Week 6 The Law of Torts Negligence Negligent Misrepresentation

1. Week 6 The Law of Torts Negligence Negligent Misrepresentation

2. Negligent Misrepresentation Most often results in purely financial loss Recovery of “pure economic loss” was denied by the courts for many years as: No duty of care Damage too remote Donoghue v Stevenson was confined to physical damage Economic effects may be more extensive than physical effects

3. Negligent Misrepresentation (cont.) Now allowed, but very narrow Difficult to Develop tests to avoid too onerous a duty Hedley Byrne v Heller (1964) A duty of care can be owed where a careless statement causes economic loss To prevent too wide a duty being owed, it only applied where there was a “special relationship”

4. Negligent Misrepresentation (cont.) Special relationship where the advisor had special knowledge, skill or ability There was an assumption of responsibility by the advisor; and Their was reliance on the advice by the person being advised Effectively limited to professional advisors

5. Negligent Misrepresentation (cont.) Special relationship test not followed in Australia (MLC v Evatt (1968) 122 CLR 556 at 723) Overruled by Privy Council Reinstated by High Court in Shaddock & Assoc. v Parramatta City Council (1981) 150 CLR 225

6. Negligent Misrepresentation (cont.) “Whenever a person gives information or advice to another upon a serious matter in circumstances where a person realises, or ought to realise, that he is being trusted to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to act on the information or advice, the speaker comes under a duty to exercise reasonable care in the provision of the information or advice he chooses to give” per Barwick CJ in MLC v Evatt (1968) 122 CLR 556 at 723

7. Negligent Misrepresentation (cont.) Shaddock v Parramatta City Council (P p405) Was advice given in respect of a serious business matter Were the circumstances such that the advisor should have realised that he was being trusted to give correct advice In the circumstances, was it reasonable for the person being advised to have relied on the advice

8. Negligent Misrepresentation (cont.) San Sebastian v Minister Administering the Environment (P p 405) “Element of reliance” is the “prominent” factor “special skill and knowledge” not a factor No need for an antecedent request for information

9. Negligent Misrepresentation (cont.) Duty can be owed where there is no contract Esso v Mardon (S&OR p44)

10. Negligent Misrepresentation (cont.) Advice involving third parties Lowe Lipman Figdoe & Franck v AGC (S&OR p47) Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 (P p406) Emphasised proximity between advisor and person receiving advice

11. Negligent Misrepresentation (cont.) Important factors: Whether plaintiff requested the advice Whether defendant assumed responsibility for the risk being taken by the plaintiff Where no request and no assumption of responsibility: Whether defendant was aware that the plaintiff could be injured by the defendant’s advice The degree of the plaintiff’s vulnerability The defendant’s knowledge of the plaintiff’s vulnerability Whether the defendant intended the plaintiff to rely on the advice

12. The Law of Torts Negligence Vicarious Liability

13. Vicarious Liability DefinitionThe law holds a person liable for the wrongs of another even though the person has personally done no wrong Examples Employer\Employee

14. Vicarious Liability (cont.) Rationale EconomicThe employer is usually insured SafetyProvides an incentive for employers to choose staff carefully and provide training PolicyEmployers profit from their enterprise and therefore should be responsible for any loss it causes

15. Vicarious Liability (cont.) Indemnities A contract can contain a clause requiring the employee to indemnify the employer Some jurisdictions have abolished this right (e.g. s27C Wrongs Act (SA)) Employee is usually covered by employer’s insurance and insurer cannot recover against him (s66 Insurance Contracts Act)

16. Vicarious Liability (cont.) Requirements Commission of a tort Not contract or other legal liabilities By an employee A Principal is not liable for acts of an Independent Contractor Acting in the course of his employment What was the employee employed to do. Employer will be liable for acts in that area or incidental to it or if the employer otherwise authorised the wrongful act.

17. Vicarious Liability (cont.) Who is an Independent Contractor? Control test Does the employer have the right to exercise control over what the employee does and how he does it? Employer need only have power to control the employee’s work to the extent to which there is scope for such control

18. Vicarious Liability (cont.) Control test (cont.) Factors Can the employer tell the employee what to do, how to do it, when to do it etc.? Does the employer have the power of dismissal Does the employer provide equipment Does the employer pay holiday pay, sick leave, workers compensation?

19. Vicarious Liability (cont.) Control test (cont.) Integration testHow closely has the employee been integrated into the employer’s business

20. Vicarious Liability (cont.) Control test (cont.) Multi-factor testA worker is likely to be an independent contractor and not an employee if he: Owns and maintains his own equipment Is paid by results Takes the chance of profit\loss Has the right to delegate work Has the right to work for others Is not entitle to sick pay, workers compensation, sick leave or superannuation Does not have PAYE tax installments deducted

21. Vicarious Liability (cont.) Acting in the course of his employment Wide meaning Employer is liable even when the employee does something that is not part of his job Century Insurance Co Ltd v Northern Ireland Road Transport Board [1942] AC 509 (P p417) Employer is liable even when the employee commits an intentional or illegal act Poland v John Parr & Sons [1927] 1 KB 236 (P p418) Lloyd v Grace, Smith & Co [1912] AC 716 (P p417)

22. The Law of Torts Negligence Reforms

23. Reforms Why is there an “insurance crisis”? What are the alleged causes? What are the proposals for reform?