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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. can’t 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
-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).
-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.
LAWS1017 Torts and Contracts II
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.
LAWS1017 Torts and Contracts II
conversion. Distinguish: ownership. Bailment: When an owner of goods hands over possession to another. immediate right to possession. and the action on the case Balkin and Davis. Trespass to goods. Liability for interferences with goods A. (Often involves money. detinue. ownership with possession. “actual” possession – control. · Four different torts/causes of action: trespass. e. goods into storage – bailor pays bailee). possession without ownership. · · · -Three types of bailment: · Bailment for a term. Title to sue always based on entitlement to sue at time of tort. · Bailment at will (revocable bailment). detinue (tort of wrongful detention). the defendant’s liability in tort is governed by the ordinary principles of negligence. reversionary rights. ch 4 Where the plaintiff’s goods are destroyed or damaged by the defendant’s negligence. Depends on plaintiff’s ‘interest’ in the goods. · Bailment subject to a condition. Court only concerned with which party in dispute has better right – not concerned with ius tertii (rights of third parties).E. . action on the case – negligence for damage to reversionary interest. .g.g.g. e. Bailor to bailee. conversion (wrongful exercise of dominion) and detinue (wrongful failure to return goods). there are several specific torts which provide a remedy for interference with goods: trespass (direct physical/forcible interference). hiring goods – bailee pays bailor. rent a car for a period of time.2. ownership without possession.No set period. conversion. but until a condition is fulfilled. In addition to the tort of negligence. LAWS1017 Torts and Contracts II 4 .
If you purchase stolen goods. · 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). . . you don’t get good title. bailor gets the immediate right to possession back. LAWS1017 Torts and Contracts II 5 . which is antiquated. bailor gets the immediate right to possession back.If bailee does a “repugnant” act. -Entitled to take something back of yours if you see it. · ‘Nemo dat’ rule – nemo dat quod non habet – you cannot give what you do not have. · Bailment at will: . so from then on it is a bailment at will. bailment term comes to an end and the bailor gets back immediate right to possession. -Historically. e. -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. good title. limited common law exceptions for trades in a ‘market overt’. and.g.Bailee has actual possession.If bailee does a “repugnant” act. even in good faith without notice that they are stolen. .Bailor retains immediate right to possession. but must be very careful.Bailor can ask for goods back at any time. · 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). so from then on it is a bailment at will.When condition fulfilled expires. -A thief cannot pass on good title. · Limited self-help remedies for interferences with goods. subject to bailor’s right to immediate possession. the bailor gets back immediate right to possession.When the term expires. . Now subject to rules and principles like the Sale of Goods Act. ..
Complainant lost two sheep dogs because of poisonous baits placed by D. Action on the case is the remedy for indirect/consequential injury caused by D to P. Dixon J: neither conversion nor trespass proved. Latham CJ. Laying of baits was unlawful. D sold P’s wines at a hotel.e. · *Hutchins v. · HC upheld first instance’s finding that injunction should be refused. also allegedly sold some to Moon. 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. Maughan  VLR 131 (Cases on Torts. · · (a) Title to sue *Penfolds Wines v. P sought injunction to restrain D from any further dealings with the bottles. and apprehended repetition of these torts. Title to sue: actual possession. p 1) Trespass is the remedy for the direct/immediate application of force by defendant to plaintiff’s person. on basis of D’s alleged commission of trespass and conversion re P’s bottles. · · -It was a bailment subject to a condition. Invoice said that when contents were used. and must not be used in any other way etc. dissenting: LAWS1017 Torts and Contracts II 6 . (i) Trespass · · · Direct interference with goods – without authority – with fault (intent or possibly negligence). only the contents. for various reasons. but the bottles said that they remained property of P – i. Actionable per se (don’t need damage). Elliott (1946) 74 CLR 204 (Cases on Torts. Admitted that had been filling branded bottles brought by customers for years. it became bailment at will. as baits laid before dogs were there etc – therefore trespass not maintainable. Once condition was fulfilled. D had allegedly been misusing the bottles – for selling/delivering etc liquids not made by P. unless they broke into your premises). Filled branded bottles brought by his brother. not the bottles.-Some authority that you can enter premises to retrieve something (although less able to break in. bottle must be returned to Penfolds on demand. Herring CJ: Injury consequential of D’s actions. land. or goods. were sold.
majority found it was made out (Latham CJ.” A bailee in possession of goods may recover full value of those goods from wrongdoer who interfered with them. but successful on appeal. McTiernan. who was unlawfully in actual possession. Collision between steamships The Winkfield and The Mexican. into which he came without trespass (delivered to him by brother/customers). (b) “As against a wrongdoer possession is title” *The Winkfield  P 42 (Cases on Torts. -Bailor at will could sue 3rd party for trespass done against bailee – exception to the general rule. · · · (ii) Conversion LAWS1017 Torts and Contracts II 7 . -Re: conversion. Postmaster-General filed motion claiming as bailee value of lost mail/parcels. which he undertook to distribute to senders or addressees. McTiernan. Need actual possession to sue for trespass. so injunction inappropriate. authorities suggest P could sue in trespass (although logic seems to tend against this view). trespass against P? Because P became entitled to immediate possession of the bottles. Motion dismissed. Starke. W admitted limited liability. paid money to court.both proved. -On question of trespass. Collins MR: ius tertii not relevant. they do not have right to sue for trespass for any unauthorised use of the chattel. Dixon J dissenting. with the loss of lots of parcels and mail. his actions were repugnant to the express terms of the bailment. Others suggested trespass made out but no evidence of continuance. Latham CJ dissenting. P as bailor at this point had an immediate right to the possession of the bottles. but did D in taking the bottles from the brother. · Dixon J: Not trespass – no infringement upon the possession of anyone by P. p 87) “As against a wrongdoer. majority found it was not made out (Dixon. but is also under obligation to account to the true owner. -If someone is out of possession but has right to immediately resume possession. Possession is title. Starke. and Williams JJ). and Williams JJ). he himself was in possession of them. M sank. · Latham CJ (dissenting): When brother delivered branded bottles to D to be filled. At the time he filled the bottles. possession is title. -Clearly no trespass against the brother.
” (c) Wrongful use? *Model Dairy v. Lord Abinger CB: Jury should have been directed that what was relevant was not merely that D put the horses on shore. p 86) per Lord Abinger CB “It is a proposition familiar to all lawyers. without any intention of making any further use of it. led the horses off the ferry to a hotel to try to get P to leave.. D. title to sue: actual possession or a right to immediate possession. When P went to get them. that a simple asportation of a chattel.. is not sufficient to establish a conversion”. then he was not exercising over the horses any right inconsistent with or adverse to the P’s rights in them. White (1935) 41 Argus LR 432 Vic SC (Web CT Materials) LAWS1017 Torts and Contracts II 8 . but if he does not do it to take them away from P or to exercise any right over them. he was asked to pay for their keep. . (b) Wrongful detention Baldwin v. they were sold to pay expenses. · · · · -Taking the horses could be trespass. the ferry manager. Conversion = intention by the party taking the goods to use them. but his intention. although it may be a sufficient foundation for an action of trespass. Intention. refused. relevance of defendant’s reasonable mistake or ignorance of the plaintiff’s rights?. thrown them into the water. or the destruction or consumption of the goods to the prejudice of the lawful owner. that would be conversion. Willoughby (1841) 151 ER 1153 (Cases on Torts. deliberate (not accidental) exercise of dominion over goods.g. But mere removal is not. P came aboard ferry with two horses and misbehaved. e.· Wrongful. 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 . it is not conversion. -If he had changed the quality of the chattel. If it was merely to induce the P to leave. “dealings” which may constitute conversion? (a) Wrongful taking? *Fouldes v.
delayed/non-return. The majority here found that use = conversion (although this will not be the case in all contexts). but deprivation of goods constitutes damage. Merely taking the bottles with no intention to exercise permanent or temporary dominion over them would not be. Latham CJ: Actual use of the bottles for the benefit of the D and his brother was conversion. with intent to deal in this way. Dixon J (dissenting – but classic judgment on conversion): not conversion.) 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. p 89) (See above for facts. · · · -Conversion: dealing with chattel in manner repugnant to owner’s rights. Gavan Duffy J: Use of P’s bottles in this way was sufficient deprivation of possession to constitute conversion – they were subjected to risk of breakage. P and D milk vendors. Merely awarding damages for each act of conversion would be a useless remedy. so correct remedy is injunction (plus nominal damages). · · -Evidence indicated that unrestrained the D would continue to act in this way. Damage is essential. Wrongful use of another’s goods may constitute tort of conversion. Howard E Perry and Co Ltd v British Railways Board  2 Al ER 579 LAWS1017 Torts and Contracts II 9 . -Re-delivery of bottles to people who left them not conversion – purpose not to confer any right over the property in the bottles.e. D “systematically and intentionally” used P’s branded bottles to carry milk to D’s own customers. · · *Penfolds Wines v. but merely to restore to person who left them there to be filled. unauthorised) use of the plaintiff’s 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.· The systematic wrongful (i. because P did not act and did not have intent inconsistent with D’s right to possession or destroy/impair it. Elliott (1946) 74 CLR 204 (Cases on Torts. -Intent to do that which would deprive true owner of immediate right to possession or impair it is essential ground of the tort.
Iraqi Airways (IAC) took the planes to Iraq. incorporated into fleet. At government’s direction. (d) Defendant treating the goods as its own *Kuwait Airways Corp v. · Demand and refusal to deliver up goods is the usual. Conduct was deliberate. For conversion. -Whether owner is excluded from possession may sometimes depend on whether D exercised dominion over goods. painted in IAC livery. Conduct was so extensive an encroachment on owner’s rights as to exclude him from use and possession of the goods. D’s conduct inconsistent with rights of owner/other person in possession. but not only way. HoL: had activity occurred in England [or Aust]. not accidental.· · · Government shutting down steel mines. because Perry was denied goods to which it was entitled. Steel and railway workers striking. -Mere unauthorised retention of another’s goods is not conversion.g. 3. Then intention of D may be material. Steel on board the trains. Based on English private international law rules. KAC commenced proceedings vs IAC in England for conversion. Workers argued that they were not denying title. Court found that it was conversion. 2. just not delivering the goods. Iraqi forces seized 10 commercial planes from Kuwait Airways (KAC). to prove this intention. would constitute conversion. Iraqi Airways Co (Nos 4 and 5)  2 AC 883 (Web CT Materials) 1990 Iraqi invasion of Kuwait. Lord Nicholls of Birkenhead: · · · -Three basic features of the tort of conversion: 1. IAC liable to KAC for conversion. and used and treated them as its own – e. Must include intention to keep the goods. detention must be adverse to owner – exclude him from goods. Mere possession without title is not necessarily detrimental to rights of owner. (e) Contributory negligence as a defence? LAWS1017 Torts and Contracts II 10 .
D’s employees negligently damaged the barge while raising a boiler. Often deals with negligence. as where a bailee negligently has lost the goods. -Bailor must demand the goods. but can be intentional. 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. permanent damage to owner’s reversionary interest. · Reeve v. let on hire to MR Russell. Palmer (1858) 141 ER 33 Solicitor negligently lost some title deeds. · · Title to sue: a right to immediate possession Detinue is the cause of action – tort is wrongful detention of goods (also: refusal to deliver). Network Rail Infrastructure  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. During the hire period. Commonwealth Trading Bank of Australia  2 NSWLR 644 (iii) Detinue · Wrongful failure to return goods after a proper demand. Motorists’ Advisory Agency  1 KB 577 Wilton v. Could be sued in detinue. (iv) Action on the case for damage to the owner’s reversionary interest · · · Title to sue: reversionary interest.e. the owner has no action on the case for damage to the LAWS1017 Torts and Contracts II 11 . P owned barge. not necessarily involving wrongful exercise of dominion. while barge in hirer’s possession.Heap v. · *Mears v. · · *HSBC Rail (UK) v. Requires permanent damage to goods. London & South Western Railway Co (1862) 142 ER 1029 (Cases on Torts.
i. 21. Longmore LJ: distinguished Mears – there the damage had not been repaired. 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. causing some damage and destruction of the stock. claimant had suffered no loss. Possession and finding (i) Finders keepers? · *Armory v. so was permanent. (vi) Extinction of title Limitation of Actions Act 1958 (Vic) s 6 Cf Limitation Act 1969 (NSW) ss. in the position that it would have been had wrong not been committed.e. p 435) General principle for damages applies for conversion. · Claimant leased out railway rolling stock to a train operating company. LAWS1017 Torts and Contracts II 12 . B. · · · -Here. 63(1) and s 55. D’s negligence cause derailment. Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 (Cases on Torts. so loss from tortious act was 1100. p 97) As between the finder of goods and a person to whom the finder delivers the goods for valuation. had D given eggs to P as required. Under lease terms. but have to pay D 2900. but D sold them to third party instead. Here. P (the Board) claimed damages for conversion of eggs – they should have been given the eggs. lessee indemnified owner for destruction of stock and paid for repairs to damaged stock. but an assessment to put injured party. the owner has suffered no relevant loss. In these circumstances. Should P be entitled to full value of eggs converted? Taylor and Owen JJ: Principle is not ‘full value of the converted goods’. P would have sold for 4000. as much as money can. · (v) Compensatory damages *Butler v. Delamirie (1722) 93 ER 664 (Cases on Torts. the finder has title to the goods.owner’s reversionary interest if the goods have been replaced or repaired in full by the lessee.
Shopkeeper unaware. · · · Parker v. who did not give it back to P after P refused money for it. LAWS1017 Torts and Contracts II 13 . Therefore judgment for the P. did not in any way exercise control over them. D found two gold rings while doing so. Possessor of land possesses everything within. This was conversion. (ii) Law of finding as between occupier and finder · · Occupier’s intention to exercise control over goods “found” on the occupier’s premises. British Airways Board  QB 1004 P found gold bracelet on floor of international executive lounge at Heathrow Airport. even if ignorant of it. but the owner was not found. but is enabled to keep it against all but the rightful owner. · Bridges v. Finder does not acquire absolute property/ownership. There is a spectrum. and had the right to direct how the pool was to be cleaned and what was to be done with things found in it. Sharman  2 QB 44 (Web CT Materials) P owned pool. shop open to public). A distinction between land to which there is public access and private residential premises? · *South Staffordshire Water Co v. employed D to clean it. Hawkesworth (1851) 21 LJQB 75 Bundle of notes dropped in a shop by someone. Customer gave notes to shopkeeper so as to advertise them to find the owner. -Distinguished from Bridges v. Shop open to public. P were freeholders. in which shopkeeper could never be said to be in possession of the goods (unaware. so had right to forbid people coming into the land or interfering with it. It was held that the customer who found them was entitled to them.· · · P (chimney boy) found a jewel and took it to D (goldsmith). Hawkesworth. Donaldson LJ: The issue is about whether the occupier of a premises manifestly intends to assert control over all articles including those lost. · -Distinguished from cases in which a thing was in a public space.
but should be considered a rebuttable presumption of fact. bank would assert high degree of control – finder would not have better title than occupier. in bank vault.000 in cash.\ -True owner would have better title than Flack. the occupier has title to the goods. No sufficient evidence of manifestation of intention to control lost property before it was found. Flack (1998) 156 ALR 501 (Cases on Torts.g. In an unrestricted public park. LAWS1017 Torts and Contracts II 14 .g. firm control over bank vault. (iii) Compare the crime of larceny by finding · (where the finder appropriates the goods reasonably believing that the “true owner” can be found). 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. National Crime Authority v. -Here. · · *Chairman.E. but no prosecutions launched against him. -Eveleigh LJ: the firmer the control of the premises (e. private home) the less the need to demonstrate independently an intention to possess all items. seems like a legal fiction. p 98) As between the finder of goods and the occupier of private residential premises on which the goods are found. · Tamberlin J: notion that a possessor of premises intends to control all items. Mrs Flack said she knew nothing about it. even those of which they are ignorant. and was sole occupant) on suspicion that her son was involved in drug offences. -Police had rights to seize it. they found a briefcase with $433. · -Doesn’t make a difference that children of friend had keys to premises – inference is that they are for ease of access. -Doesn’t matter that someone obviously deliberately placed briefcase there. In doing so. so ‘finders keepers’. middle ground. Government can’t confiscate something just because it appears ‘suspicious’. no control – so finder would prevail. Police searched Mrs Flack’s house (she had residential tenancy agreement with NSW Dept of Housing. but right to retain it ceased once it was conceded it was no longer needed for investigation/litigation. not to confer possessory rights.
000 in a backpack • didn’t take reasonable steps to identify owner o Because it was such a large amount of money. D cashes the banknote and gets caught out. 11 October 2005 • finds $263. unreported. Downing Centre Local Court. Sydney. He discovers who the true owner is the next day. • LAWS1017 Torts and Contracts II 15 . prospect of finding owner was quite high. Clifford. 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. Found for larceny by finding. Ruled that he could not have reasonably believed.R v. Thurborn (1849) 169 ER 293 • D finds a banknote and appropriates it.
E. car accident leading to costs of repairs. lobsters died. -Consequential: flows from physical loss (as long as within bounds of causation and remoteness).g. not property damage (whereas if tiles fell causing damage. as it affects the likelihood of duty of care arising. As Reid L said in Hedley. for negligent acts. [Note: in contract. if lecture theatre ceiling was built poorly. power cut off to shop which had live lobsters in tanks. Courts have found that this kind of case is pure economic loss. preventative damage. Cardozo CJ. As a result. it is harder to prove existence of duty of care. consequential is used to mean ‘indirect’. This becomes biggest hurdle for P. the question is whether the D owed a duty of care to the P or class of persons including P to prevent such loss. Issue of remoteness less likely to come up. an antonym to ‘direct’ damage. Defective goods/structures is a particularly difficult category. · Distinction has in the past been drawn between negligent acts and words. Consequential economic loss – property damage plus costs that flowed from that (value of lobsters. lost work as a result of no transport. a thoughtless slip or blunder. If it is purely economic loss. although this is not so relevant – most important distinction is between the type of damage that flows. etc. -However.3. and uni has to pay to fix it. profits lost). words can be relayed far and wide beyond initial recipient – so need more factors to find a duty of care. that would be property damage). easier to prove duty of care for pure economic loss than negligent words because of the issue of indeterminate damage. e. -The distinction is important. and tiles started to come loose.g. the failure to detect a theft or forgery beneath the cover of 16 LAWS1017 Torts and Contracts II .] · In Muirhead (UK). -Pure economic loss is separate from physical damage. -Distinction can sometimes be difficult. Liability for negligence causing economic loss I · What is economic loss? Distinction between pure economic loss and consequential economic loss. as that issue is essentially settled by identifying the purely economic loss – instead. stated: “If liability for negligence exists. but that is not what it means in tort. dealing with the liability of accountants to financiers of the accountant’s client company. · 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).
