Rectification of documents

LAWS1017 Torts and Contracts II 62
Equity will rectify a document which mistakenly does not correctly record the true agreement between the parties.
Pukallus v Cameron (1982) 43 ALR 243, CMCLA 21-06 via AustLII
(v) Non est factum

Applied where someone denied signing the contract at all or where a party admits they signed it but it was not the document they thought it was. A very narrow doctrine.
*Petelin v Cullen (1975) 132 CLR 355, CMCLA 21-19 via AustLII P granted to C an option to purchase land. C did not exercise option in time. Cs agent asked for an extension and offered $50. Cs agent later met P. P signed a document, which he believed to be a receipt for the $50 only. It was, in fact, a document extending the time for the exercise of the option. C later exercised the option within this extended time. P spoke little English and could not read English. Cs agent was aware of Ps limited understanding of English. Issue: Could P succeed on a plea of non est factum?
-(1) Non est factum is only available to a limited class of persons e.g. blind or
illiterate, or those who through no fault of their own are unable to understand the nature of what theyre signing. -(2) Needs to be a radical difference between what they actually signed and what they thought they were signing. -(3) When it comes to innocent parties, the person who signs under their misapprehension they must not have been careless when signing. P was a member of the relevant class of persons. There was a radical difference between what he signed and what he thought he was signing. As to (3), Cullens agent was involved in this particular deal and was willing to impute that sort of knowledge to Cullen personally. Saunders v Anglia Building Society [1971] AC 1004
B. Duress
Duress is a threat of a wrongful act (against person, property or economic interest) which forces another to agree to a demand.
*North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705, CsB 22-06 Shipbuilding contract; H to build tanker for NOS. Price to be paid in instalments, fixed in USD. Letter of credit from H to NOS to secure repayment of instalments if there is default. USD depreciates 10%. H
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refuses to finish vessel unless NOS pays 10% more. Over protest, NOS agrees to pay the extra 10%; H increases letter of credit by same margin. Issue: Was this transaction voidable for duress?
Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40, CMCLA 22-10, 22-11, 22-13 via NSWLR
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9. Vitiating factors: Undue influence & unconscionable conduct

Common law: -Undue influence. -Unconscionable conduct. -Principle from Yerkey v Jones, which sits in between.
Before entering into contract. Some of these things apply more widely than just contract. Common law then statute.
A. Undue influence

Parties A and B A = stronger party, B = influenced. Transactions between A and B in situations in which B does not exercise independent free will in entering into transaction deals with quality of Bs consent. Principle: B has not entered under own free will but under persuasion of A.
Several categories (these arent legal terms): -1. Situations where law applies presumption that B has entered under As
undue influence. -2. Concerned with actual undue influence, not presumptions.
-In 1, question is what factors will activate presumption? For A to rebut

presumption. -In 2, concerned with As actual conduct.
Category 1. -1a. Law recognises certain classes of relationships as by default giving rise to
presumption of undue influence. Easiest way for B to make out case. Principle concern as plaintiff is to show that relationship between A and B falls into one of these classes. Then up to A to rebut presumption. Classes arent fixed but are reasonably limited, e.g. parent-child; guardian-ward; solicitor-client; religious advisor-parishioner. Some circumstances whereby law says a class of relationship isnt recognised as automatically giving rise to resumption, e.g. dentist-
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patient (whereas doctor-patient is), employer-employee, husbandwife/wife-husband. -1b. Cases where relationship doesnt fit into 1a categories but relationship between A and B is nonetheless such that it justifies a presumption more ad hoc. If undue influence is found, the general effect is rescission.
There is a degree of latitude built into law for transactions between A and B that are naturally motivated by love/affection/friendship. Law only gets involved for transactions that cant be explained by these natural human feelings. -E.g. give present to father for Fathers Day, later have falling out, demand gift back, say that father-child is recognised category. Court wouldnt even find presumption, and if it did, easily rebutted.
Allcard v Skinner (1887) 36 Ch D 145 *Johnson v Buttress (1950) 84 CLR 377 B transferred real property to J. The property was Bs only substantial asset. Transaction was a gift. B had known J for about 20 years. Was accustomed to rely on her for advice on business matters. B did not obtain independent legal advice in relation to the transaction. B was of less than average intelligence and had no capacity for business matters (Latham CJ: highly excitable, very stupid and mentally unstable). -At the time seemed that he thought the gift was revocable, but it wasnt.
-After B dies, son contests the transaction. Not a contract because a gift, just
a transaction. Principle here is same for contracts. Issue: Could the transaction be avoided for undue influence? [1b category case.] -Long-standing friends not a recognised category.
HC said yes, presumption applies, and J did not rebut it. -Dixon J: key quality that relationship must have is a position of natural
ascendancy or influence on part of A and a dependence/trust on part of B. This also probably explains the 1a classes.
-Dixon J: explains a close relationship between 1b and 2 (actual undue

influence) both look at the facts of the case, so they can blur. But they should be conceptually kept separate. With actual undue influence look at similar factors but different focus.
-Factors the court is willing to consider: Always depends on all of the circumstances. May well be that strength
of the presumption varies depending on circumstances. Intelligence of B. Whether transaction is purely voluntary or whether consideration was received (not decisive, but court is more likely to infer presumption for gifts).
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How to rebut presumption? -Key is for A to show B exercised independent free will. Relevance of legal advice HC suggests that independent legal advice
by B goes a long way to rebutting, but not decisive. Absence of legal advice tends to suggest there was undue influence. Bank of New South Wales v Rogers (1941) 64 CLR 42 A wants to borrow money. Convinces B to provide security, which is then provided to C, who is loaning A money. Can B argue as against C that B has been affected by undue influence by A? -A was uncle, B niece (but 60 years at time), C the bank. Uncle didnt repay money, Bank sought to take the security from B. Much harder for B to establish undue influence. Generally need to show further (in addition to principles from A v B cases) that: -A was acting as Cs agent i.e. impute conduct to C itself essentially; OR
-C had knowledge/ought to have been aware that there was a relationship of

undue influence between A and B, i.e. know circumstances that give rise to presumed or actual undue influence. Bank knew that uncle and niece lived at same address, and that uncle had witnessed nieces signature on all relevant documents. One judge went so far as to say bank knew they were uncle and niece, other judges stopped short of this. -HC said that Bank was affected by notice of undue influence of uncle over niece.
B. Unconscionable transactions
Originated in 18th C, designed to protect 18th C equivalent of Paris Hilton, i.e. young people waiting for relative to die to inherit large estate in short term enjoy lifestyles beyond their means, often ran into difficulties. 18th C Cash Converters appeared, unscrupulous people would make deals with expectant heirs small amount of cash/property, in return heir would assign large part of their inheritance (catching bargains) -Law found something in these cases that went beyond mere stupidity. Undue influence is generally about quality of Bs consent. Unconscionability is more concerned about conduct of stronger party A in exploiting Bs position. Some reluctance by law to get involved. In transactions A and B rarely are in equal positions. But in certain circumstances court recognises Bs disadvantage merits protection.
(i) Equitable principles

*Commercial Bank of Australia v Amadio (1983) 151 CLR 447 CMCLA 24-06
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V was MD of a company, V Amadio Builders Pty Ltd. Co was facing a severe liquidity crisis and was substantially overdrawn with the CBA. CBA froze account. CBA agreed to reopen account if Vs parents, Mr and Mrs A provided a guarantee, secured by mortgage over their home. V told his parents that the guarantee/mortgage would be limited to $50k and of six months duration. It was not unlimited time and duration. Mr and Mrs A were both > 70 years old and had limited grasp of written English. They signed the document, without reading it, in the presence of CBA manager at their own home. Received no independent advice. Issue: Could the guarantee/mortgage be set aside? Argued unconscionability. HC majority found case of unconscionability made out. Consequence: rescission. Guiding principles that define unconscionability (Mason J and Deane J):
-1. B must be in a position of special disadvantage or under a special disability

