TORTS LECTURE 8

PARTICULAR DUTY AREAS (continued)

(d) Pure Eco Loss(e) Negligent Misstatement

(f) Supervision & Control of Others

(g) Liability of Statutory Authorities

VICARIOUS LIABILITY

PURE ECONOMIC LOSS

• What is pure economic loss?– It is generally understood to deal with matters of

tortious liability for loss that is neither consequential upon death and personal injury of the claiming victim nor upon the infringement of the victim's property.

• Pure economic loss related to damage to objects or persons

• 'Pure' pure economic loss by reliance

PURE ECONOMIC LOSS: EARLY DEVELOPMENTS

• Earlier cases restricted claims for pure economic loss to instances where misrepresentation was fraudulent or where a duty arose from breach of statute, contract or fiduciary obligation

– Palsey v Freeman (1789); Norton v Asburton [1914] AC 932• The policy basis: the fear of imposing liability "in an indeterminate

amount for an indeterminate time to an indeterminate class" • 1963: Limited recognition of a duty of care for negligent advice leading

to economic loss:– Hedley Byrne Co Ltd v Heller Partners Ltd– ‘If someone possessed of a special skill undertakes quite irrespective

of contract to apply that skill for the assistance of another person who relies on such skill, a duty of care will arise’ per Lord Morris

• 1970: Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1970) 122 CLR 628 (The emphasis seemed to be on advice provided by someone possessed of the a special skill)

NEGLIGENT MISSTATTEMENT• In general D is liable for negligent advise/information that is provided to P

which P relies and suffers economic loss – Shaddock v Parramatta CC (House affected by road widening program)– San Sabatian Pty Ltd v Minister Administering Environmental Planning

(Whether Minister and the Sydney City Council liable for the negligent preparation by the State Planning Authority and publication by the Council of a redevelopment plan containing representations in reliance upon which developer had acquired land and sustained a loss.)

What emerges is that in Australian law, the duty of care in relation to statements has been extended beyond statements made to a particular person for a particular purpose and even beyond statements made to a third person for the known purpose of communication to the person who sustains the loss. There are circumstances in which the maker of a statement owes a duty of care to a person who reasonably relies on the statement although the statement was not made to that person either directly or purposely through a third person.

NEGLIGENT MISSTATTEMENT

– Esanda Finance v Peat Marwick: (in reliance upon the audited accounts, the plaintiff entered into transactions whereby it lent money to companies associated with Excel, accepting a guarantee from Excel, and purchased debts from Excel. The transactions resulted in loss to the plaintiff by reason of Excel's financial position.)

THE ISSUE OF SKILL

• With all respect I find it difficult to see why in principle the duty should be limited to persons whose business or profession includes giving the sort of advice or information sought and to persons claiming to have the same skill and competence as those carrying on such a business or profession, and why it should not extend to persons who, on a serious occasion, give considered advice or information concerning a business or professional transaction. (Gibbs J in Shaddock)

THE CONDITIONS• Special relationship between P and D: such a relationship would

not be found to exist unless, at least, the maker of the statement was, or ought to have been, aware that his advice or information would in fact be made available to and be relied on by a particular person or class of persons for the purposes of a particular transaction or type of transaction.

• If the representor realizes or ought to realize that the representee will trust in his special competence to give that information or advice;

• If it would be reasonable for the representee to accept and rely on that information or advice;

• If it is reasonably foreseeable that the representee is likely to suffer loss should the information turn out to be incorrect or the advice turn out to be unsound."

ADVICE versus INFORMATION

• Although the giving of advice must always necessarily require an exercise of skill or judgment, and the giving of information may not necessarily do so, a person giving information may be so placed that others can reasonably rely on his ability carefully to ascertain and impart the information.

THE ‘CALTEX PRINCIPLE’

• Property damage may constitute the basis for the claim in pure economic loss: before Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. it appeared to have been established that a plaintiff who sustained economic loss which resulted from loss or damage negligently caused to the property of a third person was not entitled to recover damages – Caltex Oil v The Dredge Willemstad

Perre v Apand (1999) (HC) D introduced plant disease onto land of one farmer in SA by supplying infected seeds for planting; WA regs prohibited import into WA of potatoes grown within 20 km of land affected last 5 years

– Christopher v MV ‘Fiji Gas’

OTHER SITUATIONS OF PURE ECONOMIC LOSS

• Bryan v Maloney – It was not open to the trial judge or the Full Court to find

that the owner relied on the builder, or to infer reliance. There was no evidence that she knew the identity of the builder before deciding to purchase. Nor was there evidence that she inquired whether the house had been built by a qualified builder

– The owner can recover damages for pure economic loss only if she establishes a sufficient relationship of proximity between the builder and the owner so as to give rise to a duty of care on the part of the builder not to cause such economic loss

– It is difficult to see why, as a matter of principle, policy or common sense, a negligent builder should be liable for ordinary physical injury caused to any person or to other property by reason of the collapse of a building by reason of the inadequacy of the foundations but be not liable to the owner of the building for the cost of remedial work necessary to remedy that inadequacy and to avert such damage

OTHER SITUATIONS OF PURE ECONOMIC LOSS

• Hawkins v Clayton (Failure to notify executor of the death of testatrix substantial fine imposed as a result of death duties)

• Van Erp v Hill (Failure of solicitor to ensure that spouse of beneficiary did not witness execution of will with resultant economic loss to P)

SUPERVISION & CONTROL OF OTHERS

• In general the common law does not impose a duty to control the actions of others: No duty arises simply because one can foresee the likely risk of injury from conduct of another