-Fear of putting unfair burden on D that interferes with their autonomous rights. that one person’s gain is necessarily another’ s loss – reluctant to get involved except for cases of deliberately unlawful behaviour. which turned out to be unjustified. Situation in which the party seeking information intends to rely on it. P ordered advertising time etc on credit on behalf of a company. it was reasonable to do this. Heller & Partners  AC 465 (Cases on Torts. P argues that based on this. · 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. Acknowledgement that there is often zero-sum situation. This appeal to HL also failed. -Floodgates argument – fear of opening up a whole new basis for claim. and take different level of care based on context. Inquired through own bank re credit-worthiness of customers. free competition. LAWS1017 Torts and Contracts II 17 . [Foundational case for this principle. -Here. Negligent misstatements *Hedley Byrne & Co v. but that it did not deny possibility of liability for false statements generally. HL there found no liability for deceit because it did not intend to make false statements. and the giver of information knows or ought to have known of this reliance.” and bank had begun advice with “with no responsibility on our part”. P had begun request saying “we want to know in confidence and without responsibility on your part. -HL here went against an earlier decision Derry v Peek (1889). Given satisfactory references. Something more required: -Expressly or by implication from circumstance speaker/writer must have undertaken some responsibility [element of voluntariness]. bank’s statement shows it never undertook any duty to exercise care in their replies.deceptive entries. This HL essentially redefined the ratio of that case to say that there is no liability for deceit without intent. in which the directors of a company had made false statements in the prospectus. which might be quite broad and clog up courts. -At first instance and Court of Appeal P failed because no duty of care was found for bankers. D is bank. A. P is advertising firm.” -Reluctance to interfere with free enterprise. may expose accountants to a liability in an indeterminate amount for an indeterminate time to an indeterminate class. p 181) · A duty of care may be owed re negligent misstatement on which the recipient reasonable relies to his/her financial loss. it refrained from cancelling orders.] · Involved bankers giving references re credit-worthiness of customers. Became personally liable for costs.
there was no contemplation of anything like a formal report after long inquiry etc. Consequently he suffered economic loss. “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. a duty of care arises. who is under no obligation to do more than give honest answers based on actual knowledge and belief. occasion of interchange.” · Pearce L: Form of the inquiry and answer is important in determining whether there is liability. 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. · Hodson L: Agree with Morris L. and he knows or should know this. irrespective of contract.e. even if misstatement honestly made. someone who will rely on it. · HC set a broader principle (as below). -Reasonableness of reliance in circumstances. not a share investor and didn’t hold itself out to be. so P fails. Distinguish between formal and informal occasions. identity and relative position of the Person can be liable for financial loss resulting from negligent misstatement of fact or opinion. should it be implied? The existence of some sort of indirect award would be a good indication that such an undertaking is implied. and no fiduciary or contractual relationship existed between parties. to apply the skill for the assistance of another person who relies on such skill. which was adopted in Shaddock. so no liability.· Morris L of Borth-Y-Gest: If someone with a special skill undertakes. · · -Assumption of responsibility by speaker. -Bank’s statement is fatal to P. a duty will arise. But if service is in fact performed and done negligently. Barwick CJ: Features of the special relationship that give rise to duty of care: LAWS1017 Torts and Contracts II 18 . -Here. Bank’s statement effectively disclaimed any assumption of duty of care. · Devlin L: Promise given without consideration to perform a service cannot be enforced as a contract. MLC v Evatt (1968) 122 CLR 556 · Mr Evatt relied on advice sent out by MLC re share trading in its newsletter. it put a limitation on Hedley. -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. -Difficulty arises when there is no express warranty of an undertaking to perform as if there is a contract (minus consideration) – i. Banker giving references in ordinary exercise of business should not be in worse position than trustee. · things that reasonableness of reliance is determined by include subject matter. promisee can recover in tort.. The form here clearly indicates there is not. When this case went further to the Privy Council. or allows info/advice to be passed on to.
-However. · Policy reasons contributing to finding of liability: -No indeterminate liability – Shaddock personally identified to Council. -Instead. -Speaker knew/ought to have known recipient would rely on statement. 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. LAWS1017 Torts and Contracts II 19 . relying in info from D Council that it was not affected by road widening proposals. -Reasonable for recipient to seek or accept and rely on speaker’s advice. and reinstated the approach taken by Barwick CJ in HC. *L Shaddock & Associates v. -Duty of care applied to written answer. it should extent to people who on a serious occasion give considered advice or info concerning business/professional transaction. Nature of inquiry – by solicitor etc – underlined the gravity of situation. Council ought to have known that it would probably be understood in this way. then repeated in a certificate. 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. -D voluntarily gave info directly to recipient. -Trial and NSWCA found negligence but no DoC. and amount at stake known. Would not have been reasonable though to merely rely on unconfirmed answer given by unconfirmed person to phone inquiry. Parramatta City Council (1981) 150 CLR 225 (Cases oT. Such proposals had in fact been approved in principal by Council. Wrong info first given over phone by anon employee. as Council was in best position to give info. It rejected the Privy Council decision of MLC. Reasonable to do so. · Gibbs CJ: Reasonable for P to interpret info as he did. Not essential for maker of statement to possess or profess some special skill or competence in the subject matter of the statement.parties re actual or potential knowledge and relevant capacity to form or exercise judgment. -D knew purpose for inquiry. Council ought to have known P would rely on it – importance of the certificates for conveyancing purposes is obvious and well known. · P had contracted to buy land. -P relied on Council exercising reasonable care in giving advice. This appeal to HC succeeded. p 186) · Duty of care may be owed re negligent misstatement made re a “serious matter”. and commonly followed practice of giving such info. -D had exclusive info. this distinction not needed in present.
speaker comes under duty to exercise reasonable care. that he is being trusted to give best of his info/advice as basis for action. pursuant to a statute. but written did. Misstatement (if any) not directed to a particular person. may have interest in doing so. or ought to. 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. or intent to induce recipient to act in certain way – indeed. no need for antecedent requests. Only saw it as one step in the step-by-step ascertainment of the limits of a new area of law. as the Lordships made clear in that judgment. · 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.· Stephen J: The narrow criterion of Privy Council MLC v Evatt was not a hard and fast rule. Only a proposal. and this seems consistent with MLC v Evatt reasoning. introduced by Hedley. Reflects reasoning of MLC v Evatt but departs from narrow criterion. town planners. not reasonable to rely on Minister. p 196) · Duty of care re negligent misstatement requires known reasonable reliance by recipient of statement. has system for gathering that info. · Murphy J: Info or advice must be on “serious matters”. · Author may be known to possess or profess to possess skill and competence in the area that is the subject of the communication. P had other advisors on the matter e. -Agreed that the oral statement would not attach the duty. but reasonable re written. and it is reasonable for other party to rely on it. Allowed appeal. with monopoly of info. · Found no requirement that statements be made in response to request for information or advice i. · Here – no special relationship between parties. but class of persons.g. May warrant correctness of what is said or assume responsibility for its correctness. and an assumption of responsibility for statement’s accuracy by its maker. Water Board (2001) 178 ALR 634 (Cases on Torts. -Agreed that it would not be reasonable to rely on the oral statement. without any assurance of continuous and certain application. and as a general guide only. and holds itself out as providing that info to those who seek it. -Council is possessor of special knowledge. LAWS1017 Torts and Contracts II 20 . May invite recipient to act on info/advice. Caparo Industries plc v Dickman  2 AC 605 *Tepko v.e. Should be subject to a duty.
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. -Circumstances meant it was not reasonable for P to rely on D’s provisional “ball-park” figure to rely on bank’s demand for costings estimate. put P’s companies into receivership. upheld 4:3 by HC. P sued D for negligently overestimating cost. identity and relative position of the parties re actual or potential knowledge and relevant capacity to form or exercise judgment. Loan conditions required a costing for this. D revised estimate to $1. Indication that it was prepared to enter into further discussion means that it cannot be concluded that it assumed any responsibility re estimate. occasion of interchange. an estimate not negligently calculated or otherwise carelessly provided. estimate given well in advance of any work. -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. Look at identity and relative position of parties – D a reluctant participant. but no reason to assume it was sole expert in costing – P had its own experts. and how to do so. -Reliance not reasonable: D had position of advantage re info. -D must have known that P trusted it to provide if not a precise sum. D knew this info would likely be put to practical use. D had indicated the estimate could be discussed – could not be expected to have known that it would be relied on for any. -Also unreasonable reliance because speculative nature of venture and their awareness of political and administrative processes at play – lots of uncertainty involved. did not want to give the info. D knew that one purpose for which P sought info was to make decisions about whether to develop the land. After commencement of receivership. Gummow and Hayne JJ: Speaker must know or ought to know there will be reliance.· P took bank loan to finance proposed rezoning and subdivision of land they owned.5 mil. P knew local council would not approve it unless arrangement was made with D to supply water to the land. Trial and NSWCCA found no duty of care. D provided estimate of $2. · Gleeson CJ. must have been clear to P that estimate subject to change based on discussions or time of work. LAWS1017 Torts and Contracts II 21 . purpose. -Many steps to be taken before work done. · Kirby and Callinan JJ (dissenting): Espouse same principles but interpret facts differently. causing economic lass. let alone serious. Bank found this too high. P would have to pay for connection to water supply.7 mil. and it must be reasonable in circumstances for recipient to rely on it. Also.
It was VE that wanted to sue for negligence. -Some argue VE suffered no loss – all she had was a ‘hope’ of inheriting something. Superior to info P could have got from other professional consultants etc. Mrs VE signed the will. Mrs Hill signed it as attending witness. C drew it up. -Interests of client and beneficiary almost perfectly aligned. *Hill v Van Erp (1997) 188 CLR 159 · Mrs Currey wanted to change will. contract doesn’t prevent tort. Mrs Van Erp. and he signed as witness.-D had special capacity and opportunity to provide the info. This attitude has been taken in other cases. LAWS1017 Torts and Contracts II 22 . so VE missed out. · HC found liability in both contract and tort – parallel liability arising out of same facts. we rely on lawyers to draw up will properly. immobile. -H knew exactly the value of the loss – no indeterminacy. put will back into safe. -H knew of VE as individual. Mrs Currey asked Hill to draw up the will. but Currey had not lost anything. 7 years later new lawyer takes over after C retires. Hill and VE had to go to Mrs Currey house as she was old.e. using her solicitor Mrs Hill. Clearly a breach of contract and DoC between Hill and Currey/estate. was to get a half share in her house (her child(ren?) the other half). · Executor sued C on behalf of the estate – so not a case involving third parties. kept will in safe for safekeeping and so it could be easily found (from lawyer’s perspective. Professional negligence to contractual parties and third parties Hawkins v Clayton (1988) 164 CLR 539 · H got C to draw up will. · Gummow J: policy consideration – reliance. also benefit of extra business as likely to be instructed to distribute the estate after client’s death). H died. Mr VE was also present. her neighbour. but had appointed an executor. but there was no apparent remedy – a legal black hole. but community reliance. · HC found that VE had suffered loss. Estate has by this time depreciated. this was null and void as he was the spouse of the benefactor. and very easily locates the listed executor. Under statute though. and when did not. C made a half-hearted attempt to locate executor. B. finds will in safe. C remembered H saying she would find a new executor because she had lost touch with current one. · HC found a number of ‘salient features’: -H negligent. but H had never changed will to reflect this. Here not specific reliance. Succession of property is an important community interest. I.
-Reliance must be reasonable. Esanda was financier. D must have known/should have known that the info would be reasonably relied upon by a known person/class of persons. White v Jones  2 AC 207 · Negligently failed to draft the will before client passed away. Peat Marwick Hungerfords (1997) 188 CLR 241 (CoT. is there a duty? Appeal dismissed. LAWS1017 Torts and Contracts II 23 .e. Mrs Hill found liable to Mrs VE. -For a purpose that would likely lead to it entering into transaction like the one it did. not ‘might’. · Brennan CJ: in such cases mere reasonable foreseeability has never been enough. and UK tends usually to be more conservative on issues of pure economic loss. along with an unqualified auditor’s report. · The one bedrock principle from this case: for there to be a DoC. · 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. · Esanda sued PMH claiming damages for pure economic loss due to PMH’s negligence re auditing of account of Excel corporation. 189) · In the absence of reasonable reliance by recipient of statement (P) and assumption of responsibility by maker of statement (D). Note: likelihood.· I. which resulted in economic loss. · HL came to a similar decision as Hill v Van Erp. *Esanda Finance Corporation v. · 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. in entering into financial transaction. 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 company’s financial position. entered into transactions with Excel or associated corporations in reliance on the auditing. 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. ‘foreseeability’. and it must be reasonable to rely for the purpose that the recipient does. 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). -Also relevant for negligent misstatement. -And that it would be very likely that the P would enter into such a transaction on reliance of the information.
C. -Effect on administration of court system. -Auditing is more complex than mere fact (compared to zoning land) – include differences in professional opinion. -Alleged negligence of auditor subsidiary to failures of the corporation. -P seeks to render auditor liable as if it had given a guarantee. had power to deal from position of strength in commercial relationship. rather than this group. · McHugh J: Factors relevant to existence of duty of care (or lack thereof in this case): -Increased standard of care argument. BT Australia Ltd v Raine & Horne Pty Ltd  3 NSWLR 221 Civil Liability Act 2002 (NSW) s 5O and 5 P. Economic loss arising from defective goods and structures LAWS1017 Torts and Contracts II 24 . -Client’s conduct main reason for P’s loss. This group most efficient absorber of losses often. -DoC would likely reduce supply of auditing services – insurance in this field not readily available (i. insurance for auditors against suits).-If these conditions are satisfied. doesn’t necessarily means that special relationship exists – but they are minimum requirements. -Difficult to determine whether auditor’s report really was main basis for action – many factors affect investors’ decisions.e. Not helpful for P here as there are legal and commercial incentives already for auditors. bear the losses. so P seeking to raise itself about other stakeholders by going for solvent third party D. as corporation. delays. -Reduce demand for auditing services because increased fees due to insurance costs. unlike consumers in product liability cases. -P. -Factual issues in such case make trial/settlement avoidable even when auditor not actually liable – huge costs. auditor’s role only secondary. auditor’s corporate client will be insolvent/receivership/liquidation etc. -Creditors etc have indirect remedy – liquidator/receiver can bring action on their behalf. without reciprocal value for doing so. -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. · Gummow J: Regard a number of considerations: -Often in such cases. DoC wouldn’t increase care. Cost cutting would cause lower standards.
Connecting link of the house. extensive damage. More difficult q for pure econ loss. Deane and Gaudron JJ: -Policy considerations against liability for mere econ loss: · Avoid imposing liability for indeterminate amounts. -Goods that are merely defective (as opposed to dangerous) are under no general duty of care. -Only special cases therefore attract duty – reliance and/or assumption of responsibility. did D take reasonable care to avoid reasonably foreseeable and real risk of economic injury to another. found no defects. time. p 134) LAWS1017 Torts and Contracts II 25 . 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. who sold to Maloney. -In case of Manion-Bryan. *Woolcock Street Investments v. · Could go against community standards of competitive zero sum. did manufacturer take reasonable care etc? But if no injury. *Bryan v. · P got truck from D. Manion sold to Q. beyond scope of contract. Ford Motor Co of Australia  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. Also. CDG (2004) 205 ALR 522 (Cases on Torts. This has also been found to extend to certain third parties. Maloney inspected house before buying. Built by Bryan with inadequate footings. -Relationship between builder and subsequent owner has relevant degree of proximity. relationship characterised by assumption of responsibility. Maloney (1995) 182 CLR 609 (Cases on Torts. Clear relationship of proximity re physical injury. Similar relationship to that with first owner. recognition of relationship of proximity would not give rise to liability for indeterminate amount. jury can be asked. Wrong to impose transmissible warranty of quality. for indeterminate time. SC found D did not owe duty of care. did not preclude liability in negligence. · Mason CJ. -Bryan and Manion had contractual relationship. greater than differences. which vibrated excessively at high speed. · Brooking J: When there is physical injury to person or property. to indeterminate class. · Bryan build house for Manion. · Ormiston J: Authorities thus far concerned only with physical injury and do not support general duty for econ loss. cracks appeared. Diff standard applied for relationship between builder and first owner and builder and subsequent. classes. what is the q for the jury? Can’t be. M suffered loss of depreciated value of house. Obviously foreseeable econ loss.*Minchillo v. Later.Vul · Brennan J (dissenting): Contractual matter.
· -Vulnerability – P’s inability to protect itself from consequences of D’s 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 D’s 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. C’s loss purely economic because it did not flow from the loss of the product (risk of damage/loss rested with AOR). C’s 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?
