Lecture Fundamentals of business law (7/e): Chapter 3 - M.L Barron

Chapter 3 - The law of torts. At the end of this chapter you should understand: the difference between a tort and a crime, the elements of the tort of negligence and its applications, the amendments made to the common law of negligence by civil liability statutes, defences to negligence, torts against persons, torts against chattels, tort of nuisance, tort of defamation, changes to Australian defamation law, doctrine of vicarious liability.

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The law of torts

Chapter 3

Learning objectives

At the end of this chapter you should understand:

• the difference between a tort and a crime

• the elements of the tort of negligence and its applications

• the amendments made to the common law of negligence by civil liability statutes

• defences to negligence

• torts against persons

• torts against chattels

• tort of nuisance

• tort of defamation

• changes to Australian defamation law

• doctrine of vicarious liability.

Introduction: what is a tort?

• A tort is a civil wrong aimed at protecting

individuals against infringements of their own

personal rights.

• These infringements may be against another’s

property, reputation or person.

• The law of torts provides rules of conduct

that regulate how members of society interact,

and remedies if the rules are breached and

damage is suffered.

– Torts against chattels

 trespass against goods

 conversion of goods

 detinue

– Torts against land

 trespass against land

 public nuisance

 private nuisance

– Tort of defamation

Tort of negligence

• Definition:

A duty is imposed on a person by law to act with

care towards others If this duty exists and there

is a failure to act carefully and another suffers

loss, then the tort of negligence is committed.

• Prerequisites:

– A duty of care must be owed by one person

to another.

– There must be a breach of that duty of care.

– Damages (physical or financial) must have

been suffered as a result of the breach of duty.

Historical development of

the law of negligence

• Donoghue v Stevenson (1932) AC 562

– snail in a bottle of ginger beer

• From this case, the legal principle known

as the 'neighbour principle' developed

• This principle indicates to whom a duty

of care applies, based on:

– foreseeability

– proximity.

Neighbour principle

'You must take reasonable care to avoid acts or

omissions which you can reasonably foresee would

be likely to injure your neighbour.'

'Who in law is my neighbour?’

'Persons who are so closely and directly affected by

my act that I ought reasonably to have them in

contemplation as to being so affected when directing

my mind to the acts or omissions which are called in question.'

(Lord Atkin in Donoghue v Stevenson (1932) AC 562

at 580)

Establishing a duty of care—

foreseeability test

• Would a reasonable person foresee that

damage may result from the defendant’s

action, i.e is damage preventable and

consequently avoidable?

• Consider Sydney Water Corporation v

Mario Turano and Anor (2009) HCA 42

• Good Samaritans and volunteers acting in

good faith are exempt, under legislation,

from liability when assisting those in need.

Establishing duty of care—

proximity

• Historically, there must be some

relationship between the parties, namely:

– physical proximity

– circumstantial proximity

(i.e relationship exists between parties)

– causal proximity.

• Proximity is no longer relevant in

establishing a duty of care.

Establishing duty of care—

legislation

• The legislation passed by the states is similar in its

establishment of duty of care Section 32 of the Civil Liability

Act 1936 (SA) is illustrative and provides a three step test.

S32—Precautions against risk

(1) A person is not negligent in failing to take precautions against a risk of harm unless:

(a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known); and

(b) the risk was not insignificant; and

(c) in the circumstances, a reasonable person in the person’s

position would have taken those precautions.

The duty of care and cases of

pure economic loss

Situations in which a duty

of care applies

• Negligent misstatements—in respect to

persons being advised: of particular

importance to those in the financial

services industry

• Road users—to other road users

• School authorities—to students

• Occupier of premises—to persons entering

the premises

• Bailee of goods—to bailor

Situations in which a duty of

care applies (cont.)

• Supplier of goods or services—to persons

being supplied

• Local councils—e.g to persons requiring

zoning information

• Tobacco companies—to potential customers

• Solicitor holding will—to executor named in will

• Dog owners—to people who may be bitten

Breach of the duty of care

• Standard of care expected (i.e the

amount of care that must be taken in

particular circumstances) varies,

depending on:

– likelihood of injury

– gravity of injury

– effort (expense and inconvenience) required

to remove the risk of injury

– social utility of the defendant’s conduct

(balance risk against measures necessary to

The standard of care required

• The amount of care required may be

gauged by reference to standards set down

by statute or by what is expected of a

reasonable person.

• In some cases the standard of care

required of a defendant may be reduced,

e.g if the plaintiff has special knowledge or skill.

Establishing standard of care—

legislation

• The standard of care for personal injuries caused by negligence

is now defined by legislation and Section 32 of the Civil

Liability Act 1936 (SA) is again illustrative:

(2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things):

(a) the probability that the harm would occur if precautions were not taken;

(b) the likely seriousness of the harm;

(c) the burden of taking precautions to avoid the risk of harm;

(d) the social utility of the activity that creates the risk of harm.