(no substantial difference between terms of disadvantage and disability). Mason J: i.e. B unable to exercise judgement of what is in its own best interest. -2. A must have certain degree of awareness of Bs disability/disadvantage. Mason J: A actually knew, or ought to have known (reasonable person in As position ought to have known). -3. (something of a corollary) A then takes advantage of Bs disability by entering into the transaction with B. -Deane J: if these are met, B establishes prima facie case of unconscionability, but A can rebut that by showing transaction was fair, just, and equitable. Special disability/disadvantage: Here age, limited grasp of English.
Deane J: disadvantage sufficiently evident to A.
Awareness Bank manager actually there when they signed document, and was aware that they didnt understand document (one of them said, its only limited, isnt it?). Bank therefore took advantage knew company was in deep trouble, so knew there was good chance it would call on the security.
What amounts to special disability/disadvantage? (Many of these mentioned in Blomley) Illness and infirmity.
Ignorance, lack of education, inexperience. Intoxication. Poverty or need of any kind. (Gender mentioned in the past, but this probably not accepted these days.) Anything that affects persons capacity to make judgement about their own best interest.
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Bridgewater v Leahy (1998) 72 ALJR 1525 Louth v Diprose (1992) 175 CLR 621 Solicitor love struck, gave property to woman, then ended in tears, she refused to give property back. -King CJ: quite pathetic devotion.
HC majority seems to think woman was scheming. Other judges think this is unfair, the man was just a bit silly and shouldnt be allowed out of contract. -HC majority said it was unconscionable.
Blomley v Ryan (1956) 99 CLR 362 Alleged that plaintiff entered transaction under unconscionable circumstances. Plaintiffs condition: multi-day drunken bender wearing same clothes, D plied him with more alcohol before getting him to sign contract selling property at gross undervalue. Court found this unconscionable.
Fullager: court reluctant to rescind contract just because they were under influence of alcohol, but facts of this case sufficient.
(ii) Statute
Courts generally just run through the shopping list of factors to consider.
(a) Contracts Review Act 1980 (NSW) State Act that deals with unjust contracts. Two important limitations: -Only individuals can take advantage of it. -Generally doesnt help people for transactions of a commercial nature. Unjust contracts incl unconscionable, harsh, oppressive. Dont need to look at it in great detail. Look for: Heres a list of factors to consider when looking at whether contract is
unjust (s 9). -Most are concerned with procedural cf substantive issues rather than actual content of contract. If contract is found to be unjust, court has certain powers to give relief, incl varying the contract, declaring it void, refusing to enforce all/part of it slightly broader than CL (rescission). *West v AGC (Advances) Ltd (1986) 5 NSWLR 610 AGC loaned $68k to Mrs W. Loan was for two purposes: (1) discharge of existing mortgage over home; (2) investment of c. $40k in company, Q, of which Mr W was part-time employee.
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At time of loan, Mrs W knew that Q was having difficulty meetings its debts. Loan at ordinary commercial rates and secured by mortgage over Mrs Ws home. No independent legal advice, but had been warned against transaction by son (an accountant). Barrister friend had also suggested obtaining better security. Issue: Could Mrs W obtain relief under the CRA?
St Clair v Ptrivic & Anor (1988) ASC 55-688 Gough v Commonwealth Bank (1994) ASC 56-270 Esanda Finance Corp v Tong & Ors (1997) 41 NSWLR 482
(b) Trade Practices Act (Cth) ss 51AA, 51AB, 51AC All three sections can apply independently. S 51AA. -Says in essence that corp must not engage in conduct that is unconscionable
within meaning of unwritten law, i.e. within case law. -If contravened, affected party has broader right to relief under other provisions of TPA than under CL e.g. s 87. -Some dispute about what the provision means.
Most people understand it as Amadio-style unconscionability, i.e. special disadvantage of which other party is aware and exploits. But never decisively settled by HC.
Pritchard v Racecage Pty Ltd & Ors (1997) ATPR 41-554 *ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Proceeds on Amadio-style understanding, counsel argued this so HC didnt have to say whether thats the limit of it, but some hints it might be. Mr and Mrs R operated fish and chip shop in shopping centre. Wanted to sell business. Decision partly motivated by their daughters serious illness, which would require expensive treatment. Business was not attractive to buyers unless the sale included a lease of the premises. But their lease was about to expire and Mr and Mrs R had no right to renewal. In tough negotiations, shopping centre owners agreed to renew lease so that Mr and Mrs R could complete sale. However, Mr and Mrs R had to agree in return to withdraw from litigation against the centre over excessive levies. Issue: Was this unconscionable conduct under s 51AA?
Gleeson CJ (described by another judge as clever but cold-hearted): says it isnt even close to unconscionable conduct. Legitimate commercial armtwisting. Majority agrees. HC says, not unconscionable.
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S 51AB: -Generally concerned with conduct of corp in relation to consumer -Generally concerned with business-to-business conduct. Both sections take diff approach to s 51AA/Amadio. Set out list of factors to
consider in assessing whether corp has contravened expected standard of conduct. -Dont have to memorise the shopping list, just be aware that its a different way of thinking about unconscionable dealing. Broader considerations. Consequence of contravening either is to give access to the TPA remedies (broader than CL). goods/services. S 51AC:
(iii) National Credit Code (iv) Australian Consumer Law unfair contract terms
Major changes afoot that will take place next year. TPA wont be called TPA any more, sections will be renumbered, reordered. New provisions will be inserted. Dont need to learn for this course, but just be aware for future! An already operative change: unfair contract terms scheme just be aware of it. -Will render void unfair terms in standard form consumer contracts.
-Many people scared because this is extremely wide. -Concerned with substantive unconscionability (mainly), as opposed to
procedural. I.e. distinction between matters affecting conduct up to and incl formation (procedural) cf actual content of the contract (substantive).
C. Principle from Yerkey v Jones
Sits between undue influence and unconscionability. Closer to undue influence.
*Garcia v NAB (1998) 194 CLR 395 Mrs G provided bank with several guarantees of the indebtedness of her husbands businesses. Did so: because her husband consistently pointed out what a fool she was in commercial matters whereas he was an expert, and because she was trying to save her marriage. Did not understand the
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width of the guarantees and did not realise that they were secured by mortgage over her home. Mr and Mrs G later divorce. Mrs G applies to have guarantees set aside. No positive finding of undue influence exerted by Mr G, and husband-wife not an established category for presumption. Not really a case of special disability/disadvantage. Plus for either one, hard to establish Bank was on notice. HC allowed wife to get out of contract Yerkey v Jones principle.
Principle applies: -1. Where wife provides guarantee of husbands debts. -2. Transaction was voluntary (wife obtains no real benefit). -3. Wife doesnt understand nature or purport of transaction. Lender should be
taken to understand that because of the nature of the relationship between marriage partners wife places trust and confidence in husband and husband not likely to explain it fully. Bank takes no step to ensure that transaction fully explained to wife. Is this principle anachronistic? Gaudron J in majority made strong point that it isnt a principle based on subservience of women. Suggested it could be expanded to include reverse, or same-sex, de facto etc. In this case didnt need to expand. May be that doctrine can expand to other sorts of transactions, not just guarantees.
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10. Causation and remoteness of damage in contract

Very different topic to everything in past weeks, which have dealt largely with pre-contract actions that affect contracts validity. From now on, assume there is a valid contract, but party is seeking damages for breach. In past Contracts, have talked about termination for breach. Now talking about other important right damages.
Two kinds of damages. Every breach of contract is actionable per se. To be properly compensated, need to show the damage that has been suffered though. -Nominal damages plaintiff cant show real loss, then limited to nominal damages. In the past, $1 essentially. These days more judicial wheel of fortune, e.g. $400 sounds about right. Generally dont bother going to court if you cant prove loss. -Substantial damages plaintiff can show real loss.
Substantial damages four problems: -1. Causation. -2. Remoteness. -3. Whether that kind of loss can be recovered. -4. Measurement. Purpose of damages: -Same as tort, to put P as far as possible in position they would have been in
had the wrong not occurred. But plays out a bit differently. Place P in position had contract been performed.
Causation and remoteness. -Similar to tort but operate a bit differently. -Causation inquiry about whether the wrong led/caused Ps loss. -Remoteness how would we have expected breach of contract to play out,
i.e. was this loss expected?
(i) Loss
Alfred McAlpine Constructions Ltd v Panatown Ltd [2000] 3 WLR 946
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(ii) Causation