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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 P’s 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: · D’s knowledge that property damaged was of a kind inherently likely to cause econ damage to those who relied upon it if damaged. · D’s 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. · D’s 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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the test of foreseeability would lose its ability to function as a rule of law. *Canadian National Railway v Norsk Pacific Steamship Co (1992) 91 DLR (4th) 289 (SC of Canada) · P had contractual arrangement to use 3rd party’s bridge for railway lines and trains (80% of bridge’s use).-Now that damages can be recovered for econ loss from negligent misstatements.2d 1019 (1985) ( Supreme Court of US) (extract from Schwartz. Candlewood Navigation Corp Ltd v Mitsui OSK Lines Ltd  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. · · MV Sea Daniel and MV Testbank collided. Foundation Press. LAWS1017 Torts and Contracts II 29 . on library electronic reserve) · Found against recovery for purely economic loss. Wrong to concentrate on whether loss is purely economic. Chemical spill from Testbank. no sound reason to deny it for econ loss from negligent acts. Guste v M/V Testbank 752 F. so it was closed for several weeks. *State of Louisiana ex rel. Barge towed by tugboat owned by D damaged bridge. -No one has really picked up on this judgment. but should look at the circumstances of the loss. -Need to delimit duty of care in such a way as to avoid indeterminacy problem. 11th edition. Higginbotham: Without limiting damages with a requirement of physical damage. -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. Kelly and Partlett. 2005. Prosser. Wade and Schwartz ‘s Torts Cases and Materials. · What is meant by ascertainable class? Court found this a troubling concept. · P was able to recover damage for economic loss due to bridge being out of action (even though none of its property damaged). · Preferred the maritime bright line rule of Cattle v Stockton. Claims for purely economic loss arising out of this. 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.
some for export to WA. Christopher v. Johnson (dissenting): Should analyse on case by case basis whether pure economic losses were sufficiently foreseeable and proximate. economic losses will be covered by insurance. Rubin. Where to draw the line? No apparent principle for drawing the line. Ps (appellants) were involved in potato growing on such land and claim to suffer financial loss (pure econ loss – land not damaged). Some ‘unjust’ results at the edges inevitable.-Foreseeable consequences of the collision reveal wave upon wave of economic loss. • May interfere with freedoms. and P’s vulnerability to the risk. MV “Fiji Gas” (1993) Aust Torts Reports 81-202 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd  VSC 27 Fortuna Seafoods Pty Ltd v The Ship ‘Eternal Wind’  1 Qd R 429 *Perre v. To impose damages in such cases would make insurance more expensive. difficult to identify or measure. · When determining whether a duty of care exists re pure econ loss caused by negligent act. p 208). • Consequences of conduct may be governed by a contract between the parties. · Farmers grew potatoes in rural SA. there are exceptions. -No damage for purely economic loss has virtue of predictability. but as Dredge “Willemstad” and Hedley Byrne show. Tate. • Pure econ loss can be indirect. -The clear line praised by majority leads to too much injustice and goes against clear tort principle of foreseeability and proximity. 2. · Wisdom. and D knew about this ban. unreasonable interference with D’s commercial autonomy. D’s knowledge of and control over the risk. -What purpose of damages? At such huge amounts. LAWS1017 Torts and Contracts II 30 . WA prohibited import of potatoes grown on land or within a certain distance of land with this disease. no extra benefits of incentives for safety. Apand (1999) 198 CLR 180 (Cases on Torts.Considerations restraining acceptance of such duty in particular cases/categories of cases. and limitations established by common law and statute. Did D owe duty of care to all or any of them? · Gleeson CJ: 1. D (respondents) negligently introduced a disease. • Need some reasonable limits. account may be taken of factors such as indeterminacy of D’s potential liability. otherwise too expansive. No general rule that one person owes duty to prevent financial loss to another. onto the land of one farmer. controls. Plus. bacterial wilt.
This case is closely analogous. Salient features of present case (that give rise to duty): 1. 2. 2.3. cf categories approach.Ps had no way of appreciating existence of risk to which they were exposed by these activities. • Gummow J: Salient features approach to determine whether sufficiently close relationship to give rise to a duty exists. So here. 4. Indeterminacy and reluctance to curtail commercial competition identified. LAWS1017 Torts and Contracts II 31 . enjoyed.Policy considerations are just those. knowledge). there is duty of care to take reasonable steps to avoid foreseeable risk of economic loss resulting from loss/impairment of those rights. and that that person is in no position to protect his/her own interests. and no way to protect themselves. duty owed. and policy. only certain people in a position o use and own/enjoy land near enough to infected land. should be able to recover. and the WA regulations. • McHugh J: Incremental approach for novel cases. and that if the disease spread to that area these people were powerless to protect their own interests.If D knows/ought o know that his/her acts or omissions may cause loss or impairment of legal rights possessed.D in control of the initiation and conduct of experimental activities (that led to infection) on the land. knew that this would be impaired if the disease found within a certain distance. 2. whether as individual or member of a class. 3. D knew there was a class of persons who availed themselves of right to sell potatoes in WA. “How vulnerable was the plaintiff to incurring loss by reason of the defendant’s conduct?” 3. proximity. would not be indeterminate – known vulnerability of the Ps. or exercised by another.D knew/ought to have known that Ps grew commercial potato crops within the buffer zone.Vulnerability of P a central issues. but these four general principles need always to be considered (indeterminacy. proximity. 1. • Kirby J: Three-stage approach – foreseeability. In this case. 3.Indeterminacy and conduct legitimately protecting or pursuing person’s social or business interests are merely to be taken as factors that negative the existence of a duty. not rules of law.Other things may be relevant in various cases.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. vulnerability. control exercised by P over activities on infected land. legitimate business conduct. If these factors are absent though it doesn’t necessarily mean a duty exists.Importance of D’s actual knowledge re risk and magnitude.In this case. • Gaudron J: 1. 4. With appropriate “control mechanisms”. etc.
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. autonomy and competitive operation of marketplace. just. 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. is it fair.Does there exist between D and P a relationship of “proximity” or “neighbourhood”? 3. Apand note by Swanton and McDonald.1. and reasonable to impose duty? • Major policy considerations: indeterminacy. · B.If so. (2000) 74 Australian Law Journal 17 (e-res) · Disagreement between the justices is more apparent than real. 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  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) LAWS1017 Torts and Contracts II 32 . Perre v.
-Clearly these categories of injury will be compensable without hesitation. BP had been warned of a danger of a blowout and insisted on proceeding with the drilling. Nearby drilling platforms in the deep water horizon that were immediately put out of business because of the cleanup operations. Australian approach in Caltex and US approach in Corpus Christi. who had their jobs temporarily suspended. -2. Workers on the platforms.5. What about others who have suffered harm. elsewhere in the Gulf.g. -Cf. who had to shut down because of the moratorium that was imposed after the accident. negligently inflicted emotional distress (many exceptions now) – economic loss rule is one of them. Platforms were not damaged but their business was interrupted. It is one of the most durable ‘no duty’ rules in the US. Prof. -3. Other platforms not in such close proximity. Likely there will be some negligence. 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. -Cf. where pure economic loss would be highly relevant? -1. Lincoln Park West (US) and Bryan v. but not such an absolute rule in Aust. 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. e. LAWS1017 Torts and Contracts II 33 . The · pure economic loss rule is irrelevant. Maloney (Aus) BP Gulf oil spill Greatest example of economic loss in history. Who has suffered harm? · · · -Workers killed and injured and their relatives (personal injury) -Property damage – drilling platform owned by Trans Ocean. commercial fisherman. owners of fishing vessels.
incl. Two claims of damages · · -Gas riser got damaged and CC had to voluntarily flare off gas they owned to prevent loss to the wells. The question is more abstract: was the consequence of BP’s negligence foreseeable? Foreseeability is not going to foreclose these claims. no recovery. E. · 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. 1995. US court unlikely to accept this. · · Foreseeable that there will be a spill of some sort. -2. Two classes of resort owners: · Some resorts located where beaches were actually polluted. In Aust. -Recovery for loss of profits from being unable to use the pipe to produce and sell gas during the repair period. The defendants knew who would suffer harm and the kind of harm. Beach front businesses in Mississippi. if they acted negligently.-4. Zapata Gulf Marine Corp. but BP might argue nothing of this magnitude is foreseeable.g. But is the economic loss rule going to cut off liability? Uncertain. -3 and 4. because the last thing the courts want to do is to discourage people from doing things to minimise the damage. In the US. loss of livelihood as a result of damage to natural resources (fisherman and conceivably the resort owners). Fifth Circuit. v. Corpus would be allowed to recover.3d 198 United States Court of Appeals. · · But most resorts lost business because vacationers were worried. Basically the same as Caltex. Who can recover from BP in the face of an economic loss rule? -1. yes because these losses are foreseeable and the economic loss rule is not necessarily absolute. Clearly foreseeable that the workers would be unable to pursue their livelihoods. could probably recover unless the economic loss rule cuts them off. the gas was damaged because of the defendant’s negligence). BP might well argue that the govt was the one who shut them down. LAWS1017 Torts and Contracts II 34 . · 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. 71 F. and Florida which suffered from cancelled holiday reservations. Alabama. In Aus. They were entitled to damages for the gas they lost (the court said it was property damage. Will be asking for lost profits. Caltex Corpus Christi Oil & Gas Co.
The architect was providing a product. Is the price that has to be paid to achieve predictability worth it? Untenable position in the long term. 227. This is like a defective goods case. Gas remains in the ground. but the dispute is between the condo owners and the architect and they had no contract. Congress has abrogated the economic loss rule to a great extent – rule not that popular among legislators compared to judges. defendants cannot rely on the economic loss rule for political reasons – the rule is so unpopular. so they are committing to pay lots of economic loss claims (some would be required under statute. Ltd. The court told the plaintiffs to sue the developer. The seller has a remedy by making sure they get an express or implied warranty from the developer before buying the house. 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. 144 Ill.2d 302. who should sue the architect.Dec. Said they would pay all legitimate claims. The laws says they do not have to pay. and the house wasn’t as good as it was so there could be no recovery for economic loss without a contract. incl. Why? -Exxon Valdez oil spill 1989. instead of using tort law to adjust disputes. 136 Ill. people should arrange between themselves to settle disputes in advance in contract (makes sense from a policy perspective). 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.2d 346. loss of livelihood as a result of damage to natural resources. 1990 One reason for the economic loss rule is that courts don’t want to give people a tort liability when there is a contractual liability. a house. Personal injury and property damage claims would not come close to 20bn. Ebel & Frazier. Gin. 555 N.· Majority held TESTBANK denies recovery for pure economic losses not associated with physical injuries. unaffected by the property damage suffered by CC. · · · · · LAWS1017 Torts and Contracts II 35 . -BP’s response to Gulf spill. 2314 Lincoln Park West Condominium Ass'n v. -Congress passed the Oil Pollution Act 1990 which specifies a number of losses for which oil companies will be responsible for oil spills. A case where the law collides with widespread expectations. Problem in this case was that there was a contract between the developer and the architect. Supreme Court of Illinois. The outcome of BP litigation is likely to put a lot of pressure on the economic loss rule in the US. All other things equal. No reason for denying recovery except to preserve the pure economic loss rule. Mann.E. but BP knows they need to be generous for PR reasons. but BP certainly giving impression that they wouldn’t limit it to that). which has the virtue of predictability. This suggests that in high visibility cases.
they could be sued for pure economic loss for professional negligence. -If this were a lawyer who negligently drafts a will and thereby causes the intended beneficiaries to lose their inheritance. Why are architects different from lawyers – they purport to be professionals too? LAWS1017 Torts and Contracts II 36 . It assumes that the condo owners had the capacity to protect themselves.-Not really a good reason.
The case law on misrepresentation. bogans move in. never really had that intention. 3. -E. I intend to stay here for the next 10 years. but in fact moves out.False statement of fact. A says.The other party is in fact induced (relies on the representation).6. in the case of 2.A sells house to B. which have been ‘gotten around’. A also owns house next door. · 1. e. 2. Implied representation that the person honestly has that intention – so B can’t succeed just because A moves out in the end. 4. it must be about past or present facts that are demonstrably false. B is a uni student and worried about popularity. says. 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. Vitiating factors: Misrepresentation · · In this section we consider misrepresentations that induce one party to enter into a contract with another. Establishing misrepresentation · 3 elements of MR: 1. 3. incl remedies.Make intends to induce the other party into the contract.g. as it relates to contracts. then could. This topic is CL.g. A.. i. More a prediction about the future. It is about pre-contractual dealings designed to draw someone into a contract. Statement of opinion. and 3 at face value can’t be considered representations.A makes a promise to B about the future.e.A stays silent and fails to disclose something that could be important. LAWS1017 Torts and Contracts II 37 . -1. 2. But the law is willing to sometimes infer an implied representation. but possible two kinds of implied reps. -Same approach used for opinion – an opinion can’t be true or false.A sells B a car. this car will make you really popular in my opinion. but if B can show it was an outright lie by A. 2. this house will appreciate by 15%. Statement of intent. This leads to some problematic situations. is less significant in practice than it used to be – role of statute.
· Issue: actionable MR? · · That maker of statement actually holds that opinion. But some exceptions. With v O’Flanagan  Ch 575 · Sale of medical practice. · Normally difficult to recover. 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 buyer’s attention. A makes a rep in January which is true. e. -If person deliberately conceals something. couldn’t do much about it. -Situation whereby A is negotiating contract with B over a long period of time. · · Court held that it was – said that the representation continued from the time it was made until the point of contract. where negotiation for sale of property happened on particular footing. but failing to provide the rest of the story – a half truth. Court essentially requires vendor to tell buyer about changed circumstances. they were not aware. General approach at CL is caveat empor – i. so as to cause prospective purchaser to gain a false impression. · Silence. vendor had sold this story to magazines etc. by which time it has become false. but there was one case in USA: Stambovsky v Ackley 169 AD 2d 254 (1991) (NY Appeals). Court found that silence here was a MR. Supposedly a ‘haunted house’. Dimmock v Hallet (1866) LR 2 Ch App 21 – vendor of estate represented that farms were full let. Did not update buyer.e. then silence can be MR – fraudulent. Relevant to this course: -Present some statement of fact. omitted to say that tenants had been given notice to quit – held to be MR. but they don’t sign until Aug. business had declined due to vendor’s ill health – in 3 weeks until may had only made 15. In Jan. In Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563. vendor rep’d that takings had been 2000 pa. · · LAWS1017 Torts and Contracts II 38 . By signing of contract in May. 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. when it was clearly false. but A fails to update B.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. but that ‘this is a 2000 pa business’ – has effect until point of contract. defect in buildings or goods. Buyer didn’t know about this though. So not just a rep that it had made 2000.g. and wasn’t told.
-Doesn’t matter that he claims the MR induced him – it was not reasonable to do so. Third party made report to buyers. it is for the party alleging it was induced to prove that this was in fact the case. CMCLA 18-13 via CLR · Sale of a pastoral property as a going concern. · Griffith CJ: D should have known original statements false – doesn’t mean it’s fraudulent – might be careless etc. Facts here rebut inference that original MR was cause of contract. can it be reasonably inferred that buyer was induced – no. Contract changed post-Nov 20. Sellers also provided updated figures in separate letter (9 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. inspection etc. Buyers instructed agents to make offer to purchase property (19 Dec). But a presumption might apply in practice to help misled party. But rebuttable. 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”. then presumption that it was made with intention to induce. Defendant sellers wrote to plaintiff buyers giving them incorrect figures for cattle on property (20 Nov). -However in Arkwright v Newbold (1881) 17 Ch D 301 at 317-18 James LJ cautioned against finding fraudulent MR based on omission. · O’Connor J: if fraud. presumption isn’t the end of it – if in fact the buyer wasn’t induced by it. insisting on “active misstatement of fact. look at acts as a reasonable businessman would. or at all events. may amount to MR. · HC found that buyer not induced by 1st statement – got correct figures by itself and from the vendor. · Isaacs J: even if the statement were fraudulent (which is it wasn’t). *Holmes v Jones (1907) 4 CLR 1692. Strictly speaking. then no case. -Clearly relied on its own investigations. and it could be said that it was intended to induce. -If no fraud. Buyers sent third party to investigate property. if combined with other elements. it’s usually clear that the vendor is trying to · · draw the buyer in. (ii) Statement induces the contract · NB: It must also be intended to induce. In all the circumstances. Third party received correct (updated) figures from sellers. LAWS1017 Torts and Contracts II 39 . More difficult to show that it in fact did induce reliance.· CLA: Non-disclosure. -This is not normally a problem.
H produces records showing income of about £200 per year. · Opportunity to investigate? -Court rejected this argument. -One possible meaning deals with the degree of the disparity between the facts and what was represented. (iii) Other points about common law MR · In many cases. H represents to R that takings of practice are about £300 per year. -What is ‘calculated’ to induce? Doesn’t come out clearly in this case. But court found that presumption in misled’s party favour exists if it can show two things: -Statement was ‘calculated’ to induce. R would have found that these only accounted for a few more pounds. Probably doesn’t even need to be dominant consideration. R claims misrepresentation. · Court found in favour of the buyer – there had been actionable MR. Discovers the practice is worthless. -The middle step of ‘inducement’ is then inferred. But in practice not a big issue. If R had looked carefully. H sues for specific performance. Very hard to understand quite what ‘material’ means. buyer had paid deposit. Generally understood as: statement that is of a kind that would induce a reasonable person. MR used in defence. · Presumption? Generally for misled party to prove it was induced.g. · NB: vendor made a statement. · State of mind of the person making the rep: LAWS1017 Torts and Contracts II 40 . R enters agreement. the adjective “material” is used. buyer could have easily found out it was clearly wrong.*Redgrave v Hurd (1881) 20 Ch D 1. Vendor sued for specific performance. But does need to play some part. H tells R that evidence of the balance of takings can be found in some other documents/papers. CMCLA 18-20 · H advertises to arrange sale of legal practice upon retirement. In the past could not sue unless there was a bit disparity. e. -Second sense of ‘material inducement’ is – what role did it play in the decision? · Doesn’t need to be sole consideration. -Entry into contract. then discovered problems. Only look at whether statement was intended to and did in fact induce buyer. · NB: in most cases. Not a defence to say that if misled party had paid more attention they wouldn’t have fallen into trap. Pays deposit and takes possession of H’s house. ‘material MR’ and ‘material inducement’. Here. misled party is the P. But principles the same. R looks at documents briefly.
and usually beyond that stage – Rawlins v Wickham (1858) 3 De G & J 304. have unequivocal words or conduct. but that courts have also recognised – estoppels can limit right to rescind. particularly in case of LAWS1017 Torts and Contracts II 41 . (Mentioned in Coastal Estates v Melevende  VR 433. reliance. Election to affirm must. -Melevende says also need knowledge of right to rescind. CMCLA 18-70). detriment. -Sometimes matters though – idea of ‘material’.-For most principles the state of mind doesn’t matter whether it is fraudulent. unequivocal conduct so that the other party knows not If there has been an actionable MR. (i) Affirmation · · · If an innocent party affirms the contract after becoming aware of the falsity of the representation the right to rescind is lost. -Partial information giving some cause for suspicion is insufficient – Drozd v Vaskas  SASR 88 at 95-6. Seems that if there is a fraudulent MR. as in termination – so if rep. like rescission. -Cf termination. it’s not automatic. Representee must know that representation was false. 361. negligent. keeps everything from the past. Actions that are inconsistent with right to rescind give rise to inference of affirmation. For rescission to be effective: to proceed with the contract.e. Also in fraud the threshold for inducement is pretty low. This seems wrong. unconscionability. One not mentioned below. Limits to this discretion. or an honest mistake. but that right may be lost due to a variety of factors. there is no need to worry about materiality in the sense of degree of disparity. I. Affirmation may be express or implied. contract is voidable. could prevent rescission. · · · -There must be clear. B. · -Entitled to believe representation at least until there is some cause for suspicion. · Rescission is like pressing rewind – try to restore parties as much as possible to their positions prior to the contract. · But some exceptional cases (see Caldwell below). misled party can choose to rescind the contract. Rescission · The innocent party can rescind the contract ab initio. which only stops the future. not void. Can be conceded that in absence of this knowledge. -Usually need to communicate it – Scarf v Jardine (1882) 7 App Cas 345 at 360.