• Parents cannot be generally held liable for the conduct of their children. However where D is shown to have parental control D has a duty to exercise reasonable care to prevent the child from inflicting damage on others. Whether D has exercised the appropriate level of care is a question of fact (Smith v Leurs)

• Teachers and school authorities may also have a duty of care with respect to the activities of the children in their care

• Police and Government authorities:- Hill v Chief Constable of West Yorkshire (Failure to control criminal behaviour; No duty on the grounds of policy)

Supervision of Others: The Issue of Liability

• Liability may arise where there is a relationship between the custodian and the victim “which exposes that person to a particular risk of damage in consequence of that escape which is different in its incidence from the general risk of damage from criminal acts… which he/she shares with all members of the public”

- But see Swan v South Australia: The parol board was under a duty once informed about the conduct of the prisoner on parol

PUBLIC AUTHORITIESPart 5 of the Civil Liability Act (Sections 40 to 46)

• Section 42 sets out the principles to determine duty of care exists or has been breached (ie. financial and other resources reasonably available, allocation of resources, broad range of its activities, and compliance with the general procedures and applicable standards)

• Section 43: act or omission not a breach of duty, unless it so was unreasonable that no authority having the functions in question could properly consider it as reasonable.

• Section 45: Restores the non-feasance protection for highway authorities taken away by the High Court in Brodie v Singleton Shire Council Council; Ghantous v Hawkesbury City Council (2001) 206 CLR 512

Part 5 Liability of Public & Other Authorities

• Section 44: Removes the liability of public authorities for failure to exercise a regulatory function if the authority could not have been compelled to exercise the function under proceedings instituted by the Plaintiff.

• Section 45: Restores the non-feasance protection for highway authorities taken away by the High Court in Brodie v Singleton Shire Council Council; Ghantous v Hawkesbury City Council (2001) 206 CLR 512

PUBLIC AUTHORITIES

• “When a statute sets up a public authority, the statute prescribes its functions so as to arm it with appropriate powers for the attainment of certain objects in the public interest. The authority is thereby given a capacity which it would otherwise lack, rather than a legal immunity in relation to what it does, though a grant of power may have this effect when the infliction of damage on others is the inevitable result of its exercise… There is, accordingly, no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions, except in so far as its policy-making and, perhaps, its discretionary decisions are concerned” (per Mason J in Sutherland Shire Council v Heyman)

PUBLIC AUTHORITIES: The Planning & Operational Dichotomy

• Planning decisions of public authorities as based on the exercise of policy options or discretions and involving or dictated by social or economic considerations are in general non-reviewable and would not provide the basis for a duty

• The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints

• Operational decisions by which policy decisions are implemented are however subject to the duty of care- L v Commonwealth (sexual abuse in prison, D held liable for operational failures)- Parramatta CC v Lutz (failure to order the demolition of building P’s property catches fire)

VICARIOUS RELATIONS AND AGENCY

• An agent acts for the principal; but the liability of the principal for the act of the agent is not based on vicarious liability

• The liability of the principal is based on the maxim: qui facit per alium, facit per se

• The agent acts in a representative capacity and has the authority to act for the principal but is not necessarily a servant

VICARIOUS LIABILITY

• Vicarious liability makes D (usually the master/employer) liable for the torts of another (usually his or her servant/employee) although the master is without any blame or fault.

• Vicarious liability arises only in respect of the torts of the servant

• The master/employer is therefore responsible only for the torts of the servant and not the independent contractor

• For the master/employer to be held liable, the tortfeasor must:

– be a servant– commit the tort in the course of his or her

employment

SERVANTS AND INDEPENDENT CONTRACTORS

Non-delegable duties and vicarious liability

Vicarious liability arises in circumstances “when the law holds one person responsible for the misconduct of another, although he is himself free from blameworthiness or fault” (Fleming J, Law of Torts (9th edition) at 409)

Non-delegable duty arises in circumstances where a person cannot be excused from liability even if reasonable care is exercised in entrusting responsibility to another person

Non-delegable duties and vicarious liability

5Q Liability based on non-delegable duty (1) The extent of liability in tort of a person ("the

defendant") for breach of a non-delegable duty to ensure that reasonable care is taken by a person in the carrying out of any work or task delegated or otherwise entrusted to the person by the defendant is to be determined as if the liability were the vicarious liability of the defendant for the negligence of the person in connection with the performance of the work or task.

(2) This section applies to an action in tort whether or not it is an action in negligence, despite anything to the contrary in section 5A.

Non-delegable duties and Vicarious duties

• New South Wales v Lepore ; Samin v Queensland; Rich v Queensland [2003] HCA 4 (6 February 2003)

- Liability of school authority - Alleged sexual assault on pupil by teacher - Whether school authority in breach of non-delegable duty of care - Concept of non-delegable duty - Whether school authority vicariously liable

- Test for imposition of vicarious liability.

WHO IS A SERVANT?

• A servant is one who is under a contract of service to another an independent contractor is under a contract for services

• The contractor is paid for the job by results rather than for time spent, receives a fee or commission, the servant receives wages

• The contractor is usually employed on a casual basis, the servant on a permanent basis

• The contractor usually specifies his/her work schedule and supplies his/her own tools

• The master may select the servant for the task

WHO IS A SERVANT?: THE CONTROL TEST

• If the Master controls what the employee does and how it is done, then the employee is a servant. The relationship will give rise to Vicarious Liability.

• Zuijs v Wirth Bros: The case of the trapeze artist• What is essential is whether there is lawful authority

to command or give directives if there is scope for it.• Stevens v Brodribb Sawmilling

‘IN THE COURSE OF EMPLOYMENT’

• D is liable only if the servant committed the tort in the course of his or her employment– Deaton v Flew– Morris v Martin