Damage must flow from the breach

of duty of care: causation

• Damage must flow from the breach of the duty

of care.

• Causation based on the 'but for' test:

'But for the conduct of the defendant, would the damage have been suffered?'

• The type of damage resulting must have been reasonably

foreseeable.

• Has damage followed the severing of the chain of causation,

e.g Acts of God, or third party?

• Under civil liability legislation, the onus of proving causation is

on the plaintiff.

Remoteness of damage

• This is a further limitation

• The defendant is not liable for damages

that are too remote.

• The law uses a test of ‘reasonable

forseeability’ If the damage was

reasonably foreseeable by the defendant,

then liability will flow.

Assessment of damages

• Financial compensation, to place the plaintiff in the

position that they would have been in, had the tort not taken place, is calculated for:

– loss of income

– loss of enjoyment of life

– pain and suffering

Defences to an action in

negligence

• Damages under civil liability

legislation:

– restricts the award of damages for

personal injuries in negligence

– limits economic loss claims

– abolishes punitive, exemplary and

aggravated damages.

Defences to an action in

negligence (cont.)

Contributory negligence

– Failure of a plaintiff to take

reasonable care to avoid injury

(damages pro rata)

– Legislation permits the reduction of

Defences to an action in

negligence (cont.)

Voluntary assumption of risk

– Plaintiff voluntarily assumes the risk of

negligence (complete defence—no

damages)

– The legislation acknowledges this

common law defence There will be no

liability when a plaintiff takes an

‘inherent risk’ or an ‘obvious risk’.

Precedents existing for tort of

negligence

• Motor vehicle accidents

• Occupier’s liability

• Product liability

Motor vehicle accidents

• All drivers owe other road users

a duty of care.

• If this duty is breached and

damage is suffered, the tort of

negligence has occurred.

Insurance areas

• Personal injury

– Compulsory third party (included in

car registration fee)

• Property damage

– Comprehensive (for all property

damage incurred)

– Third party property insurance (for

damage to another person’s

property)

• A person will be regarded as an occupier of

premises if he/she has the occupation and

control of land or a structure.

• Occupier owes a duty of care to all persons

(invited and uninvited) entering the premises.

• Premises are not restricted to just buildings

They include moveable structures such as

planes.

• In SA, Vic and WA legislation now deals with

occupier’s liability.

Product liability

• Donoghue v Stevenson

– Manufacturer owes a duty of care to

ensure that the product does not cause

harm.

• Chapter 3, Part 3.5 of the Australian

Consumer Law

– Liability is imposed on manufacturers

and importers of defective goods.

• Legislation only permits one action, which

must be brought against all wrongdoers

together, not separately.

Torts against the person

• Assault: when the act of one person

causes another to believe that he/she is

going to be physically harmed by the

Torts against chattels (i.e goods)

• Trespass against goods: the wrongful

interference with the enjoyment of the

possession of goods.

• Conversion of goods: an act in relation to

a person’s goods that eliminates the

owner’s rights

to the goods.

• Detinue: the wrongful retention of another’s

goods.

Torts against land

• Trespass against land: owner’s/occupier’s

consent is not obtained before entering (direct

interference with plaintiff’s possession)

• Public nuisance: an act that interferes with the

enjoyment of a right to which all members of the

community are entitled.

• Private nuisance: an unlawful interference with

a person’s use or enjoyment of land, or with a

person’s right over or in connection with the land

(indirect interference with plaintiff’s possession).

Tort of defamation

‘Defamation is the publication of a statement that tends to lower a person in the estimation

of right-thinking members of society

generally; or that tends to make them shun or avoid that person.’

— Winfield & Jolowicz on Tort (1994,

p 78)

Elements of the tort of defamation

• The statement must be defamatory, i.e a statement

that can’t be proven to be true and/or tends to

damage a person’s reputation.

• Statement must refer to the plaintiff.

• Statement must be communicated to a third party.

• Defendant must be unable to rely on a valid defence,

Defamation Act 2005

• Uniformly enacted by Australian states and

territories to supplement the common law.

• Main features are:

– Companies cannot sue for defamation

– No action for deceased persons

– Distinction between libel and slander removed

– Multiple imputations treated as one cause of

action

– Changes to dispute resolution procedures

Defamation Act 2005 (cont.)

• Additional valid defences

introduced:

– Innocent dissemination protects

subordinate publishers unaware of the

defamation.

– Triviality for where the defendant was

unlikely to sustain any harm.

Doctrine of vicarious liability

Where a particular relationship exists (e.g

between employer and employee), a person can be held responsible for the acts or

omissions, i.e torts, of another person.

• Employer will be vicariously liable for the

employees if:

– acts or omissions are committed in the

course of their employment

– acts occur while carrying on an authorised

task, even if carried out in an unauthorised

manner.