Common sense causation March v Stramare. With but for used as negativing principle. Usually not caught by Civil Liability Act. Generally quite straightforward in contract. Breach must cause loss need not be sole or dominant cause.
Hadley v Baxendale (1954) 8 Ex 341 *Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 Contract to install a security door at rear of shop. Implied term that door, as fitted, would be reasonably fit for purpose of preventing entry by burglars. Breach of this implied term. Thieves broke in and stole stock. Would have taken between 45 and 60 minutes. Issue: Did the breach cause the loss of the stock?
Difficult to answer but for - unable to say whether the theft would have been avoided if the door had been installed in compliance with the contract. Both sides stuck with but for. Before March v Stramare, but HC does adopt essentially a common sense approach: - If P could show a. Door not fit for purpose, and b. There was a theft through the door, then a prima facie case of causation is established, which is for D to rebut (which it could not here).
(iii) Remoteness
Test is distinctly narrower than in tort beyond a certain boundary, losses would not have occurred. (a) What kind of loss is to be compensated? Hadley v Baxendale (1854) 9 Ex 341 A mill, broken crankshaft. D engaged to carry it but due to breach of contract delivered it late. P seeks compensation for loss of business. Allows recovery of loss: Arising naturally, that is, according to the usual course of things, from breach; or - Such as may be reasonably supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of breach Contemplation is different to reasonable foreseeability in tort. Test was changed in case below. I.e. two limbs to the test - reasonable foreseeability (imputed knowledge) and reasonable contemplation (actual knowledge).
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This test tends not to be used much anymore because it was restated (or reformulated?): *Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, CMCLA 35-06 Sale of boiler to launderers and dyers. Buyers told sellers that they intended to put it to use in the shortest possible time. Delivery delayed by a little over 5 months. Buyer claimed for lost profits, including profits lost due to being unable to accept particularly lucrative contracts from government (200 pounds/week). Issue: Were these profits recoverable? Are these losses too remote? Reformulation of the rule in Hadley into two elements (Asquith LJ)
Knowledge part what the defaulting party ought to have anticipated as a result of its breach, what that party knew or ought to have known. Everyone is presumed to know what happens in the normal course of things (1st limb Hadley) - imputed knowledge i.e. objective. Need knowledge of special circumstances at the time of contract (2nd limb H) - actual knowledge i.e. subjective. Contemplation or probability part given that knowledge, need to consider likelihood of the consequences. Foreseeability element. Pertains to both limbs, to all knowledge. Relevant likelihood is reasonable foreseeability. [Kind of damage.]
Ordinary profits recoverable under the first limb. If you deliver a productive machine late, its not unexpected that business would lose profits. Extraordinary profits are only recoverable if the defaulting party had knowledge of the nature and terms of those govt contracts. On the facts, they didnt possess that knowledge. (b) Foreseeability *Koufos v Czarnikow Ltd [1969] 1 AC 350, CMCLA 35-10 Charterparty of vessel for carriage of large quantity of sugar. Charterers of vessel (C) were sugar merchants who intended to sell at the destination port. Owners of vessel (K) knew of market for sugar at destination port but not of the charterers intention to sell the sugar. Vessel deviated from agreed route, which was a breach of contract by the owners of the vessel. As a result, vessel arrived at destination port later than expected. The market price for sugar had fallen during the delay (9 days). Issue: Could charterers obtain damages for fall in market? Had to be argued as a first limb case owner did not know the charterers were going to sell. HOL said that was ordinary loss was not too remote. Probability/contemplation test is more stringent than the tort test of foreseeability but might still be less than 50% - word to describe the probability is a matter of semantic disagreement. Never resolved which term preferred in Aust,
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but probably right to say not unlikely or likely have garnered reasonable support. *H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791, CMCLA 35-18 U contracted to supply and install a hopper to store pigfeed. Hopper not properly ventilated. This was a breach of a term of the contract that the hopper be reasonably fit for purpose. Nuts became mouldy. Ps pigs ate nuts anyway. Led to diarrhoea and E. coli infection. Many pigs died. P claimed damages for dead pigs; expenses incurred in dealing with outbreak; lost sales. Assessed under first limb of Hadley v Baxendale. Trial judge held no serious possibility or real danger of mouldy nuts causing such degree of illness in pigs, chain of events too remote. Lord Dennings approach not the one to follow apply a uniform test for probability across tort and contract. If the plaintiff claims for purely economic loss in contract, should apply the reasonable contemplation (more stringent test) but if theyre simply claiming for property damage and consequential economic loss apply the tort test. This was not a completely unfounded theory. Lord Scarman: difficulty in distinguishing between the tort and contract test particularly when you can conceive of many situations where you can sue in tort and contract at the same time, but he still sticks with the Koufos test. - Consider whether loss was likely, not unlikely, a serious possibility, etc. The question is not could you have predicted the precise chain of events but loss of that general kind or type arising from that kind of breach? - The breach was that the hopper was not suitable for storing pig food. Loss was illness and death of pigs. Was it not unlikely that pigs might not fall ill? Yes it was quite likely. Framed in that way, the loss was clearly not too remote.
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11. Measure of damages in contract and sums fixed by contract

A. Measure of damages
(i)
Expectation damages
Expectation damages attempt to place the plaintiff in the same situation as if the contract had been performed. In a contract for the sale of goods, the expectation interest is often calculated by reference to market price. The basic rules are: Non-delivery: Sale of Goods Act 1923 (NSW), s53(3) Non-acceptance: Sale of Goods Act 1923 (NSW), s52(3) Sale of Goods Act 1923 (NSW),s 52 Damages for non-acceptance (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyers breach of contract. (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or if no time was fixed for acceptance, then at the time of the refusal to accept. Sale of Goods Act 1923 (NSW),s 53 Damages for non-delivery (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the sellers breach of contract. (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver.
(a) Date of assessment - usually at breach

Hoffman v Cali [1985] 1 QdR 253, CMCLA 36-43
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Contract for sale of property by C to H, off the plan. Price: $89k. No date for completion C repudiated, H accepted and terminated. At that time, value of property was $130k. At time H began proceedings against C, value of property was still $130k. At the time the project ought reasonably to have been completed: value was $104k. Issue: What was Hs loss? Loss is 104k.
Assessment calculated at the time of breach (not termination - otherwise would leave it to P). In context of the anticipatory breach, assessed at time that it would have been delivered.
(b) Difficulty in assessing damages is no reason not to do so

Howe v Teefy (1927) 27 SR (NSW) 301, CMCLA 36-50 Plaintiff hired a racehorse for several years intending the race it. In breach of contract, the defendant took the horse back. What was the plaintiffs loss? Wont count the horses potential winnings because it was a dud horse, but there was an opportunity for the plaintiff to exploit the horse for profit apart from prize money. That loss was recoverable. Loss was not too remote because profit was the whole object of the contract. How much would have the chance been worth? Jury had awarded 250 pounds, court affirmed this. Street J: not too remote because making money from the horse was the whole object of the contract. Calculation of damages involves speculation so is difficult, but still should be made. Could get damage for loss of chance even though the chance was less than 50/50.
(ii) Reliance Damages

Damages to compensate for wasted expenditure prior to the date of breach because of the defaulting partys breach will sometimes be awarded.
*McRae v Commonwealth Disposals Commission (1950) 84 CLR 377, CMCLA 35-38 Sale of oil tanker lying on reef. No tanker actually existed. M paid 285 and then incurred costs in an expedition to locate and salvage the vessel. Claimed damages for wasted expenditure. Issue: Was this loss recoverable? Approaches
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Non-delivery of goods under Goods Act 1928 (Vic)? No because the ship was a
fantasy. Loss of chance? No, still an expectation benefit. Cth was promising that a ship existed, not a chance that the ship exists. Reliance measure of loss How to prove expenditure was wasted? Cth argued that the plaintiff might have wasted that expenditure anyway if they had found the ship and it was a dud. HC said that it was the Cths breach that made the plaintiffs expenditure inevitably a waste. That was a sufficient starting point for a prima facie case. Normally the burden is on the P to show expenditure was wasted. Cth couldnt do anything more to rebut this - haggling over what could have happened had a non-existent ship existed. Awarded damages for buying salvage rights and getting equipment to look for the ship.
*Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, CMCLA 35-43 via AustLII A to perform Coastwatch service for Cth for 3 years. A incurred substantial expenses (e.g., > $5M on aircraft, with resale value of < $1M) to perform services. Cth repudiated contract on first day of flights and A accepted shortly afterwards. If contract had run full term: First instance: Amann would make profit of $820k. In the HC: on a different view of As expenses, A would have made a loss on this contract. Issue: Could A recover damages for its wasted expenditure (c.$5.5M), even though this was > the anticipated profit? Yes. Limit on reliance damages cant let the plaintiff recover too much so that theyre in a better position than had the contract been performed. On who does the onus lie? Does the plaintiff have to show that he or she couldve recovered that amount? In circumstances, the onus actually shifts from the plaintiff to the defendant. Enough for the plaintiff to show that the expenditure was reasonable. Up the defendant to show that it was excessive, etc. Why does the onus shift? Mason CJ and Wilson, Deanne JJ onus shifts because they presumed that parties only enter profitable contracts. So presume that if you spend money for a contract you anticipate that you will recover it. Brennan J: presumption only operates where Ds breach makes it difficult or impossible to calculate where P would have been but for the breach (e.g. McRae). Court accepted that As expenditure was reasonable. Calculation: Court looked at expenditure up to the time of termination and extra that would have been spent to perform the contract had it gone forward.
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Then compared that to the amount they would have recovered from performing contract. If plaintiff can show it would have recovered full amount of expenditure, then that would be recoverable. However, for Amann this didnt look to be the case. But there was one extra variable - chance of follow-through on the contract in a great position to win the new tender after 3 year period was up. Applying the presumption, onus shifted to D to show income would be less than total expenditures. Fatal problem for D was that i couldnt assign value to the lost chance. So A won. Courts choice as to whether to award reliance or expectation damages or both (P doesnt get to choose). Can do both as long as no double counting. Simple example
Spent so far $3000 $5000 $7000 To spend Price Reliance dm $3000 $5000 $5000 Expectati on $2000 0 0 Total dmg s $5000 $5000 $5000
$5000 $5000 $5000
$10 000 $10 000 $10 000
Note: Where a vendor of land is unable to convey good title to the land, there is a common law rule (the rule in Bain v Fothergill (1874) LR 7 HL158) that often restricts the purchaser to reliance damages. This rule has been abolished in NSW (see s 54B of the Conveyancing Act 1919 (NSW))
(iii) Restitution Damages

Where the defendant makes a profit from the breach. E.g. A agrees to sell B iPad for $629 (market price). B goes to get it and pay, but A tells B A has got a better offer from C for $700. A repudiates contract with B; sells to C. B goes to Apple store and buys iPad for $629. Only difference is that hes had to queue etc. What is Bs loss? On expectation measure, Bs loss is 0. No wasted investment in the venture - no reliance loss. Can B say, by breaching contract with me A has made a profit of $71. I want that much in damages being how much better off he is for his wrong conduct. No! In contract this is not appropriate - always look at loss to innocent party rather than gain to defaulting party. Note, though, that in some cases in equity such losses are recoverable. But not in contract.
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Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361 B contracted with S to construct homes in a housing development. Number of houses limited to 72 by contract. B constructed 5 more houses, in breach of contract, and then sold them. S obliged by statute to give permission. S claims as damages the amount of Bs profit from selling the extra 5 houses. Issue: Was S entitled to that amount as damages? No. Court said P could only sue for its own loss, not the defaulting partys gain. AG v Blake [1998] 1 All ER 833; [2000] 3 WLR 625 Case 1, Case 2
(iv) Particular issues