-Paid interest until March 1962. 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. Dates: -Contract entered in Sept 1960.g. can’t say no affirmation.· fraud.e. · · · · Controversial case. been put to his election.e. -If misled party does acts which suggest affirmation but not necessarily. Court found that M had not affirmed. -M was certain the reps were lies by Jan 1962. *Coastal Estates v Melevende  VR 433. he is not bound by actions which seem to be an affirmation. said. · Scholl J: if misled party doesn’t know he has a right to rescind. CE made fraudulent misrepresentation to M. need unequivocal conduct. LAWS1017 Torts and Contracts II 42 . · Adam J: once a representee has. P might have to prove he didn’t affirm. you can’t be said to have chosen one alternative. conduct suggesting affirmation needs to be ‘more convincing’ – but this is a matter of proof. -If don’t know what options are open to you. CMCLA 18-70 · Sale of eight allotments of land by CE to M. Must know right. by discovery of the truth. 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). and actions must be unequivocal. not principle. Trial judge had found no affirmation because didn’t know full facts at the time. and then acts on this assumption. such as payments made to him by other party. even if without full knowledge. principal until June 1962. need knowledge of right to rescind. Issued · · summons soon after. if the party was shown to have assumed correctly re falsity of the reps. -Consulted solicitor in Sept 1962 and learned of right to rescind. he will lose his right to rescind once he had elected not to rescind. it was only when he saw his lawyer did he know of his right to rescind. do not prove affirmation. Court disagreed. misled party takes control of other’s property under contract) – form of estoppel. but can add up to suggest it and even shift onus – i. -Unless they are adverse to the other party (e. Court went for M’s formulation – need knowledge of MR’s falsity. allowed rescission. i. M argued need something more – he said he had no idea what to do when he found out about the MRs. -M decided to get out of contract in April/May 1962. CLA: illustration of affirmative conduct might be found when representee.
(ii) Restitutio impossible · Rescission is only possible if the parties can be placed in their original positions. Business had made a loss and ultimately closed down. but highly likely that in all sorts of other areas. -Maybe it should be confined to fraudulent MR. (This was before the handing down of judgment. Court tries to do what it can in the circumstances. · CLA: this case rests on distinction between right to rescind coming from law in general and from express term of contract. must know of right to rescind. e. *Alati v Kruger (1955) 94 CLR 216. not other forms of election – though logically hard to see why. A made a fraudulent misrepresentation about the takings of the business. · Balfour v Hollandia Ravensthorpe NL (1978) 18 SASR 240 – house bought on basis of MR. to the extent that deterioration caused by buyers’ act. A had to hand money back to K. However. -Court more likely to help misled party where MR was fraudulent. Took possession of business on 16 June. -Maybe this case is wrong. But in former. LAWS1017 Torts and Contracts II 43 .) A did not attempt to revive business.· Never settled by HC. · Once K learned that the trial judge had made findings of fact in his favour. Equitable rule now prevails. In this case. Can make orders in favour of both parties to achieve satisfactory restitutio. CMCLA 18-63 · A sold fruit business to K. K closed down the business and left the premises. The representation was also included as a term of the contract (cl 21).g. · CLA: this isn’t though logical. Vadasz v Pioneer Concrete (1995) 130 ALR 570 18 · Court made a declaration for partial rescission. they had to make compensation for it. · Issue: was rescission possible? · · HC found that in the past. just need to know facts that trigger that. and the court can use its power to impose terms to do substantial justice. Issued writ claiming rescission on 29 June. to say that in general need knowledge of right. but it was adjusted to take account of things like lost stock etc after K abandoned it (before the judgment handed down). House had deteriorated. In latter. This was not a bar to rescission. CE’s two-step formulation would be accepted. 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). · Precise restitution is not needed. termination for breach.
because suing for damages would have been fruitless – fraudster has no money. -Adams J: lapse of time may mean it becomes unjust to rescind re others. C does not communicate with N. · But the longer you wait. applied both to future and past. not void. you will have been inferred to have affirmed. -Scholl J: election need not be made in any particular time frame. However. C was induced by fraudulent misrepresentation by N. e. LAWS1017 Torts and Contracts II 44 . · When did N rescind? -C&UF argued that decision to rescind was never communicated. · Issue: Had C rescinded in time to prevent title passing to G&C and. get goods back. incurred by the company after its signing. · Other cases have taken view that delay is limitation per se. CMCLA 18-70. i. N gets ownership. but rule from Coastal Estates is probably right.g. the more likely that something else will occur to prevent you. or 3rd partied become affected. Vehicle eventually sold to C&UF (passing through about 6 people). On 15 Jan. rescission is not possible.e. the cheque provided by N is dishonoured and C informs police and Automobile Association. on to C&UF? C had to rescind. the vehicle is sold to G&C. -Court said. -As soon as 3rd P bought car in good faith. it was too late to rescind. · Court said that it can be treated as fraudulent MR. There is no rule that decision to rescind must be prompt – courts have seemed to suggest that delaying right to rescind probably doesn’t end right to rescind. So when contract is complete. (iv) Lapse of time · · Lapse of time can be evidence of affirmation. -C went to Auto Assoc and the police – clear enough that he intended to rescind. On 13 Jan.e.· A creditor represented that a guarantee would apply only to future debts. eventually. generally need communication. (iii) Third parties · If a third party in good faith has acquired rights under the contract for value. Car and Universal Finance Co Ltd v Caldwell  1 QB 525 · C sells Jaguar car to N on 12 Jan 1960. Creditor sought rescission of guarantee in toto. but absurd to demand this in this case – N had disappeared. but HC granted partial rescission so that guarantee stood for as much of the debts as guarantor had been willing to guarantee. · So not a limitation per se. i. but may trigger others – this comes from Coastal Estates v Melevende  VR 433. Contract is voidable.
Years later buyer went to sell it. -Negligent – damages for negligent misstatement (Hedley Byrne). negligent or innocent. 20-19. 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. -Innocent – can’t get damages. English Court of Appeal said that buyer waited too long to rescind. The right of damages differs according to whether the misrepresentation is fraudulent. Applied to contracts to convey title to something. not fraudulent. Must be innocent MR. it is too later to rescind. Courts usually try to get around it. if not fraudulent. s 4(2A)(b) of the Sale of Goods Act 1923 (NSW) · -Makes it clear that the rule doesn’t apply for sale of goods. it was represented as genuine. but can at least rescind (but orders for payment of money may be made as incidents of rescission). Until 1964. -This was a difficult case because of the time periods involved.· 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. (v) Rule in Seddon’s case 1. CMCLA 20-17. it seems unfair in many contexts. could not get damages LAWS1017 Torts and Contracts II 45 . If 1 and 2. -Courts began to say it should apply to other transactions too: · · · · Seddon v North Eastern Salt Co  1 Ch 326. 20-35 via AustLII C. Svanosio v McNamara (1956) 96 CLR 186. Leaf v International Galleries  2 KB 86 · Art bought. Probably remains right to say delay is not a bar per se. found out it wasn’t genuine. Some other cases even applied it to chattels. . 3. Also called ‘executed contract restriction’ – execution = contract discharged by complete performance in all respects. Damages · · · Now under CL: -Fraudulent – damages in tort of deceit.Found that the rule also applied to shares. then once contract has been fully formed by conveying title. 2. but considerable doubt about its application elsewhere. The rule is probably still right for land transaction because of the structure of those deals.
CMCLA 101019 · D. it would have been worth $12000. instead has a $7000 one. Sue for damages for breach of contract. section A. · In contract. B pays $10000. · The question is how much has the innocent party lost. CLA [18-37]-[18-38] Dick Bentley Productions v Harold Smith (Motors)  1 WLR 623. or Do not believe it is true (lack affirmative belief in truth).g. (The statutory rules discussed in Week 7 effectively impose strict liability for innocent as much as fault-based misrepresentation). Had it been a 2009. CMCLA 18-34 -Fraudulent MR if: · · · Believe it is not true (know it is a lie). A 2001 is worth only $7000. E. Reform CLA [18-74]-[18-78] CMCLA 18-83 Allan “The Scope of the Contract” (1967) 41 ALJ 274 LAWS1017 Torts and Contracts II 46 . -B keeps car. A says it is a 2009 model. paid $10000 for a $7000 car. but it is a 2001. Three scenarios: -B rescinds contract. but sues for damages in deceit. Gould v Vaggelas (1984) 157 CLR 215. = A pays $3000. But the statement about it being a 2009 model was also a term of the contract. A sells B a car. = A pays B $10000. Courts have therefore sometimes stretched other rules to provide remedies.· · The distinction can have a big practical effect. ask where should you have been had the contract not been breached? B would have had a $12000 car. (iii) Innocent misrepresentation Common law provides no right to damages for innocent misrepresentations. -B keeps car. CMCLA 18-37 via AustLII (ii) Negligent misrepresentation CLA [18-29]-[18-36] See the material under Week 3. Fraudulent MR. (i) Fraudulent misrepresentation Derry v Peek (1889) 14 App Cas 337. how much worse off? Here. or Make it recklessly (don’t care whether true or not). = A pays $5000.
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? LAWS1017 Torts and Contracts II 47 .
ch 22 Harland. damages (s 82) and discretionary relief (s 87) are available for contraventions of s 52. (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1). CLA Chapter 19 Balkin and Davis. The object of this topic is not to examine the provision exhaustively. Fair Trading Act 1987 (NSW). but rather to give a sense of the ambit and operation of s 52. A. (2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1). engage in conduct that is misleading or deceptive or is likely to mislead or deceive. FPA for conduct by persons. such as s 42 of the Fair Trading Act 1987 (NSW). 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. Trade Practices Act 1974 (Cth). in trade or commerce. in trade or commerce.7. “The statutory prohibition of misleading or deceptive conduct in Australia and its impact on the law of contract” (1995) 111 LQR 100 LAWS1017 Torts and Contracts II 48 . s 42 Misleading or deceptive conduct (1) A person shall not. -Engaging in conduct. engage in conduct that is misleading or deceptive or is likely to mislead or deceive. · Both require: -Trade or commerce. These provisions prohibit misleading or deceptive conduct by corporations or persons respectively. s 52 Misleading or deceptive conduct (1) A corporation shall not. Injunctions (s 80). in trade or commerce. There is an enormous number of decided cases on s 52. and to consider how it compares with the common law on misrepresentations. The statutory prohibition · TPA governs conduct by corporations.
] Bevanere v Lubidineuse (1985) 7 FCR 325 · Company selling its beauty salon held to be acting in trade/commerce.g. would be. · Court found that ‘trade or commerce’ refers to the ‘core’ or ‘central’ concepts of trade and commerce – must be essential to the activity. family home. is not trade/commerce. it wasn’t – not trade/commerce. causes an accident – not trade/commerce. even though it was not in the business or buying and selling such assets. -[E. · Victim argued it was in trade/commerce. so N fell and was injured.g. pizza delivery guy in car. · Issue: could he claim for contravention of s 52? -Was is ‘trade or commerce’? · 4:3 decision: -Not trade or commerce. *Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 via AustLII · Mr Nelson a workman at a site. not just something in the course of it. while others aren’t. that could be trade/commerce. E. indicates incorrectly. LAWS1017 Torts and Contracts II 49 . · -E. e. Usually this requirement · isn’t problematic. But real estate agent advertising it etc. Foreman said that certain grates on a shaft were attached.g. · 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. Another case mentioned in the lecture: registrar of uni told student that his claim would be dealt with expeditiously. pizza delivery van from Pizza Hut painted as Dominos.(i) Scope of the statutory prohibition (a) “trade or commerce” · Makes the provision significantly narrower than CL. -But s 52 is not limited to consumer protection. person selling private property – generally not trade and commerce. They weren’t.g. but there are some hard cases. E v Australian Red Cross Society (1991) 27 FCR 310 · Red Cross provided blood that was contaminated with HIV. Selling an individual non-business asset. Some aspects of an activity might be trade/commerce. -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).
· Court held it was misleading conduct.1 of the contract. or the giving of. the arriving at. 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. or the giving effect to a provision of. a contract or arrangement.· Judge found it was not – gratuitous supply of blood. -Whereas under CL need pre-contractual acts for MR. including the making of. an understanding or the requiring of the giving of. making it known that that act will not be done. Under one agreement. refraining (otherwise than inadvertently) from doing that act. or the giving effect to a provision of. (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. LAWS1017 Torts and Contracts II 50 . (b) “conduct” · In this respect it can be broader than CL – could be found to have engaged in conduct that’s misleading when wouldn’t have been guilty of MR under CL. *Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470. or ii. ‘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. Neither AS2000 nor AS2000 (D) (a related company) owned the copyright in the underlying software. a covenant… (c) a reference to refusing to do an act includes a reference to: i. CMCLA 19-29 · AS2000 developed software products based on certain underlying software.1(b) and (c) of the contract. · · -I. Issue: Consumer protection – do TPA provisions only apply for consumers or for all? (s 52 appears under heading “Consumer Protection”. -Owner of IP in underlying software upon which the developed software was based had a potential claim for infringement. *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. -Under cl 3.) Court found it is not restricted to consumers. (CD then licensed the software to CCH). AS2000 (D) purported to assign to CD copyright in the developed software. · Issue: was the giving of the warranties in cl 3.e. 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.
US company didn’t have presence in Australia at the time. · Directed at particular individual. -Identified the relevant section of society as those in Aust who would have known there was also a Taco Bell in US. so people wouldn’t have thought the Aust company was affiliated with it. · This test is objective. TCA (US chain) opened two Taco Bell restaurants in Sydney – one in Granville. but not especially dim. -Must ask.(ii) Meaning of “misleading or deceptive or is likely to mislead or deceive” (a) Intention not relevant · Intention is completely irrelevant. · Using this method. *Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 · TB operated business known as ‘Taco Bell’s Casa’ in Bondi since 1976. one in George St. TB alleged breach of s 52 by TCA. 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. · Generally accepted that ‘deceptive’ doesn’t add anything to misleading – enough that conduct is misleading. · Court also found that the US company was misleading. · Directed at public at large – see Taco. the court found that Aust company’s (TB) conduct not misleading. and under similar names (Taco Bill’s) since 1970. 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). -Assess conduct in reference to this person. In 1981. so whether someone actually was misled is not decisive. would this person be led into error by the conduct? · Not enough that they would just be confused. -Pick an average member of that class – average/slightly below average intelligence. LAWS1017 Torts and Contracts II 51 . although it could be influential. depending on the nature of the action. -Assess conduct standing in the shoes of that individual. -Identify the relevant class and members of that class. Would these people be misled? -Court said no.
but did not assert that it was licensed to seat 128. by then there was an existing customer base that could be misled. Premises licensed to seat 84. · -Telling a half-truth or being silent may amount to misleading conduct under TPA. · Was this misleading in breach of s 52? · · Vendor argued that it never said it was fully licensed for 128. More modern approach is to ask whether there was ‘reasonable expectation of disclosure’ (result in Henjo would have been the same). literal truths and ‘half-truths’ · Courts have been reluctant in attaching duty to disclose where nondisclosure would not be MR under CL. failure to disclose. Court found it was misleading. -No answer to say victim should have made on equiries. Door sign said ‘fully licensed’. HI’s agent said that the restaurant was ‘licensed’. Lockhart J: · Henjo was quite an ‘old-school’ approach. -Used the phrase ‘duty of disclosure’ – quite novel step. while the manner in which the business was conducted at time of sale supported this understanding – therefore duty to disclose truth. CM instructed solicitor to check licensing but solicitor did not. Solicitor would have discovered the problem if proper investigations had been conducted. LAWS1017 Torts and Contracts II 52 . · Time factor – Aust co was first on the scene.-Relevant class: People aware of Aust co. *Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 (c) Silence. no such duty at CL. Actually seated 128. no confusion until US co came on the market. Would they be misled? -Yes – geographically near enough to be misled. -Fact that misled party failed to make own enquiries not necessarily a defence · -Vendor’s agent had given the purchaser to understand the limitations upon seating capacity/arising from licensing were less restrictive than was in fact the case. Buyer argued that you can’t say it’s fully licensed and then fill it with excess seating and not say that that exceeds the license. CMCLA 19-23 · Sale of a restaurant business by HI to CM. for D.
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. 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. unless it adduces evidence to the contrary. the representation shall be taken to be misleading. *Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83. (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. representations. not generally a representation – need to find some other implied rep. be deemed not to have had reasonable grounds for making the representation. it implies you have reasonable grounds for it – more plaintiff-friendly.*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. that the maker of the statement had that state of mind when the statement was made and a basis for it. or the refusing to do. *s 51A of the Trade Practices Act 1974 (Cth) Interpretation (1) For the purposes of this Division. Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 (d) Predictions and promises as to the future · At CL. the onus is on maker of statement to show there were reasonable grounds for making it (whereas at CL.. warranties and undertakings…’ LAWS1017 Torts and Contracts II 53 . plaintiff has to show no reasonable grounds). it’s not misleading. expressly or by implication. where a corporation makes a representation with respect to any future matter (including the doing of. the corporation shall.e. · S 51A TPA (and s 41 FPA) establishes that if you make rep as to future. any act) and the corporation does not have reasonable grounds for making the representation. CMCLA 19-23 · Clause 7 of the contract: -‘the agreement constitutes the whole of any promises. -I. -If there is a reasonable ground for the statement.
Can’t exclude liability for contravention of s 52/42. so normal practice is to go after realtors. Diagram was provided by H. -In such cases. -Disclaimer is no magic bullet. · Disclaimer in the brochure said: All information contained herein is gathered from sources we deem to be reliable. representations. · Could not sue the vendors because not trade/commerce. But they can work sometimes – court conceptualises it as: disclaimer goes to whether conduct could be said to be misleading in the first place. sophisticated players. Have to look elsewhere in Act. but even assuming it was. B inspected property before auction with designer and builder. including the high water mark. court said it was ineffective for public policy reasons. can’t even exclude for innocent MR. The backyard could not be reconfigured as planned.-‘…no promise. *Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 via AustLII · Sale of residential property by H to B and another. just sets out the standard. · · · Outright exclusion clauses don’t work. · 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. Brochure produced by agents contained diagram with dimensions. not fair to assign blame to realtor who is just passing on info and says so. LAWS1017 Torts and Contracts II 54 . and the boundaries. Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41-601 via AustLII21 B. For damages – s 82. Remedies for contravention · s 52 doesn’t refer to consequences of breach. Disclaimers usually don’t work. Must look at it in context of other conduct. Had engaged construction experts to check out property even before they had bought it. -Legitimate here to talk about things like experience of the purchaser because it concerned individual – so in the shoes of the individual. However we cannot guarantee it's [sic] accuracy and interested persons should rely on their own enquiries. The high water mark was not recorded accurately. by reason of any…representation… made… on or prior to the making of this agreement’. · · -As intent is irrelevant under statute. Intended to reconfigure backyard. There was some doubt as to whether this was really aimed at s 52. warranties undertakings… shall be deemed… to arise…. -Also strong vibe that purchasers were well informed.