(a) Plaintiff must prove the extent of the breach
CLA [35-05]-[35-07] Onus on P to show its loss.
(b) Effect of termination

CLA [36-13]-[36-17] If terminate for a non-serious breach, relying on contractual provision, then the court says that you have caused the future loss so cant claim damages for loss of bargain. *Shevill v Builders Licensing Board (1982) 149 CLR 620, CMCLA 36-34 via AustLII B leased property to a company STS&S; S was guarantor of the companys obligations. A clause in the lease allowed B to terminate if rent remained unpaid for 14 days. STS&S was often behind in paying the rent. When two months rent was outstanding B terminated lease and retook possession. Lessor eventually finds a new tenant. Lessor sued for two diff kinds of loss: Outstanding rent - 2 months rent due and owing. Uncontroversial. Lost future rent. Issue: Could B claim damages for loss of the bargain, that is, the rent to fall due in the future, less the amount obtained by the lessor through re-letting the premises? Generally, termination discharges all future duties, but not uncommon to claim damages for the loss of the bargain. Valued lost bargain as 1-2 [fairly standard]: 1: amount of rent to be paid for the rest of the term of the lease. 2: amount lessor had received once it had started re-letting the premises.
HC held that this amount was not recoverable as damages. Need to characterise the nature of the breach by the lessee.
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If the lessee commits a serious breach i.e. of a condition, that would allow termination at common law, then no problem for claiming damages for loss of a bargain. But in this case held that the lessor had terminated for a non-serious breach, which you normally cant do at CL but relied on the contractual provision. Generally how the law works - time is not of the essence for obligations to pay. All of that future loss is caused by the lessors decision to terminate, not by the lessees breach. I.e. explained more-or-less in terms of causation.
(c) Effect of taxation and inflation

CLA [36-23]-[36-24]
(d) Injured feelings

CLA [36-08]-[36-10] Golden rule - innocent party placed in position they would have been in had the contract been performed. Much of the time courts interpret this as financial position. Most contracts cases are financial in nature. But can imagine cases with disappointment etc. Jarvis v Swan Tours Ltd [1973] 1 QB 233, CMCLA 36-13, 36-14, 36-18, 36-23 Jarvis had booked skiing holiday. Comedy of errors - wrong skis, yodelling night was really bad, only person in villa, tea cakes were hard! I.e. generally disappointed all round. *Baltic Shipping Co v Dillon (Mikhail Lermontov) (1993) 176 CLR 344, CMCLA 36-15 D booked pleasure cruise on the Mikhail Lermontov. Vessel sank a little over halfway through the voyage. D claimed damages for, inter alia, (1) lost property; (2) disappointment, distress; (3) personal injuries (incl emotional trauma). Issue: was she entitled to damages for (2)? General rule is that these sorts of damages are not recoverable in contract. HC majority said this isnt simply an issue of remoteness, but an extra limitation as a matter of policy. In contract generally dont have concepts of aggravated or exemplary damages - purely compensatory. But exceptions to the general rule: Used to be action for breach of promise of marriage - i.e. ditched at alter, could sue for injured feelings - doesnt exist any more. Physical inconvenience due to breach of contract. Hobbs - Mr Hobbs and wife bought train ticket to destination X, train went to Y. Late at night, had to walk home in rain. Mrs Hobbs caught a cold. Sue railway company for breach of contract claiming damages (1) for
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inconvenience; and (2) cold caught by Mrs Hobbs. Court allowed (1), held that (2) too remote. Physical injury due to breach of contract. Incl nervous shock/psychiatric harm etc - classed as a kind of physical injury. So (3) recoverable. Item (2) fell short of this. Freedom from molestation exception (i.e. harassment or bother). Heywood v Wellers - A client was being harassed by someone nasty, went to solicitor, asks solicitor to arrange a restraining order. In breach of contract, solicitor doesnt carry out instruction as required (either didnt get one at all or an interim one that was then allowed to lapse). Client bothered again - could be compensated by this as damages for breach of contract. Series of holiday cases e.g. Jarvis. HC says you can recover for injured feelings in two cases: Proceed from physical injury or inconvenience; or Where object of contract is to provide relaxation or enjoyment or freedom from molestation. The pleasure cruise fell within the second category, so (2) recoverable. Mason J: could probably also have recovered (2) on the basis of the first category - i.e. anxiety etc stemmed from physical injury (emotional trauma). Elizabeth Macdonald, "Contractual Damages for Mental Stress" (1994) 7 JCL 134
(e) Reinstatement costs

CLA [36-11]-[36-12] *Bellgrove v Eldridge (1954) 90 CLR 613, CMCLA 36-27 B contracted with E to construct a two-storey villa. Contract price was 3,500. Substantial defects in foundations and in mortar used in the walls. Trial judge awarded damages of 4,950 on a reinstatement basis, that is, on the basis that the plaintiff was entitled to the cost of rectifying the defects. The sum included the cost of demolishing and reconstructing the building. Issue for HC: was this the correct basis upon which damages were to be assessed? Other obvious option - give homeowner the difference in value. In construction contracts, the default measure (prima facie measure) is the cost of reinstatement/rectification. For commodity goods, usually difference in value. For construction, courts quite protective of a persons home. Also, with goods you can easily sell if you dont want it and get an equivalent product, whereas homes and land are quite unique. A qualification to this measure: Only awarded when it is necessary to do the work and it is reasonable to do so in the circumstances.
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What the building owner intends to do with the damages is irrelevant. I.e. doesnt matter if they intend to keep the money and live in the damages building and not actually use the damages to fix it. Therefore, appropriate in this case to award cost of reinstatement. Ruxley Electronics v Forsyth [1995] 3 WLR 118 Ask builder to build swimming pool in backyard, want a deep swimming pool. Specify it will be 7ft 6in deep. In fact pool is built at 6ft to 6ft 8in. Still functional, homeowner as no physical need for it to be deeper. How much to award? Neither of the two usual measures seem appropriate. Difference in value? Doesnt seem like there really is any, possibly even a negative if its deeper. Cost of reinstatement would be huge because would have to rebuild. HL said would be unreasonable to award reinstatement costs. Instead awarded damage for loss of amenity - loss of enjoyment, pleasure. Did so on basis that contract to build pool has the object of providing pleasure, enjoyment. Awarded 2500 pounds - a bit of judicial wheel of fortune. Giliker Damages for distress or loss of amenity(1998) 19 Business Law Review 86-88
(f) Effect of contributory negligence

CLA [35-29]-[35-32] At common law contributory negligence is not a defence to an action for breach of contract: Astley v Austrust Ltd (1999) 73 ALJR 403 via AustLII. What if party could sue for breach of contract or negligence at same time e.g. professional has contract, negligently fails to exercise due care. Professional owes duty of care to client, but also could be express or implied term of contract - so two wrongs. Used to be the case that contributory negligence was only a defence on the tort claim, not the contract claim. That position has been altered, to some extent, by statutes in various jurisdictions in Australia since 2000. Under ss 8 and 9 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW), contributory negligence may apply to a claim for breach of a contractual duty of care that is concurrent and co-extensive with a tortious duty of care. Still true to say that in general contributory negligence is not a defence to breach of contract. Only other way that plaintiffs negligence could come into it is re causation - in some cases might be able to show that this negligence broke chain of causation. Very hard standard to pass though.
(g) Apportionment
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If a defendant breaches a contractual duty to take reasonable care, the plaintiffs claim may be subject to the apportionment scheme set out in Part 4 of the Civil Liability Act 2002 (NSW). It has even been suggested that the scheme may apply where the defendants breach arises from a failure to take reasonable care, even though this was not the substance of the obligation breached (Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187).
See the material below for Week 12.
(h) Damages in equity

CLA [36-25]-[36-29]
(v) Mitigation
CLA [35-33]-[35-37], [36-05] The plaintiff must take all reasonable steps to mitigate the loss. Often regarded as third controlling factor (along with causation and remoteness). Sometimes see people talk about duty or obligation to mitigate which is broadly correct but could be technically misleading - its not that there is a contractual obligation, but that damages are reduced if steps to mitigate not taken. Three principles that are referred to by mitigation: Party cannot recover loss it ought reasonably to have avoided.
e.g. The Soholt.