-(2) Value at which the completed properties could be sold. but there have been signs of dissent. Travel Compensation Fund v Tambree (2005) 224 CLR 627 via AustLII · Suggested that common sense causation unhelpful. HC said. no loss. CMCLA 19-15 LAWS1017 Torts and Contracts II 55 . Issue: had W’s misleading conduct caused the loss for the purpose of s 82? Can say. · -Under s 82. so contributory negligence provisions were added later (see below). (expected: $750k. actual: $545k) If either (1) or (2) had been assessed correctly. no loss. -W. (a) Causation of loss · Courts have taken a few different approaches. W’s misleading conduct did cause H’s loss. · The project made a significant loss (> $300k) for two reasons: -H had badly underestimated (1). ‘but for’ valuer’s mistake. a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV. H would not have proceeded with the project. -It was realised this was quite unfair. · Law in this area is still developing – no majority has said Wardley was wrong. he considered: -(1) Costs of development. Henville v Walker (2001) 206 CLR 459 via AustLII · H planned to develop property. s 82 (1) Subject to subsection (1AAA). had overestimated value of · · · property.e. (b) Measure of loss *Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 · Just applied March v Stramare. whom H had engaged to advise on (2). common sense causation. i. defendant’s conduct doesn’t need to be sole or even dominant cause. IVA. But equally: ‘but for’ H’s own error. just has to ‘materially’ contribute to the loss. 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.(i) Damages Trade Practices Act 1974 (Cth). But principle about ‘material contribution’ still good law. In assessing the feasibility of the development.
· Not constrained by common law / equitable principles. so no loss.25%. -GIO was still the best on the market so couldn’t have got a better deal elsewhere. they gave option to refinance i. 87A LAWS1017 Torts and Contracts II 56 . ss 82(1B) and 87CB-87CI of the Trade Practices Act 1974 (Cth) See the material below for Week 12. GIO represented that the interest rate would be a base rate + 1. · M sought variation of contract (s 87) or damages (s 82). ss 80. · Gummow and Gaudron JJ – GIO’s conduct did not cause any loss to M. but rescission still most common. What loss had M suffered for s 82? He wanted it to be equal to 1% over the course of the loan. which seemed unfair. · Declaring contract void in whole or in part. Would have been in same position. Evidence was that even if not misled. 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. -Injunction – s 80. (ii) Other remedies · Broader than CL. 80A.25%. GIO offered M and others the opportunity to refinance without penalty. When GIO realised they had probably misled. -Other relief – s 87.e.· M and others borrowed money from GIO. Contract actually allowed for GIO to vary rate upon notice. GIO then increased the rate to base rate + 2. TPA didn’t provide for contributory negligence. M chose not to – this was the real cause of any 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. go to someone else. · Varying contract. · Refusing to enforce any or all of the provisions of a contract · Refunds or return of property. would still have gone to GIO. Law developed in response. so W stuck for whole loss. This rate was still the best on the market. · Other judges – a loss isn’t suffered under TPA simply because of a broken promise. 87.
CMCLA 19-23 *Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. LAWS1017 Torts and Contracts II 57 . 80A: no 80A? 87: declare contract void – ab initio or from other time. order repair of goods. order supply of services. order refund. refuse to enforce contract provisions. vary contract. · *Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83. but is not binding. order compensations. 87A: Power of Court to prohibit payment or transfer of moneys or other property. order execution of an instrument creating/transferring interest in land. CMCLA 19-15 · Henjo and Marks both said that when court exercises s87 power it is not limited by CL – it might provide guidance.· · · 80: Injunctions.
· Issue: Was the contract void for common mistake? · · · · HC held that the contract was valid and that it was not affected by common mistake. LAWS1017 Torts and Contracts II 58 .g. M went looking for it. Both are unaware the government resumed the property the day before. M claims damages for wasted expenditure. CMCLA 20-06 · Sale of oil tanker lying on reef by CDC to M. need to ask whether there was there some sort of implied contingency or condition precedent in the contract. Divergence in English and Australian approaches. the CDC were at fault and had no reasonable grounds in entertaining in the belief that the ship existed – can’t then rely on it as a basis for getting out of the contract. Vitiating factors: Mistake and Duress A. Rather. Exists in common law and equity. Note: difference – void and voidable. No tanker actually existed. (i) Common mistake · The parties are under a common misapprehension: eg. Mistake · · · Often the same facts can be analysed as mistake or misrepresentation. If the ship does not exist. Mistake deals with circumstances preceding the formation of the contract. · · *McRae v Commonwealth Disposals Commission (1950) 84 CLR 377. CDC sought to get out of the contract. there is no particular doctrine dealing with common mistake. Angela agrees to sell a house to Belinda. HC preferred the view that common mistake at common law operates by the implied condition precedent approach – at common law. Even on the assumption that there is a common law principle of common mistake. is the contract void (a nullity from the start)? On the proper construction of the contract. such that if it failed.8. the issue being which provides a better remedy. That is inconsistent with any implied condition precedent. the contract failed as well? E. CDC has promised that a ship exists. doctrine of frustration deals with events after formation of contract.
B sought rescission. After conveyance of title. together with licence and goodwill. · Issue: Was the contract void for common mistake? · · -1. -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. could B rescind for a common mistake? · At common law. B and S discussed the applicable rent for the flats once the work was done.200 to licence and goodwill.000 apportioned £800 to premises. 20-35 via AustLII · Sale by M to S of hotel and land (on which it was thought hotel stood). · Denning – elements of common mistake in equity. HC thought there was no room for operation of common mistake. 20-19. Limits to granting the remedy of rescinding the contract: · · LAWS1017 Torts and Contracts II 59 . -Parties entering under a common misapprehension as to their rights or facts. S discovered that about one-third of the hotel building stood on Crown land. Here the mistake was fundamental in that it significantly affected the price. Spent a considerable sum repairing them. Parties fell out. No suggestion of fraud. £4. sold a plot of land and the purchaser still got two thirds of the hotel. 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. -Party who seeks to set aside the contract for mistake must not be at fault. S claimed that the lease was subject to the rent-control. CMCLA 20-17. Thought that flats were not subject to rent-control by statute (standard rate was 140l pa). The contract itself therefore directly deals with common mistake. Contract was set aside in equity. Price of £5. It was a voidable contract. -2. · Issue: If the flat was subject to rent-control. CMCLA 20-11 · Common mistake in equity. This contract contained such a clause. could not have run a misrepresentation case. · B and S were partners in a real estate business styled ‘Godfrey and Charles’. -That misapprehension needs to be fundamental (in a broader sense than CL). the contract would have been effective and common mistake would not have applied. B took a long lease of a building containing five flats.*Svanosio v McNamara (1956) 96 CLR 186. B let one flat to S at 250l pa for seven years. As a purchaser they would be stuck with the property because of the rule in Seddon’s case (cannot rescind for innocent misrepresentation). Purchaser had to rely on mistake. Approved in Australia but rejected by the HoL in the UK. HC held that the mistake did not affect the validity of the contract. The contract was effective notwithstanding the mistake – the vendor still From the plaintiff’s point of view. *Solle v Butcher  1 KB 671.
GM sought an order for specific performance. neither realised they had already perished. · Not a separate legal doctrine. -Did not apply Seddon’s rule – essentially said. but in McCrae HC cast doubt. -A sold B goods. that interpretation prevails and the contract continues. CMCLA 20-24 via CLR · Grant by Q (def) to GM (pl) of option to purchase land.-The same principles that would apply in misrepresentation apply for rescission in mistake in equity. the contract is void. e. -Line of cases in which A sold B goods. neither realising that B already owned them. Brian accepts thinking Alan means his Porsche. the VW. to Brian for $5000 and thinking that Brian believes he is offering his VW. surely best analogy would be with innocent MR so Seddon’s should have applied. meaning his VW. and the goods without the knowledge of the seller have perished at the time when the contract is made. Dealt with as an issue of formation of contract where subjective intention is irrelevant. contract is uncertain and falls over.g. · Wider scope under equity (Solle). Some cases found this to be common mistake. -But if it can give it a meaning. · Common mistake is clearly very narrow. There have been few successful common mistake cases in CL. e. Error of interpretation no basis for rescission. (ii) Mutual mistake · The parties are at cross-purposes about the contract: eg Alan offers to sell his car. clear. “Alan’s car” – if it can’t give it any meaning. Equitable rule prevails. But now enshrined in statute. · Court looks at whether it can give any meaning the phrase that caused mistake. Some egs: -Coronation cases. · Alternative remedy: to allow the tenants stay on the premises but only on the proviso that they pay the market price (unusual relief).g. LAWS1017 Torts and Contracts II 60 . s 11 Goods which have perished Where there is a contract for the sale of specific goods. 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. *Sale of Goods Act 1923 (NSW). it has been rubbished so I don’t have to follow it! (Dubious!) If both parties innocent. Goldsbrough Mort v Quinn (1910) 10 CLR 674. 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.
Second buyer: A. Rogue: Claims to be Richard Greene. Alice offers to sell her car. First buyer’s cheque bounces for e. CMCLA 20-42 · Sellers: L. meaning her VW. no title can pass to Rogue – nemo dat quod non habet. that meaning prevails and the contract is valid – a mistake in interpretation the contract is no basis for rescinding the contract. the parties were face to face.· If Q’s construction was incorrect. R can’t pass on title to 2nd B. Pays for car with a fraudulent cheque. Bella accepts thinking Alice means her Porsche. The first contract was valid and the rogue passed title to the car to A. then Rogue acquires title to goods. *Lewis v Averay  1 QB 198. -Generally concerned with a particular type of case of sale of goods. Rogue: Blenkarn. 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. Was the first contract void? · Unlike in Cundy. -If 1st contract is void. L sued C for conversion. · HC found that the first contract was void. Second buyer: B then sold some of the goods to C. to Bella for $5000. One party is mistaken about: · -Identity -Terms of the contract and quality of the subject matter of the contract. if the court can’t give an essential term any meaning. TV actor. · Akin to an offer and acceptance problem. therefore no title passed to B or C. which it can pass to 2nd buyer. -Seller could sue for damages in fraud. B wanted to buy goods from L but L wanted to sell goods to Blenkiron & Co. LAWS1017 Torts and Contracts II 61 . so between seller and 2nd B. · Identity. Therefore no formation of contract. no face to face dealings. But if it can assign a meaning. so 2nd B owns the goods. L sues A for conversion. the contract is void. No correspondence between the parties to the contract in terms of offer and acceptance. B wrote to L to order goods (linen). could Q rely on this mistake? No. Seller – Rogue (First buyer) – Second buyer. seller loses out. -If 1st contract valid. but difficult because Rogue usually doesn’t have money and has gone missing. CMCLA 20-49 · Seller: L. *Cundy v Lindsay (1878) 3 App Cas 459. seller wins. L delivered the goods without payment. He gave his address but signed the letter with the name of a reputable firm Blenkiron & Co. Alice knows of Bella’s mistake.g.
Not easily reconciled with Smith which also dealt with an oral contract. Element of unconscionable conduct. Price . *Smith v Hughes (1871) LR 6 QB 597. -The seller usually loses unless they act quickly to rescind before the goods are sold on. T knew correct price. -The judgment is confusing though. The non mistaken party deliberately set out to prevent the mistaken party discovering their mistake. 2. · Seems that the court acknowledged that if (2) were the case. pretended not to have copy of option with him. A mistake as to a term of the contract. When J executed the option. 1. Appears to have known that J was probably mistaken as to price. the contract would be void for unilateral mistake. Took steps to inhibit J’s discovery of correct price – avoided mentioning price. she believed that the price was $15k per acre. Concerned with a serious mistake about a fundamental term of the contract. but land might increase in value to $195k after rezoning. (iv) Rectification of documents LAWS1017 Torts and Contracts II 62 . Court drew a distinction between two things: -(1) The seller believed that the buyer believed that the seller was selling old oats. · Here. L intended to deal with the rogue. as do some Js. At time of contract. Would have to be a serious mistake. Seller sold oats to the buyer. In this case. CMCLA 1-41 · Unilateral mistake at common law. Superseded by later cases. there was nothing to rebut the presumption. Could the contract be rescinded? · Test applies to written contracts. the non mistaken party were aware of circumstances that indicated that the seller was mistaken. CMCLA 20-32 via AustLII · J granted option to T to purchase 10 acres of land.· Denning LJ: when parties deal face to face there is a rebuttable presumption that they intend to deal with the person physically present. land value estimated to be $50k.$15k total – was specified in the option. -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. -(2) The seller believed that the buyer believed that the seller was promising the oats were old. -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. A mistake as to the quality of the subject matter. *Taylor v Johnson (1983) 151 CLR 422.
P spoke little English and could not read English.g. USD depreciates 10%. in fact. · 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. H LAWS1017 Torts and Contracts II 63 . Cullen’s agent was involved in this particular deal and was willing to impute that sort of knowledge to Cullen personally. or those who through no fault of their own are unable to understand the nature of what they’re signing. -(3) When it comes to innocent parties. fixed in USD. property or economic interest) which forces another to agree to a demand. H to build tanker for NOS. 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. the person who signs under their misapprehension they must not have been careless when signing. There was a radical difference between what he signed and what he thought he was signing. a document extending the time for the exercise of the option. Price to be paid in instalments. P signed a document. Duress · Duress is a threat of a wrongful act (against person. · P was a member of the relevant class of persons. *North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd  1 QB 705. C’s agent was aware of P’s limited understanding of English. It was. CMCLA 21-19 via AustLII · P granted to C an option to purchase land. C did not exercise option in time. -(2) Needs to be a radical difference between what they actually signed and what they thought they were signing. which he believed to be a receipt for the $50 only. *Petelin v Cullen (1975) 132 CLR 355. A very narrow doctrine. blind or illiterate. Pukallus v Cameron (1982) 43 ALR 243. C’s agent later met P. As to (3). Saunders v Anglia Building Society  AC 1004 B. CsB 22-06 · Shipbuilding contract. Letter of credit from H to NOS to secure repayment of instalments if there is default.· Equity will rectify a document which mistakenly does not correctly record the true agreement between the parties. C later exercised the option within this extended time. C’s agent asked for an extension and offered $50.
22-11. Over protest. CMCLA 22-10. 22-13 via NSWLR LAWS1017 Torts and Contracts II 64 . NOS agrees to pay the extra 10%.· refuses to finish vessel unless NOS pays 10% more. Issue: Was this transaction voidable for duress? Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40. H increases letter of credit by same margin.
· Classes aren’t fixed but are reasonably limited. concerned with A’s actual conduct. dentist- LAWS1017 Torts and Contracts II 65 . -2. -Unconscionable conduct. guardian-ward. Easiest way for B to make out case. Before entering into contract. Concerned with actual undue influence. Law recognises certain classes of relationships as by default giving rise to presumption of undue influence. Principle: B has not entered under own free will but under persuasion of A. question is ‘what factors will activate presumption?’ For A to rebut presumption. solicitor-client.9. Vitiating factors: Undue influence & unconscionable conduct · · · Common law: -Undue influence. -In 2.g. Some of these things apply more widely than just contract. -In 1. Transactions between A and B in situations in which B does not exercise independent free will in entering into transaction – deals with quality of B’s consent. not presumptions. B = influenced. Undue influence · · Parties A and B – A = stronger party. -1a. Common law then statute. parent-child. e. Situations where law applies presumption that B has entered under A’s undue influence. A. · Principle concern as plaintiff is to show that relationship between A and B falls into one of these classes. e. -Principle from Yerkey v Jones. · Some circumstances whereby law says a class of relationship isn’t recognised as automatically giving rise to resumption. · · Several categories (these aren’t legal terms): -1. Then up to A to rebut presumption. which sits in between.g. · Category 1. religious advisor-‘parishioner’.
B had known J for about 20 years. very stupid and mentally unstable’).] -Long-standing friends not a recognised category. later have falling out. · With actual undue influence look at similar factors but different focus. Transaction was a gift. But they should be conceptually kept separate. · HC said yes. so they can blur.patient (whereas doctor-patient is). Cases where relationship doesn’t fit into 1a categories but relationship between A and B is nonetheless such that it justifies a presumption – more ad hoc. -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. Not a contract because a ‘gift’. · There is a degree of latitude built into law for transactions between A and B that are naturally motivated by love/affection/friendship. The property was B’s only substantial asset. Intelligence of B. Law only gets involved for transactions that can’t be explained by these natural human feelings. B was of less than average intelligence and had no capacity for business matters (Latham CJ: ‘highly excitable. Allcard v Skinner (1887) 36 Ch D 145 *Johnson v Buttress (1950) 84 CLR 377 · B transferred real property to J. Whether transaction is purely voluntary or whether consideration was received (not decisive. but court is more likely to infer presumption for gifts). · This also probably explains the 1a classes. easily rebutted. demand gift back. -Factors the court is willing to consider: · Always depends on all of the circumstances.g. -After B dies. son contests the transaction. · If undue influence is found. · Issue: Could the transaction be avoided for undue influence? [‘1b’ category case. B did not obtain independent legal advice in relation to the transaction. just a transaction. and if it did. -E. Was accustomed to rely on her for advice on business matters. say that father-child is recognised category. presumption applies. give present to father for Fathers’ Day. the general effect is rescission. -At the time seemed that he thought the gift was revocable. Court wouldn’t even find presumption. husbandwife/wife-husband. but it wasn’t. -1b. LAWS1017 Torts and Contracts II 66 . May well be that strength · · of the presumption varies depending on circumstances. -Dixon J: explains a close relationship between 1b and 2 (actual undue influence) – both look at the facts of the case. Principle here is same for contracts. employer-employee. and J did not rebut it.