Onus on defendant in default to show that P failed to take reasonable steps. Has to arise from the breach, i.e. the breach has to give rise to circumstances that make the mitigation possible. If its completely collateral then its not relevant for mitigation (e.g. if buy a lottery ticket after the breach and win lots of money, thats not taken into account). If in taking reasonable steps to mitigate loss, innocent party happens to exacerbate its loss, that increase is still recoverable as damages. Banco de Portugal v Waterlo. W printing notes for B. Criminals posed as bank to get notes from W. B honoured that, claimed as damages. W said, should have just not honoured. B said, cant really not honour national currency - reasonable for them to do this so it was recoverable, even though it increased the losses. Innocent plaintiff must account for benefits it obtains as a result of breach. e.g. Leasing out apartment. Have to terminate because lessee is rowdy etc. Lost future rent. But able to lease out apartment at a lower rate. Have to discount damages for these incomes. e.g. British Westinghouse.
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*British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, CMCLA 35-68 BW contracted to deliver and erect eight steam turbines for UER. Machines as delivered did not comply with contract. They produced less power and were inefficient - so railway had to buy more coal, incurred more costs in operating them. A few years later, UER replaced the defective machines with new ones. The new machines were even more efficient than the original machines were supposed to be, according to the contract. The increased efficiency offset the cost of purchasing the machines. Sued for damages. Claimed: Extra costs incurred up until the time of changing the machines (extra coal etc). Cost of buying the new machines. Issue: If UER were to include the cost of the replacement machines in their claim for damages, did they have to account also for the extra benefit received from the new machines? There was no doubt that once they switched over there was no more loss from the old machines, so that ongoing loss stopped. HL says: railway had to account for the extra benefit they got from having the new machines. In accounting for benefits, dont just count up to what contract said you would get, but account for benefits that go beyond that. Still has to be some connection between breach and conduct of the innocent party for these benefits to be accounted for. I.e. need to arise out of the same transaction. Sometimes the benefits will be too remote or collateral to the breach. e.g. buy massage, goes badly. Then go out and get drunk, have a great time this benefit cannot be accounted for when looking at damages owed by masseur.
White & Carter Councils Ltd v McGregor [1962] AC 413, CMCLA 37-37 M wanted C to advertise business on garbage bins, then decided against it. C advertised for three years as per contract anyway. Claimed the total cost. Duty to mitigate? HL said no - claiming debt owed under contract, not damages, so no obligation to mitigate. The Solholt [1983] 1 Lloyds Rep 605 Defendants agreed to sell vessel to plaintiffs for 5M. Defendants did not deliver on time, so plaintiffs terminated the contract. At this time, the vessel had a market value of 5.5M. Plaintiffs then offered to buy the vessel again for 4.75M. Defendants refused. Plaintiff sued for 500k. Issue: How much was the plaintiff entitled to recover?
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Prima facie measure would have been the 500k - lost expectation. Result: judge says buyer gets 0 because it had not acted reasonably to reduce its loss. Said that had buyer acted reasonably it would have suffered no loss rather than the 500k loss. What should buyer have done to have acted reasonably? Court said that it could terminate contract, but then should have offered to buy it again for 5m. Thats what it reasonably could have done to minimise its loss. Goes beyond Paizu - put onus on P to put forward fresh offer. How heavy is this onus? Perhaps only saying that if you re-initiate contract, must be reasonable. (Paizu v Saunders) Duty to mitigate might involve P accepting new contract offered by breaching party (if reasonable).
A. Recovery of sums fixed by the contract

(i) Damages distinguished from a debt due
CLA [37-01]-[37-06] Damages are payable in contract because a party has not performed the contract. Contrast with obligations to pay money that are imposed because that is what contract actually requires by way of performance of the contract. e.g. obligation to pay rent under a lease. e.g. wages payable to employee. e.g. borrowers obligation to repay money under a loan.
White v Macgregor: Court said council was claiming debt owed under the contract, so no requirement to mitigate. Young v Queensland Trustees Ltd (1956) 99 CLR 560, CMCLA 37-06 via AustLII
(ii) Liquidated damages clause distinguished from a penalty

CLA [37-07]-[37-17] In building contracts often a deadline, contract agrees that builder will be liable for X amount if misses the deadline - agreed damages clause/liquidated damages clause. Renders certain amount of damages - this is generally exhaustive and definitive, i.e. causation, remoteness etc dont apply.
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Courts generally uphold such clauses, but courts have been concerned that parties may start to impose extortionate amounts payable on breach because of different position of parties etc. Court draws distinction between genuine liquidated damages, which are okay, and a penalty. The tests arent concerned with mathematical precision. i.e. might be a bit more or less - not fatal to it being effective. If decide that it is a penalty re cl 1, that will taint it re cl 2 - i.e.. either good on the whole or not, no half measures. In practice often specify that certain liquidated damages provisions apply to certain clauses. Doesnt matter if its described as a penalty - court is concerned with the substance, not form. What is the effect if it is a penalty? Some say it is void, others say simply unenforceable. What is clear is that it cannot be relied upon. This doesnt mean plaintiff walks away empty-handed - falls back to common law rights, i.e. have to prove loss etc. *Dunlop Pneumatic Tyre Co v New Garage [1915] AC 79, CMCLA 37-17 NG bound by a price maintenance clause. NG was not to sell or offer for sale certain products (incl tyres, covers, tubes) below specified prices. Cl 5 provided that NG would pay D the sum of 5 for each and every tyre, cover or tube sold or offered in breach of this agreement, as and by way of liquidated damages and not as a penalty. NG sold a tyre cover below price list. D sought injunction and claimed damages. Issue before HL: was cl 5 a penalty? (Dunedin L) One of the tests most often applied: is the amount payable extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach? Stand in the shoes of the parties at the time of contract. Anticipate potential breaches to which the clause will apply. In relation to these, is the clause extravagant and unconscionable? Also, where a sum is made payable on the basis of several contingencies, it is prima facie a penalty. Whereas if for genuine loss, prima facie not. AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170, CMCLA 37-22 via AustLII Test used here by HC (quite similar to Dunlop): Is the amount out of all proportion with the loss likely to flow from breach?
(iii) Continuation of performance after breach

CLA [37-18]-[37-24] If relevant activity continues and the benefit is derived, the party that sought to terminate is liable (repudiation was not accepted).
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Faced with repudiatary breach, can either terminate or affirm. If the continued fulfilment of the contract doesnt involve the D doing anything, P can perform the contract and sue for the liquidated debt - plead it as debt, not contract. Three conditions: 1. P must fulfil all obligations under contract. 2. Must not need Ds cooperation. 3. Must have legitimate interest in pursuing it in this way - i.e. must have some reason for having wanted to go through with your performance (doesnt just mean so that can avoid requirements of mitigation if were to sue for breach). If you cant perform, your only choice is to terminate and sue for damages. In e.g. sale of land contract can affirm and sue for specific performance, but cant do that for contracts to perform services - court wont force people to work together if they dont want to. *White & Carter Councils Ltd v McGregor [1962] AC 413, CMCLA 37-37
(iv) Recovery after termination of payments due previously

CLA [37-25]-[37-41]
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12. Concurrent, proportionate & vicarious liability

Aims To develop statutory interpretation skills and an understanding of the following issues: the practical significance of damage or loss having been caused by multiple wrongdoers the statutory context of contribution rights the provisions of and issues raised by the new proportionate liability regime the difference between employees and independent contractors the circumstances in which an employer may be vicariously liable for the torts of an employee the incidence and significance of common law non-delegable duties Introduction In many cases, a plaintiff P will have suffered loss as a result of the negligence or other torts or other wrongs (e.g. breach of contract, breach of a fiduciary duty, breach of a statute) of more than one person ( A, B and C etc). In such cases the liability of the various wrongdoers may be concurrent. In this topic we look at two aspects of such multi-party litigation: the circumstances when A will be vicariously liable for the torts of B (and thus jointly and severally liable with B to P) Ps rights against concurrent tortfeasors or wrongdoers A, B and C the rights of those wrongdoers (A, B and C) between each other. Proportionate liability introduced in 2004 in NSW - only for property damage and economic loss arising out of negligence. Joint and severable liability still exists for all personal injury and all intentional torts (for any damages).
A. Vicarious Liability
There are three instances of vicarious liability at common law: employer/employee; principal/agent; partner/partner. In 2010 we will not consider agency or partnerships. 90% governed by common law. There is a statute - Law Reform (Vicarious Liability) Act 1983 - but it was only passed to fill in some gaps in common law.
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(i) Relationship of employer and employee