Bank sought to take the security from B. i. -HC said that Bank was affected by notice of undue influence of uncle over niece. i. Unconscionability is more concerned about conduct of stronger party A in exploiting B’s position. B niece (but 60 years at time). impute conduct to C itself essentially. Unconscionable transactions · Originated in 18th C. · Much harder for B to establish undue influence. C the bank. · Relevance of legal advice – HC suggests that independent legal advice by B goes a long way to rebutting. which is then provided to C. unscrupulous people would make deals with expectant heirs – small amount of cash/property. designed to protect 18th C equivalent of Paris Hilton. Convinces B to provide security. Undue influence is generally about quality of B’s consent. and that uncle had witnessed niece’s signature on all relevant documents. Generally need to show further (in addition to principles from A v B cases) that: -A was acting as C’s agent – i. Absence of legal advice tends to suggest there was undue influence. One judge went so far as to say bank knew they were uncle and niece. but not decisive. B.e. know circumstances that give rise to presumed or actual undue influence. Can B argue as against C that B has been affected by undue influence by A? -A was uncle. often ran into difficulties.· How to rebut presumption? -Key is for A to show B exercised independent free will.e. But in certain circumstances court recognises B’s disadvantage merits protection.e. 18th C ‘Cash Converters’ appeared. Some reluctance by law to get involved. OR -C had knowledge/ought to have been aware that there was a relationship of undue influence between A and B. other judges stopped short of this. Uncle didn’t repay money. In transactions A and B rarely are in equal positions. · Bank knew that uncle and niece lived at same address. who is loaning A money. in return heir would assign large part of their inheritance (‘catching bargains’) -Law found something in these cases that went beyond mere stupidity. young people waiting for relative to die to inherit large estate – in short term enjoy lifestyles beyond their means. · · (i) Equitable principles *Commercial Bank of Australia v Amadio (1983) 151 CLR 447 CMCLA 24-06 LAWS1017 Torts and Contracts II 67 . Bank of New South Wales v Rogers (1941) 64 CLR 42 · A wants to borrow money.
· · ·
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 V’s 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 B’s disability/disadvantage. Mason J: A actually knew, or ought to have known (reasonable person in A’s position ought to have known). -3. (something of a corollary) A then takes advantage of B’s 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 didn’t understand document (one of them said, it’s only limited, isn’t 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 person’s 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 shouldn’t 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. · Plaintiff’s 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.
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 doesn’t help people for transactions of a commercial nature. · Unjust contracts – incl unconscionable, harsh, oppressive. · Don’t need to look at it in great detail. Look for: · Here’s 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.
LAWS1017 Torts and Contracts II
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 W’s 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 didn’t have to say whether that’s 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 daughter’s 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 isn’t even close to unconscionable conduct. Legitimate commercial armtwisting. Majority agrees. HC says, not unconscionable.
LAWS1017 Torts and Contracts II
· Consequence of contravening either is to give access to the TPA remedies (broader than CL). but just be aware for future! · An already operative change: unfair contract terms scheme – just be aware of it. distinction between matters affecting conduct up to and incl formation (procedural) cf actual content of the contract (substantive). goods/services. -Concerned with substantive unconscionability (mainly). Did not understand the LAWS1017 Torts and Contracts II 71 . TPA won’t be called TPA any more. Broader considerations. C. · I. reordered. *Garcia v NAB (1998) 194 CLR 395 · Mrs G provided bank with several guarantees of the indebtedness of her husband’s businesses. Don’t need to learn for this course.e. Did so: “because her husband consistently pointed out what a fool she was in commercial matters whereas he was an expert. sections will be renumbered.· S 51AB: -Generally concerned with conduct of corp in relation to consumer · -Generally concerned with business-to-business conduct. just be aware that it’s a different way of thinking about unconscionable dealing. · Both sections take diff approach to s 51AA/Amadio. and because she was trying to save her marriage”. Set out list of factors to consider in assessing whether corp has contravened expected standard of conduct. -Will render void unfair terms in standard form consumer contracts. Principle from Yerkey v Jones · Sits between undue influence and unconscionability. S 51AC: (iii) National Credit Code (iv) Australian Consumer Law – unfair contract terms · Major changes afoot that will take place next year. Closer to undue influence. as opposed to procedural. -Don’t have to memorise the shopping list. -Many people scared because this is extremely wide. New provisions will be inserted.
-2. HC allowed wife to get out of contract – Yerkey v Jones principle. Mrs G applies to have guarantees set aside. Plus for either one. No positive finding of undue influence exerted by Mr G. not just guarantees. Where wife provides guarantee of husband’s debts. or same-sex. de facto etc. and husband-wife not an established category for presumption. -3. Bank takes no step to ensure that transaction fully explained to wife. 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. Is this principle anachronistic? Gaudron J in majority made strong point that it isn’t a principle based on subservience of women.· · width of the guarantees and did not realise that they were secured by mortgage over her home. In this case didn’t need to expand. Not really a case of special disability/disadvantage. hard to establish Bank was on notice. LAWS1017 Torts and Contracts II 72 . May be that doctrine can expand to other sorts of transactions. Transaction was voluntary (wife obtains no real benefit). Wife doesn’t understand nature or purport of transaction. Mr and Mrs G later divorce. Suggested it could be expanded to include reverse. · · Principle applies: -1.
Remoteness. In past Contracts. To be properly compensated. · Place P in position had contract been performed. -Causation – inquiry about whether the wrong led/caused P’s loss. Every breach of contract is actionable per se. Whether that kind of loss can be recovered. -Remoteness – how would we have expected breach of contract to play out. then limited to nominal damages. e. Causation. Now talking about other important right – damages. These days more judicial ‘wheel of fortune’. which have dealt largely with pre-contract actions that affect contract’s validity. -3. Causation and remoteness of damage in contract · · · · Very different topic to everything in past weeks.10. assume there is a valid contract. From now on. was this loss expected? (i) Loss Alfred McAlpine Constructions Ltd v Panatown Ltd  3 WLR 946 LAWS1017 Torts and Contracts II 73 . · In the past. ‘$400 sounds about right’. -2. but party is seeking damages for breach. $1 essentially. -Similar to tort but operate a bit differently. to put P as far as possible in position they would have been in had the wrong not occurred. Generally don’t bother going to court if you can’t prove loss. Measurement. -Substantial damages – plaintiff can show real loss. Two kinds of damages. have talked about termination for breach. i. · Causation and remoteness. -Nominal damages – plaintiff can’t show real loss. · Substantial damages – four problems: -1.g. But plays out a bit differently.e. need to show the damage that has been suffered though. · Purpose of damages: -Same as tort. -4.
· · - · · LAWS1017 Torts and Contracts II 74 .(ii) Causation · · · · Common sense causation – March v Stramare. · Before March v Stramare. Allows recovery of loss: Arising naturally. then a prima facie case of causation is established.Such as may be reasonably supposed to have been in the contemplation of both parties at the time they made the contract. according to the usual course of things. Thieves broke in and stole stock. (iii) Remoteness · Test is distinctly narrower than in tort – beyond a certain boundary. D engaged to carry it but due to breach of contract delivered it late. Usually not caught by Civil Liability Act. two limbs to the test . would be reasonably fit for purpose of preventing entry by burglars. Implied term that door.e. Breach of this implied term. which is for D to rebut (which it could not here).unable to say whether the theft would have been avoided if the door had been installed in compliance with the contract. I. Generally quite straightforward in contract. Breach must cause loss – need not be sole or dominant cause. from breach. Would have taken between 45 and 60 minutes. as the probable result of breach Contemplation is different to reasonable foreseeability in tort. that is. There was a theft through the door.If P could show a. but HC does adopt essentially a common sense approach: . P seeks compensation for loss of business. as fitted. losses would not have occurred. Test was changed in case below. With ‘but for’ used as negativing principle. broken crankshaft. · Issue: Did the breach cause the loss of the stock? · Difficult to answer ‘but for’ . and b. (a) What kind of loss is to be compensated? Hadley v Baxendale (1854) 9 Ex 341 A mill. Both sides stuck with ‘but for’. 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. Door not fit for purpose. or .reasonable foreseeability (imputed knowledge) and reasonable contemplation (actual knowledge).
Vessel deviated from agreed route. [Kind of damage. 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. The market price for sugar had fallen during the delay (9 days). Pertains to both ‘limbs’. including profits lost due to being unable to accept particularly lucrative contracts from government (200 pounds/week). Charterers of vessel (C) were sugar merchants who intended to sell at the destination port.imputed knowledge i. · Everyone is presumed to know what happens in the normal course of things (1st limb Hadley) . they didn’t possess that knowledge. vessel arrived at destination port later than expected. CMCLA 35-06 Sale of boiler to launderers and dyers. Delivery delayed by a little over 5 months. · Need knowledge of special circumstances at the time of contract (2nd limb H) .word to describe the probability is a matter of semantic disagreement. As a result. Extraordinary profits are only recoverable if the defaulting party had knowledge of the nature and terms of those govt contracts. which was a breach of contract by the owners of the vessel. · Relevant likelihood is ‘reasonable foreseeability’. Probability/contemplation test is more stringent than the tort test of foreseeability but might still be less than 50% . On the facts.] · Ordinary profits recoverable under the first limb. (b) ‘Foreseeability’ *Koufos v Czarnikow Ltd  1 AC 350. what that party knew or ought to have known. If you deliver a productive machine late. objective. ‘Foreseeability element’.actual knowledge i. to all knowledge. · · · · · LAWS1017 Torts and Contracts II 75 . Buyer claimed for lost profits. Owners of vessel (K) knew of market for sugar at destination port but not of the charterers’ intention to sell the sugar. it’s not unexpected that business would lose profits. CMCLA 35-10 Charterparty of vessel for carriage of large quantity of sugar. 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. subjective. HOL said that was ordinary loss was not too remote.e.e. need to consider likelihood of the consequences.· This test tends not to be used much anymore because it was ‘restated’ (or reformulated?): *Victoria Laundry (Windsor) Ltd v Newman Industries Ltd  2 KB 528. Contemplation or probability part – given that knowledge. Never resolved which term preferred in Aust. Buyers told sellers that they intended to put it to use ‘in the shortest possible time’.
but he still sticks with the Koufos test.Consider whether loss was likely. Was it not unlikely that pigs might not fall ill? Yes it was quite likely. Assessed under first limb of Hadley v Baxendale. Nuts became mouldy. P’s pigs ate nuts anyway. This was not a completely unfounded theory. chain of events too remote. Led to diarrhoea and E. a serious possibility. Trial judge held no ‘serious possibility’ or ‘real danger’ of mouldy nuts causing such degree of illness in pigs. CMCLA 35-18 U contracted to supply and install a hopper to store pigfeed.but probably right to say ‘not unlikely’ or ‘likely’ have garnered reasonable support. *H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd  QB 791. · · · · · LAWS1017 Torts and Contracts II 76 . coli infection.The breach was that the hopper was not suitable for storing pig food. the loss was clearly not too remote. P claimed damages for dead pigs. should apply the reasonable contemplation (more stringent test) but if they’re simply claiming for property damage and consequential economic loss apply the tort test. If the plaintiff claims for purely economic loss in contract. Hopper not properly ventilated. This was a breach of a term of the contract that the hopper be reasonably fit for purpose. lost sales. Framed in that way. Many pigs died. expenses incurred in dealing with outbreak. 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. etc. not unlikely. Lord Denning’s approach not the one to follow – apply a uniform test for probability across tort and contract. . Loss was illness and death of pigs. 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? .
or if no time was fixed. s53(3) • Non-acceptance: Sale of Goods Act 1923 (NSW). (3) Where there is an available market for the goods in question. the expectation interest is often calculated by reference to market price. Measure of damages (i) • Expectation damages Expectation damages attempt to place the plaintiff in the same situation as if the contract had been performed. 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 seller’s 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.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 buyer’s breach of contract. The basic rules are: • Non-delivery: Sale of Goods Act 1923 (NSW). CMCLA 36-43 LAWS1017 Torts and Contracts II 77 . (a) Date of assessment .usually at breach Hoffman v Cali  1 QdR 253. then at the time of the refusal to accept. then at the time of the refusal to deliver.11. Measure of damages in contract and sums fixed by contract A. s52(3) Sale of Goods Act 1923 (NSW). • In a contract for the sale of goods. or if no time was fixed for acceptance. 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.
the defendant took the horse back. Claimed damages for wasted expenditure. In breach of contract. Street J: • not too remote because making money from the horse was the whole object of the contract. At that time. assessed at time that it would have been delivered. Loss was not too remote because profit was the whole object of the contract.otherwise would leave it to P). Assessment calculated at the time of breach (not termination . No date for completion C repudiated. value of property was $130k. • In context of the anticipatory breach. • Issue: Was this loss recoverable? • Approaches LAWS1017 Torts and Contracts II 78 . ‘off the plan’. Could get damage for loss of chance even though the chance was less than 50/50. but there was an opportunity for the plaintiff to exploit the horse for profit apart from prize money. H accepted and terminated. At the time the project ought reasonably to have been completed: value was $104k. No tanker actually existed. • • • (ii) Reliance Damages • Damages to compensate for wasted expenditure prior to the date of breach because of the defaulting party’s breach will sometimes be awarded. but still should be made. • Calculation of damages involves speculation so is difficult. At time H began proceedings against C. Issue: What was H’s loss? Loss is 104k. M paid £285 and then incurred costs in an expedition to locate and salvage the vessel. (b) Difficulty in assessing damages is no reason not to do so • • Howe v Teefy (1927) 27 SR (NSW) 301. *McRae v Commonwealth Disposals Commission (1950) 84 CLR 377. Price: $89k.• • • • • • • Contract for sale of property by C to H. How much would have the chance been worth? Jury had awarded 250 pounds. value of property was still $130k. CMCLA 35-38 • Sale of oil tanker lying on reef. court affirmed this. What was the plaintiff’s loss? Won’t count the horse’s potential winnings because it was a dud horse. CMCLA 36-50 Plaintiff hired a racehorse for several years intending the race it. That loss was recoverable.
• • • • • • • *Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. On who does the onus lie? Does the plaintiff have to show that he or she could’ve recovered that amount? In circumstances. Issue: Could A recover damages for its wasted expenditure (c. A incurred substantial expenses (e.. • HC said that it was the Cth’s breach that made the plaintiff’s expenditure inevitably a waste.$5.5M). • 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. Limit on reliance damages – can’t let the plaintiff recover too much so that they’re in a better position than had the contract been performed. • Normally the burden is on the P to show expenditure was wasted.• Non-delivery of goods under Goods Act 1928 (Vic)? No because the ship was a fantasy. Deanne JJ – onus shifts because they presumed that parties only enter profitable contracts. A would have made a loss on this contract. • Awarded damages for buying salvage rights and getting equipment to look for the ship. • Brennan J: presumption only operates where D’s breach makes it difficult or impossible to calculate where P would have been but for the breach (e. Cth repudiated contract on first day of flights and A accepted shortly afterwards. Cth was promising that a ship existed. not a chance that the ship exists. Court accepted that A’s expenditure was reasonable. even though this was > the anticipated profit? Yes. 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. That was a sufficient starting point for a prima facie case. the onus actually shifts from the plaintiff to the defendant. with resale value of < $1M) to perform services. still an expectation benefit. CMCLA 35-43 via AustLII A to perform Coastwatch service for Cth for 3 years. etc.g. McRae).g.haggling over what could have happened had a non-existent ship existed. LAWS1017 Torts and Contracts II 79 . If contract had run full term: • First instance: Amann would make profit of $820k. • Loss of chance? No. • In the HC: on a different view of A’s expenses. So presume that if you spend money for a contract you anticipate that you will recover it. • Why does the onus shift? • Mason CJ and Wilson. Enough for the plaintiff to show that the expenditure was reasonable. Up the defendant to show that it was excessive. • Cth couldn’t do anything more to rebut this . > $5M on aircraft.
E. 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. • Can B say. for Amann this didn’t look to be the case. So A won. then that would be recoverable. B’s loss is 0. • Note. LAWS1017 Torts and Contracts II 80 . by breaching contract with me A has made a profit of $71. but A tells B A has got a better offer from C for $700.chance of follow-through on the contract in a great position to win the new tender after 3 year period was up.g. However.no reliance loss.• 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. Can do both as long as no double counting.always look at loss to innocent party rather than gain to defaulting party. But not in contract. 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. Only difference is that he’s had to queue etc. What is B’s loss? • On expectation measure. • But there was one extra variable . • Court’s choice as to whether to award reliance or expectation damages or both (P doesn’t get to choose). there is a common law rule (the rule in Bain v Fothergill (1874) LR 7 HL158) that often restricts the purchaser to reliance damages. • No wasted investment in the venture . onus shifted to D to show income would be less than total expenditures. A repudiates contract with B. Fatal problem for D was that i couldn’t assign value to the lost chance. B goes to get it and pay. though. • No! In contract this is not appropriate . • Applying the presumption. B goes to Apple store and buys iPad for $629. I want that much in damages being how much better off he is for his wrong conduct. A agrees to sell B iPad for $629 (market price). that in some cases in equity such losses are recoverable. sells to C.
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. • Lost future rent. then the court says that you have caused the future loss so can’t claim damages for loss of bargain. in breach of contract. relying on contractual provision. Number of houses limited to 72 by contract. termination discharges all future duties. • • HC held that this amount was not recoverable as damages. and then sold them. CMCLA 36-34 via AustLII • B leased property to a company STS&S. *Shevill v Builders Licensing Board (1982) 149 CLR 620. S obliged by statute to give permission. Court said P could only sue for its own loss. (b) Effect of termination CLA [36-13]-[36-17] • If terminate for a non-serious breach. LAWS1017 Torts and Contracts II 81 . Lessor eventually finds a new tenant. AG v Blake  1 All ER 833. • Valued lost bargain as 1-2 [fairly standard]: • 1: amount of rent to be paid for the rest of the term of the lease. less the amount obtained by the lessor through re-letting the premises? • Generally.  3 WLR 625 Case 1.• • • • • Surrey County Council v Bredero Homes Ltd  1 WLR 1361 B contracted with S to construct homes in a housing development. that is. S claims as damages the amount of B’s profit from selling the extra 5 houses. When two months’ rent was outstanding B terminated lease and retook possession. S was guarantor of the company’s obligations. STS&S was often behind in paying the rent. but not uncommon to claim damages for ‘the loss of the bargain’. • Lessor sued for two diff kinds of loss: • Outstanding rent .2 months rent due and owing. • Need to characterise the nature of the breach by the lessee. the rent to fall due in the future. • 2: amount lessor had received once it had started re-letting the premises. not the defaulting party’s gain. B constructed 5 more houses. Issue: Was S entitled to that amount as damages? No. Issue: Could B claim damages for loss of the bargain. A clause in the lease allowed B to terminate if rent remained unpaid for 14 days. Uncontroversial.
• I.Mr Hobbs and wife bought train ticket to destination X. 36-14. yodelling night was really bad. • Generally how the law works . (3) personal injuries (incl emotional trauma). but an extra limitation as a matter of policy. distress.wrong skis. • Hobbs .e. *Baltic Shipping Co v Dillon (Mikhail Lermontov) (1993) 176 CLR 344.e. 36-18. Sue railway company for breach of contract claiming damages (1) for • LAWS1017 Torts and Contracts II 82 . 36-23 • Jarvis had booked skiing holiday. Mrs Hobbs caught a cold.innocent party placed in position they would have been in had the contract been performed. CMCLA 36-15 • D booked pleasure cruise on the Mikhail Lermontov. • But exceptions to the general rule: • Used to be action for breach of promise of marriage . CMCLA 36-13. then no problem for claiming damages for loss of a bargain. • Physical inconvenience due to breach of contract. HC majority said this isn’t simply an issue of remoteness. (c) Effect of taxation and inflation CLA [36-23]-[36-24] (d) Injured feelings CLA [36-08]-[36-10] • Golden rule . tea cakes were hard! I.e. that would allow termination at common law.doesn’t exist any more. (1) lost property. Late at night. D claimed damages for. which you normally can’t do at CL but relied on the contractual provision. train went to Y. Jarvis v Swan Tours Ltd  1 QB 233. could sue for injured feelings . had to walk home in rain. ditched at alter.purely compensatory. generally disappointed all round. of a condition. (2) disappointment. • But in this case held that the lessor had terminated for a non-serious breach. • In contract generally don’t have concepts of aggravated or exemplary damages . Most contracts cases are financial in nature.i. only person in villa. explained more-or-less in terms of causation.• If the lessee commits a serious breach i. • Much of the time courts interpret this as financial position. Issue: was she entitled to damages for (2)? • • General rule is that these sorts of damages are not recoverable in contract.time is not of the essence for obligations to pay. But can imagine cases with disappointment etc. inter alia. Vessel sank a little over halfway through the voyage.e. • All of that future loss is caused by the lessor’s decision to terminate. Comedy of errors . not by the lessee’s breach.
Contract price was £3. • Elizabeth Macdonald. and (2) cold caught by Mrs Hobbs. 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. Issue for HC: was this the correct basis upon which damages were to be assessed? • Other obvious option . So (3) recoverable. Incl nervous shock/psychiatric harm etc . Trial judge awarded damages of £4.g.e. In breach of contract. held that (2) too remote. that is. harassment or bother). Client bothered again . usually difference in value. or • Where object of contract is to provide relaxation or enjoyment or freedom from molestation. solicitor doesn’t carry out instruction as required (either didn’t get one at all or an interim one that was then allowed to lapse).inconvenience.500. In construction contracts. • Heywood v Wellers . HC says you can recover for injured feelings in two cases: • Proceed from physical injury or inconvenience. For construction. whereas homes and land are quite unique. went to solicitor. "Contractual Damages for Mental Stress" (1994) 7 JCL 134 (e) Reinstatement costs CLA [36-11]-[36-12] *Bellgrove v Eldridge (1954) 90 CLR 613.give homeowner the difference in value. so (2) recoverable. • For commodity goods. Court allowed (1). Jarvis.e. • The pleasure cruise fell within the second category. • Physical injury due to breach of contract. CMCLA 36-27 B contracted with E to construct a two-storey ‘villa’.classed as a kind of physical injury. asks solicitor to arrange a restraining order. Substantial defects in foundations and in mortar used in the walls. • Item (2) fell short of this.A client was being harassed by someone nasty.950 on a ‘reinstatement basis’. the default measure (prima facie measure) is the cost of reinstatement/rectification. The sum included the cost of demolishing and reconstructing the building.i. • • • • LAWS1017 Torts and Contracts II 83 .could be compensated by this as damages for breach of contract. • Series of holiday cases e. anxiety etc stemmed from physical injury (emotional trauma). Also. • Mason J: could probably also have recovered (2) on the basis of the first category . • Freedom from molestation exception (i. courts quite protective of a person’s home. with goods you can easily sell if you don’t want it and get an equivalent product. on the basis that the plaintiff was entitled to the cost of rectifying the defects.
but also could be express or implied term of contract . by statutes in various jurisdictions in Australia since 2000. In fact pool is built at 6ft to 6ft 8in. Used to be the case that contributory negligence was only a defence on the tort claim.so two wrongs. • Therefore.e. I. • How much to award? Neither of the two usual measures seem appropriate.loss of enjoyment. • 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. pleasure.in some cases might be able to show that this negligence broke chain of causation. • Cost of reinstatement would be huge because would have to rebuild. possibly even a negative if it’s deeper. That position has been altered. Only other way that plaintiff’s negligence could come into it is re causation . Did so on basis that contract to build pool has the object of providing pleasure. want a deep swimming pool. not the contract claim. Awarded 2500 pounds . appropriate in this case to award cost of reinstatement.g. homeowner as no physical need for it to be deeper. • • • • (g) Apportionment LAWS1017 Torts and Contracts II 84 . negligently fails to exercise due care. enjoyment. • HL said would be unreasonable to award reinstatement costs. What if party could sue for breach of contract or negligence at same time e.What the building owner intends to do with the damages is irrelevant. Specify it will be 7ft 6in deep. doesn’t matter if they intend to keep the money and live in the damages building and not actually use the damages to fix it. to some extent. • Ruxley Electronics v Forsyth  3 WLR 118 • Ask builder to build swimming pool in backyard. professional has contract. 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.a bit of judicial wheel of fortune. Professional owes duty of care to client. Still functional. Very hard standard to pass though. • Difference in value? Doesn’t seem like there really is any. Instead awarded damage for loss of amenity .
[36-05] The plaintiff must take all reasonable steps to mitigate the loss. can’t really not honour national currency . Three principles that are referred to by mitigation: • Party cannot recover loss it ought reasonably to have avoided. (h) Damages in equity CLA [36-25]-[36-29] (v) Mitigation • • • CLA [35-33]-[35-37]. • • e. W printing notes for B. B said. Criminals posed as bank to get notes from W. the plaintiff’s claim may be subject to the apportionment scheme set out in Part 4 of the Civil Liability Act 2002 (NSW).e. if buy a lottery ticket after the breach and win lots of money. the breach has to give rise to circumstances that make the mitigation possible. • Onus on defendant in default to show that P failed to take reasonable steps.it’s not that there is a contractual obligation. B honoured that. • Innocent plaintiff must account for benefits it obtains as a result of breach. Have to terminate because lessee is rowdy etc. claimed as damages. • e. but that damages are reduced if steps to mitigate not taken.reasonable for them to do this so it was recoverable. LAWS1017 Torts and Contracts II 85 . Sometimes see people talk about ‘duty’ or ‘obligation’ to mitigate which is broadly correct but could be technically misleading . • Has to arise from the breach. The Soholt. Have to discount damages for these incomes. • e. • It has even been suggested that the scheme may apply where the defendant’s breach arises from a failure to take reasonable care. i. even though it increased the losses.g. that’s not taken into account). Lost future rent.g. If it’s completely collateral then it’s not relevant for mitigation (e.g. W said. Leasing out apartment.If a defendant breaches a contractual duty to take reasonable care. • See the material below for Week 12. even though this was not the substance of the obligation breached (Reinhold v New South Wales Lotteries Corporation (No 2)  NSWSC 187). • If in taking reasonable steps to mitigate loss. British Westinghouse. innocent party happens to exacerbate its loss. Often regarded as third controlling factor (along with causation and remoteness).g. But able to lease out apartment at a lower rate. • Banco de Portugal v Waterlo. should have just not honoured. that increase is still recoverable as damages.
need to arise out of the same transaction. Issue: If UER were to include the cost of the replacement machines in their claim for damages.g. the vessel had a market value of £5.claiming debt owed under contract. The increased efficiency offset the cost of purchasing the machines. Machines as delivered did not comply with contract.5M. so no obligation to mitigate. • Duty to mitigate? • HL said no . The Solholt  1 Lloyd’s Rep 605 • Defendants agreed to sell vessel to plaintiffs for £5M. 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. don’t just count up to what contract said you would get. e. not damages. Then go out and get drunk. Plaintiffs then offered to buy the vessel again for £4. • Cost of buying the new machines. • Sometimes the benefits will be too remote or collateral to the breach. according to the contract. CMCLA 35-68 BW contracted to deliver and erect eight steam turbines for UER. Plaintiff sued for £500k. incurred more costs in operating them. have a great time this benefit cannot be accounted for when looking at damages owed by masseur. Claimed the total cost. goes badly.• • • • • • *British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd  AC 673. then decided against it. • In accounting for benefits. I. White & Carter Councils Ltd v McGregor  AC 413. so plaintiffs terminated the contract. • Issue: How much was the plaintiff entitled to recover? LAWS1017 Torts and Contracts II 86 . • Still has to be some connection between breach and conduct of the innocent party for these benefits to be accounted for. Sued for damages.75M. C advertised for three years as per contract anyway. Defendants refused.e. They produced less power and were inefficient . Claimed: • Extra costs incurred up until the time of changing the machines (extra coal etc). HL says: railway had to account for the extra benefit they got from having the new machines. buy massage. At this time. CMCLA 37-37 • M wanted C to advertise business on garbage bins. UER replaced the defective machines with new ones. Defendants did not deliver on time. but account for benefits that go beyond that.so railway had to buy more coal. A few years later. The new machines were even more efficient than the original machines were supposed to be. so that ongoing loss stopped.
(Paizu v Saunders) • Duty to mitigate might involve P accepting new contract offered by breaching party (if reasonable).g. • e. so no requirement to mitigate.g. must be reasonable.lost expectation. Result: judge says buyer gets 0 because it had not acted reasonably to reduce its loss. • Contrast with obligations to pay money that are imposed because that is what contract actually requires by way of performance of the contract. i. remoteness etc don’t apply.agreed damages clause/liquidated damages clause.e. • Renders certain amount of damages . 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. borrower’s obligation to repay money under a loan. LAWS1017 Torts and Contracts II 87 . • What should buyer have done to have acted reasonably? • Court said that it could terminate contract. contract agrees that builder will be liable for X amount if misses the deadline .Prima facie measure would have been the 500k . CMCLA 37-06 via AustLII (ii) Liquidated damages clause distinguished from a penalty CLA [37-07]-[37-17] • In building contracts often a deadline. obligation to pay rent under a lease.put onus on P to put forward fresh offer. • e. • • • How heavy is this onus? Perhaps only saying that if you re-initiate contract. That’s what it reasonably could have done to minimise its loss. A. but then should have offered to buy it again for 5m. • Goes beyond Paizu . • e. • White v Macgregor: Court said council was claiming debt owed under the contract. causation. Said that had buyer acted reasonably it would have suffered no loss rather than the 500k loss.this is generally exhaustive and definitive. wages payable to employee.g. Young v Queensland Trustees Ltd (1956) 99 CLR 560.
i..e. prima facie not. i.court is concerned with the • substance.not fatal to it being effective. tubes) below specified prices. might be a bit more or less . that will taint it re cl 2 . D sought injunction and claimed damages. AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170. it is prima facie a penalty. • The tests aren’t concerned with mathematical precision. covers. • Court draws distinction between genuine liquidated damages. NG sold a tyre cover below price list. • This doesn’t mean plaintiff walks away empty-handed . NG was not to sell or offer for sale certain products (incl tyres. not form.i. the party that sought to terminate is liable (repudiation was not accepted).falls back to common law rights. Cl 5 provided that NG would pay D “the sum of £5 for each and every tyre. In relation to these. • In practice often specify that certain liquidated damages provisions apply to certain clauses.e.Courts generally uphold such clauses. which are okay. CMCLA 37-17 • NG bound by a price maintenance clause. but courts have been concerned that parties may start to impose extortionate amounts payable on breach because of different position of parties etc. cover or tube sold or offered in breach of this agreement. • *Dunlop Pneumatic Tyre Co v New Garage  AC 79. as and by way of liquidated damages and not as a penalty”. 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. have to prove loss etc. LAWS1017 Torts and Contracts II 88 . • If decide that it is a penalty re cl 1. others say simply unenforceable. and a penalty. Doesn’t matter if it’s described as a penalty .e. What is clear is that it cannot be relied upon. either good on the whole or not. Whereas if for genuine loss. where a sum is made payable on the basis of several contingencies. • 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. • What is the effect if it is a penalty? • Some say it is void. no half measures. is the clause extravagant and unconscionable? • Also.
your only choice is to terminate and sue for damages.i.court won’t force people to work together if they don’t want to. but can’t do that for contracts to perform services . • 3. sale of land contract can affirm and sue for specific performance.plead it as debt. Must not need D’s cooperation. Must have legitimate interest in pursuing it in this way . • • *White & Carter Councils Ltd v McGregor  AC 413. • Three conditions: • 1. • In e. not contract. CMCLA 37-37 (iv) Recovery after termination of payments due previously CLA [37-25]-[37-41] LAWS1017 Torts and Contracts II 89 .Faced with repudiatary breach. • 2.e. can either terminate or affirm. P must fulfil all obligations under contract. If the continued fulfilment of the contract doesn’t involve the D doing anything. • If you can’t perform.g. must have some reason for having wanted to go through with your performance (doesn’t just mean so that can avoid requirements of mitigation if were to sue for breach). P can perform the contract and sue for the liquidated debt .
12. breach of contract. partner/partner. 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. • 90% governed by common law. a plaintiff P will have suffered loss as a result of the negligence or other torts or other wrongs (e. B and C • the rights of those wrongdoers (A. 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) • P’s rights against concurrent “tortfeasors” or wrongdoers A. • A. In such cases the liability of the various wrongdoers may be “concurrent”.only for property damage and economic loss arising out of negligence. There is a statute . • Joint and severable liability still exists for all personal injury and all intentional torts (for any damages). B and C) between each other. principal/agent. In 2010 we will not consider agency or partnerships.but it was only passed to fill in some gaps in common law. Vicarious Liability There are three instances of vicarious liability at common law: employer/employee. • LAWS1017 Torts and Contracts II 90 . Concurrent.g. breach of a fiduciary duty.Law Reform (Vicarious Liability) Act 1983 . breach of a statute) of more than one person ( A. Proportionate liability introduced in 2004 in NSW . B and C etc).
An example is an employer’s duty to provide a safe workplace for his or her employees. • What tests have courts used in the past? • See Stevens v Brodribb for discussion.if it says “X employed Y”. • Control test .g. both liable .delegable duty of care” to the plaintiff. • 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. An employer is not generally liable for a tort committed by an independent contractor. • • How does a court decide whether a person is an employee or an independent contractor? • Employee works under a contract of service.if employer controls manner of work.although these have been reduced.watch out in prob qs . • 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. that was seen as indicating employee.(i) Relationship of employer and employee • An employer is vicariously liable for a tort committed by an employee in the course of employment. issues with dual employment etc. The exact nature of such a duty and the circumstances when it applies are controversial. • An employer’s 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 this came to be seen outmoded. so should carry the costs. whereas an independent contractor works under a contract for services. 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. • Doesn’t matter what the employer says the relationship is . If context of worker’s comp could be different result than other cases. don’t assume anything about the relationship.to the P. • Why? Employer gets the benefit of the enterprise. although the employee may be entitled to be indemnified by the employer. But it does require proof that the employee was at fault.jointly and severably liable . • i.e. • Some ancient exceptions . giving rise to a “personal” liability upon the employer if the delegate is negligent. e. • Answer may vary depending on why you are asking the question. especially when technical people were employed doing jobs which employer wouldn’t know how to do LAWS1017 Torts and Contracts II 91 . • Probably best then to describe the independent contractor as the “agent” of the employer but agency is complex in tort law.
taxi driver might own own car and work for themselves. Taxi driver might turn up at a depot and get first car available . • Organisation test . if you are employee can’t send someone in your place . • e.g. p 390) Zuijs v. p 377) • Hollis knocked over by bicycle courier. p 373) • Discusses the different tests .precisely when. Brodribb Sawmilling Co (1986) 160 CLR 16 (Cases. • Some level of control. safety measures. Hollis v. place etc. hospital can employ doctors as employees without knowing how to do surgery). 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. rehearsals. • Other cases: • Power of delegation of task indicates contractor. • Subsidiary matters determined by employer . whereas independent contractor can choose who comes to do the job. • As a matter of policy. • Master can dismiss for poor conduct.that person needs to work it out with employer. p 372) • Was trapeze artist employee or independent contractor of circus? • Held: employee.g. Wallsend District Hospital (1989) 17 NSWLR 553 (Cases.for this course don’t have to worry about all the issues of the case. • Level of control over subsidiary matters (if not for central act itself). costumes. • Too blunt to be useful.g. • More likely that employers will set up safe system of work. • Power to dismiss for poor conduct.• (e. Vabu (2001) 207 CLR 21 (Cases.for whom is the person working? For themselves or the employer? • e. Wirth Brothers (1955) 93 CLR 561 (Cases. • Some level of control. Ellis v. what advantages are there in finding that a person is an employee rather than an independent contractor? Hollis. Stevens v.then working for someone else. • Factors indicating employment: • Wages as remuneration. Was the courier to be treated as employee of Vabu for this purpose? LAWS1017 Torts and Contracts II 92 . • Wages. who was wearing livery of Crisis Couriers trading name of Vabu.
so can just look to other cases for guidance .representation to the public that these couriers were part of Vabu’s organisation. • Policy factor: impose liability on employer gives them strong impetus to set up safe system of work.historically would suggest independent contractor. so under common law Police was not vicariously liable for torts committed by police people. • Vabu interacted with clients. 8(1).• • • For Cth superannuation legislation court had held that couriers were independent couriers. • • • LAWS1017 Torts and Contracts II 93 . Factors: • Couriers had to provide own bicycles . not employees. 9B(1). but that didn’t govern this case. The course of employment does not include the employee’s wrongful acts which are unconnected with and not incidental to the acts the employee is engaged to perform. • Factual decision from case to case. • Bugge v Brown 1919 HCA (casebook 369). Starks v RSM Security NSWCA 2004 (casebook 372). Deatons v Flew 1949 HCA (casebook 370). Is there a better test for determining what is in the “course of employment”? See Lepore v NSW. • Doesn’t really give a test to work out how to determine whether this is the case. Boylan Nominees (2006) 227 ALR 46 (ii) Police tort claims Law Reform (Vicarious Liability) Act 1983 (NSW) ss 6. Bryant  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. (2) • Filled in gap that police officers were considered ‘officers’ of the Crown. • But HC pointed out this could just indicate a mean employer.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? . • Wearing the livery of Crisis Courier . HC held: Couriers were employees. New South Wales v. • Vabu determined when the work was done. Sweeney v.But not determinative.
doesn’t necessarily constrain course of employment to avoid liability. Brown (1919) 26 CLR 110 (Cases. (a) Effect of express prohibitions on particular conduct by the employee? Bugge v. • Not usual mode. p 382) • Customer that was drunk was upsetting customers. • What can the school actually do? Should find fault on part of the school. unreasonable and uncalled for. despite prohibition. but also threw glass and injured him. • Prohibition as to manner. Was this in course of employment? • Held: Not in course of employment.not done to further master’s interests or under master’s instruction. They were still employed to go out to the general area. Starks v.e. They disobeyed this. • But in this case. • Held: In course of employment. • Ultimately question of fact whether prohibition keeps act in course of employment. time. • Barbara Macdonald: Seems unfair/artificial to make schools the guarantors. Residential facility in which teachers were essentially in loco parentis. • Many factors contribute to decision of child being in school. or place. • Here: it still occurred in course of employment. Curry (Can. or even the act itself. • Keeping order and defending other customers is part of employment allowed to use proportionate reasonable force to evict someone (excessive force is battery).). She retaliated by throwing beer in his face.specifically told not to use a particular location for the fire. Found sufficiently close connection. • Lister v Hesley Hall (UK . • But acted in that way in the course of seeking to remove P from premises i. which included cooking their lunch etc. Deatons v. Fire caused when employee set up fire to cook lunch (agricultural workers in rural area) . it was an act of passion and resentment. a personal act of retribution .HL). • Act of self-defence would be in course of employment. • HC held: employer still liable. insulted barmaid.• Courts of Canada and UK have supported alternate test . his job.was there a sufficiently close connection between what school does and what happened? • Bazley v. ) • Bouncer head-butted P. RSM Security  NSWCA 351 (Cases. LAWS1017 Torts and Contracts II 94 . Flew (1949) 79 CLR 370 (Cases. p 369 ) • Loss from fire.