An employer is vicariously liable for a tort committed by an employee in the course of employment. An employers vicarious liability is a form of strict liability in the sense that it is not dependent on any personal fault on the part of the employer. But it does require proof that the employee was at fault. Why? Employer gets the benefit of the enterprise, so should carry the costs.
An employer is not generally liable for a tort committed by an independent contractor. There are a very limited number of exceptions to this rule: If an employer authorises or directs an an activity which necessarily involves a tort being committed then the employer may be liable. Probably best then to describe the independent contractor as the agent of the employer but agency is complex in tort law. Some ancient exceptions - although these have been reduced. The vicarious liability of an employer does not affect the personal responsibility of the employee who committed the tort as between the employee and the tort victim, although the employee may be entitled to be indemnified by the employer. i.e. both liable - jointly and severably liable - to the P. Special rules protecting employee vis-a-vis employer (not vis-a-vis P) in NSW. In some limited circumstances the employer of the negligent employee or independent contractor may owe what is confusingly called a non- delegable duty of care to the plaintiff, giving rise to a personal liability upon the employer if the delegate is negligent. An example is an employers duty to provide a safe workplace for his or her employees. The exact nature of such a duty and the circumstances when it applies are controversial.
How does a court decide whether a person is an employee or an independent contractor? Employee works under a contract of service, whereas an independent contractor works under a contract for services. Answer may vary depending on why you are asking the question, e.g. issues with dual employment etc. If context of workers comp could be different result than other cases. Doesnt matter what the employer says the relationship is - watch out in prob qs - if it says X employed Y, dont assume anything about the relationship. What tests have courts used in the past?
See Stevens v Brodribb for discussion. Control test - if employer controls manner of work, that was seen as
indicating employee. But this came to be seen outmoded, especially when technical people were employed doing jobs which employer wouldnt know how to do
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(e.g. hospital can employ doctors as employees without knowing how to do surgery). Organisation test - for whom is the person working? For themselves or the employer? e.g. taxi driver might own own car and work for themselves. Taxi driver might turn up at a depot and get first car available - then working for someone else. Too blunt to be useful. What factors does the court now take into account to decide this issue?
See Zuis v Wirth Bros P/L 1955 HCA and Hollis v Vabu P/L HCA 2001.
Wages. Power to dismiss for poor conduct. Some level of control. Level of control over subsidiary matters (if not for central act itself). Other cases: Power of delegation of task indicates contractor. e.g. if you are employee cant send someone in your place - that person needs to work it out with employer, whereas independent contractor can choose who comes to do the job. As a matter of policy, what advantages are there in finding that a person is an employee rather than an independent contractor? Hollis. More likely that employers will set up safe system of work. Stevens v. Brodribb Sawmilling Co (1986) 160 CLR 16 (Cases, p 373) Discusses the different tests - for this course dont have to worry about all the issues of the case. Ellis v. Wallsend District Hospital (1989) 17 NSWLR 553 (Cases, p 390) Zuijs v. Wirth Brothers (1955) 93 CLR 561 (Cases, p 372) Was trapeze artist employee or independent contractor of circus? Held: employee. Factors indicating employment: Wages as remuneration. Master can dismiss for poor conduct. Some level of control. Subsidiary matters determined by employer - precisely when; safety measures; rehearsals; costumes; place etc. Hollis v. Vabu (2001) 207 CLR 21 (Cases, p 377) Hollis knocked over by bicycle courier, who was wearing livery of Crisis Couriers trading name of Vabu. Was the courier to be treated as employee of Vabu for this purpose?
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For Cth superannuation legislation court had held that couriers were independent couriers, but that didnt govern this case. HC held: Couriers were employees. Factors: Couriers had to provide own bicycles - historically would suggest independent contractor. But HC pointed out this could just indicate a mean employer. Vabu determined when the work was done. Vabu interacted with clients. Wearing the livery of Crisis Courier - representation to the public that these couriers were part of Vabus organisation. Policy factor: impose liability on employer gives them strong impetus to set up safe system of work. Sweeney v. Boylan Nominees (2006) 227 ALR 46
(ii) Police tort claims

Law Reform (Vicarious Liability) Act 1983 (NSW) ss 6, 8(1), 9B(1), (2) Filled in gap that police officers were considered officers of the Crown, not employees, so under common law Police was not vicariously liable for torts committed by police people.
New South Wales v. Bryant [2005] NSWCA 393
(iii) Course of employment

The course of employment includes an act authorised by the employer and an act which constitutes an unauthorised mode of performing an authorised act. The course of employment does not include the employees wrongful acts which are unconnected with and not incidental to the acts the employee is engaged to perform. Bugge v Brown 1919 HCA (casebook 369), Deatons v Flew 1949 HCA (casebook 370), Starks v RSM Security NSWCA 2004 (casebook 372). Doesnt really give a test to work out how to determine whether this is the case. Factual decision from case to case, so can just look to other cases for guidance - but because it is a factual determination no case is precedent. Popular to ask: was employee off on a frolic of his/her own? Also can be useful to ask: for whose benefit was employee acting? - But not determinative. Is there a better test for determining what is in the course of employment? See Lepore v NSW.
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Courts of Canada and UK have supported alternate test - was there a sufficiently close connection between what school does and what happened? Bazley v. Curry (Can.).
Lister v Hesley Hall (UK - HL). Residential facility in which teachers were
essentially in loco parentis. Found sufficiently close connection. Barbara Macdonald: Seems unfair/artificial to make schools the guarantors. Many factors contribute to decision of child being in school. What can the school actually do? Should find fault on part of the school. (a) Effect of express prohibitions on particular conduct by the employee? Bugge v. Brown (1919) 26 CLR 110 (Cases, p 369 ) Loss from fire. Fire caused when employee set up fire to cook lunch (agricultural workers in rural area) - specifically told not to use a particular location for the fire. They disobeyed this. HC held: employer still liable. Prohibition as to manner, time, or place, or even the act itself, doesnt necessarily constrain course of employment to avoid liability. Ultimately question of fact whether prohibition keeps act in course of employment. Here: it still occurred in course of employment, despite prohibition. They were still employed to go out to the general area, which included cooking their lunch etc. Deatons v. Flew (1949) 79 CLR 370 (Cases, p 382) Customer that was drunk was upsetting customers, insulted barmaid. She retaliated by throwing beer in his face, but also threw glass and injured him. Was this in course of employment? Held: Not in course of employment. Act of self-defence would be in course of employment. Keeping order and defending other customers is part of employment allowed to use proportionate reasonable force to evict someone (excessive force is battery). But in this case, it was an act of passion and resentment, a personal act of retribution - not done to further masters interests or under masters instruction. Starks v. RSM Security [2004] NSWCA 351 (Cases, ) Bouncer head-butted P. Held: In course of employment. Not usual mode, unreasonable and uncalled for. But acted in that way in the course of seeking to remove P from premises i.e. his job.
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* New South Wales v. Lepore (2003) 212 CLR 511 (Cases)

Liability for sexual assault perpetrated by teacher on pupil? If school/entity has itself been negligent, that is obviously best action for P to bring. If no personal negligence on part of school though, then will look for vicarious liability. Under traditional test, no way that it can be said that committing sexual assault on pupil is merely unauthorised mode of carrying out authorised action - would be totally artificial to shoehorn it into this test. Is there a better test? Didnt decide it, just sent it back. Canadian Pacific Railway v. Lockhart [1942] AC 591 Rose v. Plenty Boy helped milkman deliver milk. Milkman specifically told not to employ children to help, but he did. Child injured, sued the co-op that organised the milk delivery. Held: vicariously liable. There was a prohibition, but it was within course of employment, not without.
(iv) Agency
Motor Accidents Act 1988 (NSW) s 53(1) Scott v. Davis (2000) 204 CLR 333 (Cases, p 374) Gutman v McFall (2004) 51 NSWLR 599 (Cases, p377 note) Thelma (Owners) v. University College School [1953] 2 Lloyds Rep 613
(v) Non-delegable duties

M employed E to deliver newspaper from a van. M expressly told E not to throw the papers from the van but to get out and place them in each customers property. E, in a hurry to deliver all the papers before the end of his shift, threw some of the papers from the van and in doing so, hit P who was on his morning jog. He fell and broke his ankle. Is M liable? What if E threw the paper because he hated joggers? Non-delegable means: cant escape responsibility by delegating the task. If the party to which you have delegated is liable, you are liable. e.g. Employer has three types of duties to individual employee (these are nondelegable): Safe system of work. Safe premises.
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Safe equipment. e.g. might delegate provision of equipment to independent contractor, but employer is still liable to employee if equipment is unsafe. e.g. hospital employing doctors as independent contractors. If patient went to hospital (c.f. to doctor directly), hospital is liable for acts of the doctor. e.g. schools liable for negligence of independent contractors.
Cth v Introvigne.
Child injured by flagpole that fell. Supervised by teacher on secondment from elsewhere (i.e. independent contractor). More onerous than vicarious liability. Special relationship in above e.g.s - semi-custodial element. The above three e.g.s are relatively uncontroversial; other situations more troublesome. What points to non-delegable duty? Control. Vulnerability. X Courts have been reluctant to extend non-delegable duties.
* Kondis v. State Transport Authority (1984) 154 CLR 672 (Cases, p 386)
* Burnie Port Authority v General Jones (1994) 179 CLR 520 (Cases p 381) * New South Wales v. Lepore (2003) 212 CLR 511 (Cases at 390)) * Leichhardt Council v Montgomery (2007) 230 CLR 22 (Library electronic reserve)
Held: road authority does not have non-delegable duty to motorists simply because it employs independent contractors to dig up the road.
* Civil Liability Act 2002 (NSW) s 5Q
B. Joint and severable concurrent liability

Since 2004 it has become important to distinguish between, on the one hand, claims for negligence for property damage or economic loss, and on the other hand, all other tort claims such as negligence claims for personal injury and all intentional tort claims for any type of damage. Proportionate liability applies to the first type of claim while joint and several liability, or solidary liability, applies to all the rest. But in any event it is first necessary to distinguish two types of tortfeasors (people who have committed a tort), as this may affect liability too. Joint and severable means P can sue any D or all of them.
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(i) Joint tortfeasors tortfeasors compared
and
several
concurrent
Distinction is important. If joint tortfeasors, only one cause of action. Release of one means all are released. If several causes of action, separate causes of action against each. What happens in one action vis-a-vis one D has little effect on Ps case against other Ds. Joint tortfeasors if one act/omission, but more than one person responsible. e.g. two people lock someone in a room. One tort committed by both. e.g. more than one person owes a duty - joint owners of a house - each has a duty to take reasonable care to ensure safe entry. If breach, each has breached joint duty. e.g. vicarious liability - one person does the tort, but someone else also responsible. Several concurrent tortfeasors - each person has committed separate tort, but causing same damage. e.g. multi-car accident in which each driver guilty of a tort, but one pedestrian injured - each tort contributed to the one damage. note: here concurrent means different people liable for same damage (c.f. concurrent liability in tort and contract). Thompson v. The London County Council [1899] 1 QB 840
(ii) Plaintiffs tortfeasors
rights
against
concurrent
Note: regime here of unitary, solidary, or joint and several liability applies to all torts other than those to which proportionate liability now applies. i.e. all liability for personal liability is joint and/or several and liability for intentional torts in general is joint and/or several. At CL, joint tortfeasors have solidary/unitary liability to P - they are jointly liable for all the loss. There is only one cause of action against all of them. But they are also severally liable because P can recover 100% of the loss from any one tortfeasor. As only one cause of action, release of one joint tortfeasor would release all. So if P sued one joint tortfeasor (A) and got a judgment, this would bring the single cause of action against the other joint tortfeasors to an end too, even if A could only pay 50% of the loss.
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If concurrent tortfeasors were only severally liable for different torts causing same damage, then multiple causes of action. P can recover 100% of loss from any one several concurrent tortfeasor. Judgment against a several concurrent tortfeasor doesnt affect others as several causes of action. Can never recover more than 100% of loss from any one/all source(s). Legislation has improved Ps rights, but still limitations to discourage multiple actions. Brinsmead v Harrison (1872) LR 7 CP 547 If P obtains judgment against one joint tortfeasor, barred from suing other joint tortfeasors, even if the one cant pay 100% of the loss. * Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5(1)(a),(b), (3) (a) judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to action against any other person who would have been liable as a joint tortfeasor in respect of that damage. I.e. literally overcomes the Brinsmead v Harrison rule.
In Thompson v ACTV interpreted as going even further.

(b) If more than once action brought re damage against tortfeasors (joint tortfeasors or otherwise) liable re that damage, P cant recover more in aggregate than the amount awarded in the first judgment given. Unless it was successfully appealed, in which case that is taken as the first judgment - s 5(3)(b). If A and B are joint tortfeasors, they are usually liable for the same amount, but there is an exception when exemplary damages are payable - see XL Petroleum v Caltex.
XL Petroleum (NSW) v. Caltex Oil (Australia) (1985) 155 CLR 448 (Cases, p 450) Caltex engaged some plumbers essentially to trespass on land and spike underground tanks of a competitor. Caltex was liable for exemplary damages ($150 000). Were the plumbers, who were joint tortfeasors, also liable? HC held no - s 5(1)(b) also means that different sums can be given against joint tortfeasors when one is liable for exemplary damages and the other is not. Plumbers only jointly liable for the $5000 compensatory damages. Thompson v Australian Capital Television (1996) 186 CLR 574 Sued Ch 7 and ACTV. HC said, look past literal wording of s 5(1)(a) - it abolishes rule that there is only one cause of action that merges in the judgment against all joint tortfeasors. A release of one no longer releases them all - Thompson could settle with one and continue suing the other.
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Nevertheless it is important that any settlement not imply that P has received full compensation for loss, as full satisfaction of a claim will also bring the claim to an end.
(iii) Contribution tortfeasors
between
concurrent
Note: right to contribution = A gets part from B. Right to indemnity = A gets 100% from B.
Merryweather v Nixan (1799) 101 ER 1337 (Lord Kenyon) At common law, there was no contribution between wrongdoers or tortfeasors. *Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5(1)(c) Allows any tortfeasor liable for the damage to recover contribution from any other tortfeasor (joint or otherwise) who is/would be if sued liable for same damage. Except A cant recover from B if B is entitled to be indemnified by A re the liability. Issues: What is a person liable (A)? Includes: s.o. found liable by court, s.o. who has been sued, and s.o. who has settled a claim - all three can seek contribution. Who is someone who is or would, if sued, be liable (B)? e.g. what if B not liable to P because limitation period has expired? - It doesnt matter (Brambles). However, if B has been found not liable by court for any reason, then no contribution. e.g. P sues A. P then sues B outside limitation period - B thus not liable. A then cant get contribution from B (James Hardie). If B has settled with P without admission of liability, A must prove B would be liable (Amaca) Brambles Constructions v Helmers (1966) 114 CLR 213 B is liable for contribution at any time, even if P could no longer sue B because of limitation period. There is a limitations period also for contribution proceedings. James Hardie & Co v Seltsam (1988) 196 CLR 53 If B has been found not liable for any reason, A cant get contribution - even because the reason is that P sued B after expiration of limitations period. Amaca v New South Wales (2003) 199 ALR 596
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If B settles with P without admitting liability, A must prove that B would be liable to get contribution. Note: contribution only applies where there is the same damage, not different tortfeasors liable for different (divisible) damage. Can be liable for someone elses tort if your action exposed the persons action - has to be the very likely thing to happen. e.g. could be liable for minor medical negligence, but not gross medical negligence.
*Law Reform Miscellaneous Provisions Act 1946 (NSW) s 5(2) In proceedings for contribution, court grants whatever it finds to be just and equitable based on the persons responsibility for the damage. Can exempt any person from liability, or direct that the contribution to be recovered from one person amounts to a complete indemnity. Gives court broad powers to determine contribution and give indemnity regardless of the lack of prior contractual indemnity. Issue: how does the court determine the just and equitable amount?
Same principles apply as for apportionment between P and D for

contributory negligence under Law Reform (Miscellaneous Provisions) Act 1965. * Law Reform (Miscellaneous Provisions) Act 1965 s 9(b) If contributory negligence by P, damages recoverable are reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage. Podresebersek v Australian Iron and Steel Pty Ltd (1985) HC (CoT 341) In apportionment, court considers and compares: Causative importance of each partys contribution. Relative culpability of each person, i.e. the degree of departure from standard of reasonable person. Wynbergen v Hoyts Corp Pty Ltd HCA (CoT 339) Hayne J: It is the whole conduct of each negligent party re circumstances of accident that must be subjected to comparative examination. Amaca P/L v New South Wales [2003] HCA 44 Amaca, asbestos manufacturer, sought contribution from Ps (NSW) employer, concurrently liable. Triale judge rejected the claim, took into consideration that Amaca (James Hardie) was massive profit-seeking commercial entity, compared to NSW, whereby damages would be paid by taxpayer. HC overturned this, held that those factors were irrelevent.
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Reinhold v NSW Lotteries Corp (No 2) [2008] NSWSC 187 Barrett J: irrelevant considerations for contribution/apportionment. Financial strength or profitability. Situation or status of the parties. Attitude of wrongdoer - remorse/lack thereof. Barrett J: it is however relevant if one wrongdoer profited from the wrongdoing and retains the profits - goes to the issue of responsibility. Chandra v Perpetual Trustees Victoria Ltd Relevant that one party was deceitful in pursuit of monetary gain - here found more culpable than the other party, whose conduct fell short of appropriate level of professional skill. Yates v Mobile Marine Repairs Pty Ltd Relevant that one party more actively engaged in loss-causing activity - greater causative contribution. Bitumen & Oil Refineries (Aust) v Comm for Government Transport (1955) 92 CLR 200 In apportionment of just and equitable can take into account if A settled Ps claim for too much. Unsworth v Commissioner for Railways (1958) 101 CLR 73 If B has liability or damages cap in place re P, A can only recover in contributions up to that amount. e.g. P sues A, loss is assessed at $100. B would be liable but liability capped at $25 (either by statute or prior agreement with P). A can get max $25 from B.
C. Contribution and indemnity between employer and employee

When employee E commits tort in course of employment by M: E personally liable to P; M vicariously liable to P - i.e. joint tortfeasors. Contribution rights apply under 1946 Act.
(i) Common law principles

Lister v Romford Ice and Cold Storage [1957] AC 555 Imposed a contractual obligation for E to indemnify M. I.e. implied term in every contract of service that employee (E) will not conduct him/herself negligently so that employer (M) is exposed to liability to (P). If E does, E must indemnify M for any losses M must pay P.
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(ii) Statutory modification of the common law

* Insurance Contracts Act 1984 (Cth) s 66
If insurer pays damages for employee they can exercise rights of subrogation, i.e. obtain rights of the employee. This would mean they can claim Ms right to be indemnified by E. s 66 abolishes this right of subrogation if Es conduct not serious and wilful misconduct.
* Employees Liability Act 1991 (NSW) ss 3, 5, 6