He fell and broke his ankle. just sent it back. M expressly told E not to throw the papers from the van but to get out and place them in each customer’s property. not without. Lockhart  AC 591 Rose v. • Under traditional test.* 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. Plenty • Boy helped milkman deliver milk. sued the co-op that organised the milk delivery. Davis (2000) 204 CLR 333 (Cases. • Is there a better test? • Didn’t decide it. then will look for vicarious liability. that is obviously best action for P to bring. • e. • Canadian Pacific Railway v. p377 note) “Thelma” (Owners) v. p 374) Gutman v McFall (2004) 51 NSWLR 599 (Cases. but it was within course of employment. • Held: vicariously liable. Child injured. in a hurry to deliver all the papers before the end of his shift. If no personal negligence on part of school though. University College School  2 Lloyd’s Rep 613 (v) Non-delegable duties M employed E to deliver newspaper from a van. • If the party to which you have delegated is liable. • Safe premises.g. Milkman specifically told not to employ children to help. • Is M liable? • What if E threw the paper because he hated joggers? • Non-delegable means: can’t escape responsibility by delegating the task. Employer has three types of duties to individual employee (these are nondelegable): • Safe system of work. (iv) Agency Motor Accidents Act 1988 (NSW) s 53(1) Scott v. hit P who was on his morning jog. • LAWS1017 Torts and Contracts II 95 . but he did. 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. There was a prohibition. threw some of the papers from the van and in doing so. you are liable. E.
or “solidary” liability. • But in any event it is first necessary to distinguish two types of tortfeasors (people who have committed a tort). • • • * Kondis v. Joint and severable concurrent liability Since 2004 it has become important to distinguish between. p 386) * Burnie Port Authority v General Jones (1994) 179 CLR 520 (Cases p 381) * New South Wales v. but employer is still liable to employee if equipment is unsafe. • Child injured by flagpole that fell. other situations more troublesome.s are relatively uncontroversial. Supervised by teacher on secondment from elsewhere (i. hospital is liable for acts of the doctor. independent contractor). might delegate provision of equipment to independent contractor. • LAWS1017 Torts and Contracts II 96 .g.s . as this may affect liability too.g.f. Proportionate liability applies to the first type of claim while joint and several liability.e. * Civil Liability Act 2002 (NSW) s 5Q B. hospital employing doctors as independent contractors. • The above three e. • Special relationship in above e. X Courts have been reluctant to extend non-delegable duties.g. State Transport Authority (1984) 154 CLR 672 (Cases. • Vulnerability.semi-custodial element. e. and on the other hand. More onerous than vicarious liability. • If patient went to hospital (c. What points to non-delegable duty? • Control. • Joint and severable means P can sue any D or all of them. on the one hand. • e.g.g.• • • Safe equipment. applies to all the rest. e. all other tort claims such as negligence claims for personal injury and all intentional tort claims for any type of damage. • Cth v Introvigne. 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. claims for negligence for property damage or economic loss. schools liable for negligence of independent contractors. to doctor directly).
• If several causes of action. Thompson v. all liability for personal liability is joint and/or several and liability for intentional torts in general is joint and/or several. ‘concurrent’ liability in tort and contract). Joint tortfeasors if one act/omission.each has a duty to take reasonable care to ensure safe entry. but causing same damage. • Several concurrent tortfeasors . The London County Council  1 QB 840 (ii) Plaintiff’s tortfeasors • rights against concurrent Note: regime here of unitary. • e.one person does the tort. One tort committed by both. There is only one cause of action against all of them. separate causes of action against each. • Release of one means all are released. • e. solidary. • note: here ‘concurrent’ means different people liable for same damage (c.e. multi-car accident in which each driver guilty of a tort. release of one joint tortfeasor would release all. even if A could only pay 50% of the loss.they are jointly liable for all the loss.g. but more than one person responsible. two people lock someone in a room. only one cause of action.g.joint owners of a house . joint tortfeasors have solidary/unitary liability to P . vicarious liability . • If joint tortfeasors. So if P sued one joint tortfeasor (A) and got a judgment. At CL.f. • • e. more than one person owes a duty . this would bring the single cause of action against the other joint tortfeasors to an end too. i. • e.each tort contributed to the one damage. each has breached joint duty.(i) Joint tortfeasors tortfeasors compared • and several concurrent Distinction is important.g. • What happens in one action vis-a-vis one D has little effect on P’s case against other Ds. If breach. but one pedestrian injured . • LAWS1017 Torts and Contracts II 97 .g. or “joint and several liability” applies to all torts other than those to which proportionate liability now applies. • As only one cause of action. but someone else also responsible. But they are also severally liable because P can recover 100% of the loss from any one tortfeasor.each person has committed separate tort.
• Brinsmead v Harrison (1872) LR 7 CP 547 • If P obtains judgment against one joint tortfeasor. • Judgment against a several concurrent tortfeasor doesn’t affect others as several causes of action. XL Petroleum (NSW) v. • (b) If more than once action brought re damage against tortfeasors (joint tortfeasors or otherwise) liable re that damage. • Unless it was successfully appealed. they are usually liable for the same amount. Caltex was liable for exemplary damages ($150 000). • I. but still limitations to discourage multiple actions. P can recover 100% of loss from any one several concurrent tortfeasor. • Legislation has improved P’s rights. Caltex Oil (Australia) (1985) 155 CLR 448 (Cases. LAWS1017 Torts and Contracts II 98 .Thompson could settle with one and continue suing the other. then multiple causes of action. • Can never recover more than 100% of loss from any one/all source(s).it abolishes rule that there is only one cause of action that merges in the judgment against all joint tortfeasors. look past literal wording of s 5(1)(a) . Were the plumbers. in which case that is taken as the first judgment . • A release of one no longer releases them all . * Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5(1)(a).see XL Petroleum v Caltex. but there is an exception when exemplary damages are payable . Thompson v Australian Capital Television (1996) 186 CLR 574 • Sued Ch 7 and ACTV. who were joint tortfeasors. p 450) • Caltex engaged some plumbers essentially to trespass on land and spike underground tanks of a competitor. • HC said. even if the one can’t pay 100% of the loss. (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. • In Thompson v ACTV interpreted as going even further.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. P can’t recover more in aggregate than the amount awarded in the first judgment given. literally overcomes the Brinsmead v Harrison rule. • If A and B are joint tortfeasors.If concurrent tortfeasors were only severally liable for different torts causing same damage.s 5(3)(b). • Plumbers only jointly liable for the $5000 compensatory damages.(b).e. also liable? • HC held no . barred from suing other joint tortfeasors.
Merryweather v Nixan (1799) 101 ER 1337 (Lord Kenyon) • At common law. • If B has settled with P without admission of liability. • Who is someone who “is or would. A then can’t get contribution from B (James Hardie). A must prove B would be liable (Amaca) Brambles Constructions v Helmers (1966) 114 CLR 213 • B is liable for contribution at any time.o. s. Right to indemnity = A gets 100% from B. found liable by court. and s. Amaca v New South Wales (2003) 199 ALR 596 LAWS1017 Torts and Contracts II 99 .• Nevertheless it is important that any settlement not imply that P has received full compensation for loss. James Hardie & Co v Seltsam (1988) 196 CLR 53 • If B has been found not liable for any reason. (iii) Contribution tortfeasors • between concurrent Note: right to contribution = A gets part from B. if B has been found not liable by court for any reason. *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.It doesn’t matter (Brambles). e. • There is a limitations period also for contribution proceedings. P sues A. Issues: • • What is “a person liable” (A)? Includes: s. what if B not liable to P because limitation period has expired? . • Except A can’t recover from B if B is entitled to be indemnified by A re the liability.o.g. P then sues B outside limitation period . if sued.even because the reason is that P sued B after expiration of limitations period. then no contribution. as full satisfaction of a claim will also bring the claim to an end. • However.all three can seek contribution.o. who has been sued. who has settled a claim . be liable” (B)? e. there was no contribution between wrongdoers or tortfeasors. A can’t get contribution .B thus not liable.g. even if P could no longer sue B because of limitation period.
could be liable for minor medical negligence. Amaca P/L v New South Wales  HCA 44 • Amaca. the degree of departure from standard of reasonable person. court considers and compares: • Causative importance of each party’s contribution. • Can exempt any person from liability. court grants whatever it finds to be ‘just and equitable’ based on the person’s responsibility for the damage. asbestos manufacturer. damages recoverable are reduced to “such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage”. held that those factors were irrelevent. e.• If B settles with P without admitting liability. • Relative culpability of each person. but not gross medical negligence. 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. sought contribution from P’s (NSW) employer. or direct that the contribution to be recovered from one person amounts to a complete indemnity.has to be the very likely thing to happen. • HC overturned this. took into consideration that Amaca (James Hardie) was massive profit-seeking commercial entity. i. compared to NSW. Podresebersek v Australian Iron and Steel Pty Ltd (1985) HC (CoT 341) • In apportionment. • 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 1946 (NSW) s 5(2) • In proceedings for contribution. • Can be liable for someone else’s tort if your action exposed the person’s action . concurrently liable. whereby damages would be paid by taxpayer. • Gives court broad powers to determine contribution and give indemnity regardless of the lack of prior contractual indemnity. Note: contribution only applies where there is the same damage.g. • Triale judge rejected the claim. * Law Reform (Miscellaneous Provisions) Act 1965 s 9(b) • If contributory negligence by P.e. A must prove that B would be liable to get contribution. not different tortfeasors liable for different (divisible) damage. LAWS1017 Torts and Contracts II 100 .
greater causative contribution. • Situation or status of the parties. joint tortfeasors. Contribution rights apply under 1946 Act.e. I.e. (i) Common law principles Lister v Romford Ice and Cold Storage  AC 555 • Imposed a contractual obligation for E to indemnify M.remorse/lack thereof. LAWS1017 Torts and Contracts II 101 . A can get max $25 from B. C. P sues A. loss is assessed at $100.here found more culpable than the other party. • Barrett J: it is however relevant if one wrongdoer profited from the wrongdoing and retains the profits . Unsworth v Commissioner for Railways (1958) 101 CLR 73 • If B has liability or damages cap in place re P. M vicariously liable to P .goes to the issue of responsibility.Reinhold v NSW Lotteries Corp (No 2)  NSWSC 187 • Barrett J: irrelevant considerations for contribution/apportionment. B would be liable but liability capped at $25 (either by statute or prior agreement with P). 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). whose conduct fell short of appropriate level of professional skill. A can only recover in contributions up to that amount. Contribution and indemnity between employer and employee • When employee E commits tort in course of employment by M: E personally liable to P. • Financial strength or profitability. 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 P’s claim for too much.g. Chandra v Perpetual Trustees Victoria Ltd • Relevant that one party was deceitful in pursuit of monetary gain . • e.i. If E does. E must indemnify M for any losses M must pay P. Yates v Mobile Marine Repairs Pty Ltd • Relevant that one party more actively engaged in loss-causing activity . • Attitude of wrongdoer .
This would mean they can claim M’s right to be indemnified by E. but some case law suggests it could from negligence. Note employee still has some exposure . even gross or culpable negligence. • ‘Wilful’ . Lister no longer applies. and E under insurance is entitled to be indemnified for liability from the tort. and proceeded without regard to that risk. 6(1): if M is proceeded against for E’s tort. • Conduct beyond negligence. i. 6 • • • • 3(1)(a): E not liable to indemnify or pay contribution to M for tort committed by E for which M also liable.e. didn’t arise out of employment. • Must have had knowledge of risk of injury. 5. i. police officer had committed serious and wilful misconduct. • In this case. obtain rights of the employee.must have acted deliberately. rendering P’s arrest unlawful and prosecution malicious. • No distinction between consequential and pure economic loss.(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. 3(1)(b) M liable to indemnify E for liability for the tort. State could get 80% contribution from police officer. • 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.personal liability.e. Proportionate Liability • Proportionate liability introduced in 2004 in NSW . He threatened that P would be loaded up with heroin if he did not confess. 5: Doesn’t apply if E’s tortious conduct was (a) serious and wilful misconduct or (b) not in course of employment. • s 66 abolishes this right of subrogation if E’s conduct not serious and wilful misconduct. Doesn’t apply for personal injury claims.only for property damage and economic loss arising out of negligence. LAWS1017 Torts and Contracts II 102 . D. M is subrogated to E’s rights under that policy re liability for that tort. • *New South Wales v Eade  NSWCA 84 • What is ‘serious and wilful misconduct’? • Hoeben J: Same meaning adopted as for Workers Compensation Act. • * Employees Liability Act 1991 (NSW) ss 3. • Applies for strict contractual obligations? Argue no.
• s 3A (2) contracts can exclude wrongdoers from CLA provisions. • Statute allowed Ds to seek contribution from each other. exclude portion for which P is contributorily negligent. • A claim is not apportionable if by specific exclusion or not from ‘arising from failure to take reasonable care’. D may be liable for these costs. but can’t recover more than 100% of loss overall. *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. or has died. being wound up. • Debatable whether premiums have really gone down. s 35(1)(a) apportionment based on what court considers ‘just and equitable’ in light of D’s responsibility.• Point is that P can only recover the amount from each of multiple Ds. s 35A: if D knows info about concurrent wrongdoer. • s 35(3) in apportioning between Ds. s 34(2) concurrent wrongdoer for this Part can be joint wrongdoer or one of several wrongdoers that caused same harm. Ds benefit . that D cannot be required to contribute to or indemnify any other concurrent wrongdoer (or receive contribution from) for the claim. If P cannot recover from A because A insolvent. and can have regard for comparative responsibility of any concurrent wrongdoer not party to the proceedings. s 36: If judgment against D under this part as concurrent wrongdoer in apportionable claim.g.e. • • • • • • • • • LAWS1017 Torts and Contracts II 103 . whether or not the damages or contribution are recovered in same proceedings in which judgment given against D. unless they were party to previously concluded proceedings re same claim. s 37: P can initiate subsequent claims against other concurrent wrongdoers after receiving judgment against one.solidary / joint and severable liability . • s 34(4) doesn’t matter if concurrent wrongdoer insolvent. but P must now run multiple actions to recover 100%. s 39: this part doesn’t affect vicarious liability. and to lead to less litigation. must inform P. • To make it fairer. proportionate to that D’s liability. P could choose which D to target.whereby P could recover 100% from one or each of the Ds. if wrongdoer intentionally or fraudulently caused damage. does not apply to personal injury damage. • No contributions litigation. s 34A: certain exclusions . also to reduce professional insurance costs. B doesn’t bear that risk any more. s 38: Court can give leave for any person to be joined as D in proceedings re apportionable claim.only liable for proportionate amount. If doesn’t inform and P incurs extra costs because of this. • Different to previous system .
but his ticket was not entered into the draw. s 87CF = CLA s 36.f. Most PEL Ps can’t protect themselves with contract.Trade Practices Act 1974 (Cth) • s 87CB: proportionate liability for damages arising from breach of s 52. newsagent . greater capacity to avoid problem . Lotteries and Newsagent could not enforce their contractual rights with each other. • Then held that because of the s 36. • s 34(1)(a) . proportionate liability regime applies to strict contractual claim if contract breached negligently. C. relied on Lotteries. s 87CE = CLA s 35A. s 87CG = CLA s 37. • s 52: corporation shall not in trade or commerce engage in misleading or deceptive conduct. 10% newsagent. In Reinhold (No 1) it had been found the negligence of both was causative of the loss. not goods that are defective and dangerous (Brookings J) .that does not apply to chattels. • s 87CC = CLA s 34A. • 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.sale of goods warranties etc.perhaps this opens a chink. This makes him not vulnerable. • Apportioned 90% Lotteries. experience of common occurrence. and both had breached contract to Reinhold. The result is that defendants are better off pleading negligence. s 87 CH = CLA s 38.‘failure to take reasonable care’. • Tort should therefore not have a role in this case. • 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. • NSW Lotteries’ negligence was greater . • In any event.had significant degree of culpability and causative force.his numbers would have entitled him to $2m prize. s 87CD = CLA s 35. • Although this only covers defective goods. • 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. • Cannot apply Bryan v Maloney .dominant position. s 87CI = CLA s 39. • R is owed strict contract liability . LAWS1017 Torts and Contracts II 104 . • Barrett J held: • Newsagent and NSW Lotteries owed contractual duties and tort duty to avoid negligently causing R pure econ loss.lack of experience. * Reinhold v NSW Lotteries Corp (No 2)  NSWSC 187 • P suffered loss because of negligence of both newsagent and NSW lotteries when processing lottery ticket .
Would turn every strict contractual claim into apportionable claim. Is either statute directed at pre-existing contractual indemnity rights? • s 5(2): in proceedings for contribution under this section.odd result! • In contract you have either strict promises and duties based on care. • In other respects. Proportionate liability is all about negligence liability. claim should not arise from negligence. • BM: extraordinarily expanded application of this section. normally. St George Bank v Quinerts  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. Can direct that one party pays nothing in contribution or completely indemnifies the other. • If Reinhold accepted. • 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. that P could target just one of joint and several tortfeasors for 100%].• Got there because s 34(1)(a) .people can’t know their rights until court apportions damages. • Breach of strict contractual obligation is not fault-based. LAWS1017 Torts and Contracts II 105 . it should not be seen as changing the law and should be considered in light of the existing contribution legislation. multi-party construction contracts with indemnities are in doubt .‘arising from failure to take reasonable care’.e. making Ds better-off if negligent than if they did it innocently . doesn’t say anything about strict contractual obligations. court apportions based on ‘just and equitable’.
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