3(1)(a): E not liable to indemnify or pay contribution to M for tort committed by E for which M also liable. 3(1)(b) M liable to indemnify E for liability for the tort. 5: Doesnt apply if Es tortious conduct was (a) serious and wilful misconduct or (b) not in course of employment, didnt arise out of employment. 6(1): if M is proceeded against for Es tort, and E under insurance is entitled to be indemnified for liability from the tort, M is subrogated to Es rights under that policy re liability for that tort. i.e. Lister no longer applies. Note employee still has some exposure - personal liability.
*New South Wales v Eade [2006] NSWCA 84 What is serious and wilful misconduct? Hoeben J: Same meaning adopted as for Workers Compensation Act. Conduct beyond negligence, even gross or culpable negligence. Must be shown that person performing act/omission knows it will cause risk of injury or acts in disregard of consideration whether it will cause injury. Wilful - must have acted deliberately. Must have had knowledge of risk of injury, and proceeded without regard to that risk. In this case, police officer had committed serious and wilful misconduct. He threatened that P would be loaded up with heroin if he did not confess, rendering Ps arrest unlawful and prosecution malicious. State could get 80% contribution from police officer.
D. Proportionate Liability
Proportionate liability introduced in 2004 in NSW - only for property damage and economic loss arising out of negligence. No distinction between consequential and pure economic loss. Doesnt apply for personal injury claims. Applies for strict contractual obligations? Argue no, but some case law suggests it could from negligence.
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Point is that P can only recover the amount from each of multiple Ds, proportionate to that Ds liability. Ds benefit - only liable for proportionate amount. If P cannot recover from A because A insolvent, B doesnt bear that risk any more. Different to previous system - solidary / joint and severable liability - whereby P could recover 100% from one or each of the Ds. P could choose which D to target. Statute allowed Ds to seek contribution from each other. To make it fairer, also to reduce professional insurance costs, and to lead to less litigation. Debatable whether premiums have really gone down. No contributions litigation, but P must now run multiple actions to recover 100%. *Civil Liability Act 2002 (NSW) Part 4 and s 3A s 34(1)(a) applies for economic loss and property damage arising from failure to take reasonable care; does not apply to personal injury damage. A claim is not apportionable if by specific exclusion or not from arising from failure to take reasonable care. s 34(2) concurrent wrongdoer for this Part can be joint wrongdoer or one of several wrongdoers that caused same harm. s 34(4) doesnt matter if concurrent wrongdoer insolvent, being wound up, or has died. s 34A: certain exclusions - e.g. if wrongdoer intentionally or fraudulently caused damage. s 3A (2) contracts can exclude wrongdoers from CLA provisions. s 35(1)(a) apportionment based on what court considers just and equitable in light of Ds responsibility. s 35(3) in apportioning between Ds, exclude portion for which P is contributorily negligent, and can have regard for comparative responsibility of any concurrent wrongdoer not party to the proceedings. s 35A: if D knows info about concurrent wrongdoer, must inform P. If doesnt inform and P incurs extra costs because of this, D may be liable for these costs. s 36: If judgment against D under this part as concurrent wrongdoer in apportionable claim, that D cannot be required to contribute to or indemnify any other concurrent wrongdoer (or receive contribution from) for the claim, whether or not the damages or contribution are recovered in same proceedings in which judgment given against D. s 37: P can initiate subsequent claims against other concurrent wrongdoers after receiving judgment against one, but cant recover more than 100% of loss overall. s 38: Court can give leave for any person to be joined as D in proceedings re apportionable claim, unless they were party to previously concluded proceedings re same claim. s 39: this part doesnt affect vicarious liability.
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Trade Practices Act 1974 (Cth) s 87CB: proportionate liability for damages arising from breach of s 52. s 52: corporation shall not in trade or commerce engage in misleading or deceptive conduct. s 87CC = CLA s 34A; s 87CD = CLA s 35; s 87CE = CLA s 35A; s 87CF = CLA s 36; s 87CG = CLA s 37; s 87 CH = CLA s 38; s 87CI = CLA s 39.
* Reinhold v NSW Lotteries Corp (No 2) [2008] NSWSC 187 P suffered loss because of negligence of both newsagent and NSW lotteries when
processing lottery ticket - his numbers would have entitled him to $2m prize, but his ticket was not entered into the draw. In Reinhold (No 1) it had been found the negligence of both was causative of the loss, and both had breached contract to Reinhold. Barrett J held: Newsagent and NSW Lotteries owed contractual duties and tort duty to avoid negligently causing R pure econ loss. In any event, proportionate liability regime applies to strict contractual claim if contract breached negligently. s 34(1)(a) - failure to take reasonable care. NSW Lotteries negligence was greater - dominant position, experience of common occurrence, greater capacity to avoid problem - had significant degree of culpability and causative force. C.f. newsagent - lack of experience, relied on Lotteries. Apportioned 90% Lotteries, 10% newsagent. Then held that because of the s 36, Lotteries and Newsagent could not enforce their contractual rights with each other. Some issues:
Should the claim in Reinhold have been apportioned at all? What was the
nature of the contractual obligation? Should a duty of care in tort have been found at all? No. Do manufacturers of products owe duty of care not to cause pure economic loss to an end consumer? Minchillo v Ford Motor Company suggests that it does not. Although this only covers defective goods, not goods that are defective and dangerous (Brookings J) - perhaps this opens a chink. Cannot apply Bryan v Maloney - that does not apply to chattels. R is owed strict contract liability - sale of goods warranties etc. This makes him not vulnerable. Most PEL Ps cant protect themselves with contract. Tort should therefore not have a role in this case. This case is authority for the proposition that negligently breaching a strict term of the contract will place the case within the proportionate liability scheme. The result is that defendants are better off pleading negligence.
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Got there because s 34(1)(a) - arising from failure to take reasonable care. BM: extraordinarily expanded application of this section. Would turn every strict contractual claim into apportionable claim, making Ds better-off if negligent than if they did it innocently - odd result! In contract you have either strict promises and duties based on care, normally. Proportionate liability is all about negligence liability, doesnt say anything about strict contractual obligations. Breach of strict contractual obligation is not fault-based, claim should not arise from negligence. Should the pre-existing contractual rights between newsagent and Lotteries been disallowed? Compare s 36 with s 5 (2) of the Law Reform Miscellaneous Provisions Act 1946. Is either statute directed at pre-existing contractual indemnity rights? s 5(2): in proceedings for contribution under this section, court apportions based on just and equitable. Can direct that one party pays nothing in contribution or completely indemnifies the other. If Reinhold accepted, multi-party construction contracts with indemnities are in doubt - people cant know their rights until court apportions damages. St George Bank v Quinerts [2009] VSCA 245 Court noted that purpose of the proportionate liability legislation in CLA was to remedy the perceived injustice of the joint and several liability scheme [i.e. that P could target just one of joint and several tortfeasors for 100%]. In other respects, it should not be seen as changing the law and should be considered in light of the existing contribution legislation.
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Torts and Contracts II

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Torts and Contracts II

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1.

Professional services concurrent and coextensive duty to take care.

The extent to which contractual obligations regulate or limit obligations in tort

LAWS1017 Torts and Contracts II

LAWS1017 Torts and Contracts II

-Important distinction. For co-extensive cases like professional liability, it

-Reduction for damages in misleading and deceptive conduct case (s 82 1B)

LAWS1017 Torts and Contracts II

2. Liability for interferences with goods

-Three types of bailment:

- E.g. rent a car for a period of time.

- No set period, but until a condition is fulfilled.

LAWS1017 Torts and Contracts II

- If bailee does a repugnant act, bailment term comes to an end and

- When condition fulfilled expires, bailor gets the immediate right to

-Historically, limited common law exceptions for trades in a market overt,

-Entitled to take something back of yours if you see it.

LAWS1017 Torts and Contracts II

(a) Title to sue

-It was a bailment subject to a condition. Once condition was fulfilled, it

LAWS1017 Torts and Contracts II

-If someone is out of possession but has right to immediately resume

(b) As against a wrongdoer possession is title

LAWS1017 Torts and Contracts II

(a) Wrongful taking?

(b) Wrongful detention

(c) Wrongful use?

LAWS1017 Torts and Contracts II

-Conversion: dealing with chattel in manner repugnant to owners rights, with

-Intent to do that which would deprive true owner of immediate right to

Howard E Perry and Co Ltd v British Railways Board [1980] 2 Al ER 579

LAWS1017 Torts and Contracts II

(d) Defendant treating the goods as its own

-Whether owner is excluded from possession may sometimes depend on

-Mere unauthorised retention of anothers goods is not conversion. Mere

(e) Contributory negligence as a defence?

LAWS1017 Torts and Contracts II

-Bailor must demand the goods.

LAWS1017 Torts and Contracts II

(v) Compensatory damages

(vi) Extinction of title

B. Possession and finding

LAWS1017 Torts and Contracts II

(ii) Law of finding as between occupier and finder

LAWS1017 Torts and Contracts II

-Here, middle ground. No sufficient evidence of manifestation of intention to

-Doesnt make a difference that children of friend had keys to premises

(iii) Compare the crime of larceny by finding

LAWS1017 Torts and Contracts II

R v. Thurborn (1849) 169 ER 293

Ruled that he could not have reasonably believed.

LAWS1017 Torts and Contracts II

3. Liability for negligence causing economic loss I

LAWS1017 Torts and Contracts II

LAWS1017 Torts and Contracts II

LAWS1017 Torts and Contracts II

-Reasonable for recipient to seek or accept and rely on speakers advice.

-No indeterminate liability Shaddock personally identified to Council, and

LAWS1017 Torts and Contracts II

LAWS1017 Torts and Contracts II

LAWS1017 Torts and Contracts II

B. Professional negligence to contractual parties and third parties

LAWS1017 Torts and Contracts II