Case Law

1 January 2017

Negligence is a complex term including advertent and inadvertent acts and omissions where there has been a failure to take reasonable care to prevent loss, damage or injury to others whom they could reasonably have foreseen might have been injured if that care was not taken. Pentony at al. 2011) There are different categories of negligence and the one concerning the above mentioned cases is Pure Economic Loss.

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A claim for ‘pure’ economic loss arises where the plaintiff has suffered economic loss which is not consequent upon any physical injury to person or property (Stewart & Stuhmcke, 2007) Caltex Oil (Australia) Pty Ltd v The Dredge “Wilemstad” (1976) has been a one of the landmark cases, where the High Court reached a conclusion that damages could be recovered for economic loss not consequent on injury to personal property.

The facts of the case were: – An oil refinery pipeline was damaged during dredging work in Sydney’s Botany Bay which connected an oil refinery at Kurnell, on the southern shore, with an oil terminal at Banksmeadow, on the northern shore * Both the refinery and the pipeline were owned by Australian Oil Refining Pty. Ltd. (“A. O. R. “) and the terminal was owned by Caltex Oil (Australia) Pty. Ltd. (“Caltex”). * Caltex supplied crude oil to the refinery for processing, and the product was delivered to Caltex either into a vessel at the A. O. R. wharf or by way of the pipeline to the Caltex terminal.

Caltex, which used but did not own the pipe, was forced to transport oil by road and sea while the line was repaired * Caltex claimed these costs from the dredge owner and the company responsible for preparing the dredging route This case succeeded in High Court on consideration of following factors: – * The damages were purely economic and have resulted directly because of the defendant’s negligence and therefore is entitled to damages * Though there was no physical damage, defendant’s negligence has caused the plaintiff or the plaintiff’s property to be ‘immobilised’.

Hence needed compensation. * Another factor which was considered while arriving at a decision was negligent conduct and knowledge of the plaintiff’s vulnerability. The defendant here knew and should have known that Caltex would suffer the type of financial losses it did. * Hence Caltex succeeded. A similar case Perre & Ors v Apand Pty Ltd (1999) appeared once again on grounds of pure economic loss.

The facts of the case are as under: – * Apand Pty Ltd controls 60% of the Australian potato crisp industry and regularly new varieties of potatoes * The Perre family owns several potato farms in South Australia and sells its products in Western Australia * In 1991, Apand supplied non-certified (unapproved) potato seed for experimental use to a farm adjoining a Perre farm * The seed contained bacteria disease which infected the experimental crop *

The Western Australian regulations imposed a prohibition on the importation into Western Australia, not only of potatoes grown on land known to be affected by the disease, but also of potatoes grown on land within a certain distance of affected land. Although the Perre crop was not contaminated, they were barred under Western Australian quarantine laws from selling their potatoes in that state for five years * Apand’s internal records showed it knew there was a contamination risk and that neighbouring farms could suffer economic loss because of the quarantine laws *

This case was declined by the full federal court on grounds that Apand’s duty of care was limited to the farmer who had received the diseased seed However, later, on appeal to the High Court, it was held that Apand was liable * In broad terms, the court found that there is a duty to take care to avoid economic loss where: * One party knows or reasonably should know that their conduct could harm an individual or class (group) of people, i. e. , they held a ‘controlling’ position; and * That person or class cannot protect themselves, ie. they were vulnerable *

However, the justices abandoned proximity as the sole basis of identifying a duty of care and took a number of individual approaches in this case with the most notable being the plaintiffs’ vulnerability and inability to protect themselves. * There were some particular policy considerations that have been identified by the courts as being relevant in these types of cases, the most often cited policy consideration in these cases is the fear of indeterminate liability’

The difference in decisions of High Court: – Caltex Oil (Australia) Pty Ltd v The Dredge “Wilemstad” (1976) case was decided based on factors like duty of care, reasonable foreseeability of harm and proximity. * In Perre & Ors v Apand Pty Ltd (1999), factors like duty of care, plaintiff’s vulnerability and inability to protect themselves were the main considerations apart from factors of policy considerations like indeterminate liability while arriving at the conclusion not placing major reliance on proximity. Question 2 Andrew was not a regular wine drinker but to celebrate his anniversary with Mary, he decided to find the perfect red wine to complement the food that he was going to cook for both of them. Andrew was told by one of his friends that Winemaker Leo Cusseo makes excellent red wines.

Andrew bought the Pinot Noir 2004 by Leo Cusseo accordingly. During the dinner, everything was very lovely and Andrew proceeded to unscrew the metal cap on the wine bottle. All of a sudden the plastic stopper on the bottle shot out and hit Andrew in one eye. This led to serious bleeding and eventually blindness on the eye. Mary was so shocked that she suffered from post-traumatic disorder and could not go back to work for months. She also had to constantly care for Andrew. After an investigation by a third party, it was later discovered that the hidden plastic stopper would often shoot out, sometimes up to 3 meters, after unscrewing the metal cap.

As there was no warning on the bottle, could Andrew bring a successful negligence claim against Leo Cusseo? Explain. Issues: – The Issue here is whether Andrew can bring a successful negligence claim against Leo Cusseo under common law or Statutory law? To succeed in the negligence claim, Andrew – plaintiff will have to prove these elements of law. Relevant Legal principles: – We shall examine the case under both statutory law and common law.

The plaintiff not only needs to prove that the defendant owed him or her a duty of care, but also that there has been a ‘breach’ of that duty of care. To prove a breach of duty involves the plaintiff having to prove two things: that he or she owed a particular ‘standard of care’ and that the defendant failed to meet that required standard or failed to take the appropriate precautions’ (Pentony at al. 2011). There is a breach of the duty of care if the defendant does not do what a reasonable person would have done in the same circumstances. To decide this, the court is to consider the following.

The probability that the harm would occur if care were not taken; b) The likely seriousness of harm; ) The burden of taking precautions to avoid the risk of harm d) The social utility of the activity that creates the risk of harm (Pentony at al. 2011). 3. The third element required in any action in negligence is proof that the plaintiff suffered loss, damage or injury as result of defendant’s negligent acts or omissions. A plaintiff suffered loss, damage or injury. There are two tests which should be complied with to prove the link between the cause and damage. The ‘but for’ test and the ‘direct consequences’ test. 4. The relevant case applicable in these circumstances is Donoghue V Stevenson(1932) AC 562- common law Application: – * In the present case, Leo Cusseo as a manufacturer of red wine owed a duty of care not to cause injury or damage as a result of his products.

As the third party investigation revealed that the hidden bottle stopper often shooted out upto 3 metres of unscrewing the cap, it was reasonably foreseeable that Leo’s conduct could harm anyone in Andrew’s position. Moreover Leo was in a position to prevent such harm from happening as it was under his control. Moreover he failed to provide any warning about the same on the bottle of wine. Thus based on the above circumstances, it can be proved that Leo Cusseo owed a duty of care to Andrew. * To prove a negligence claim, it is important to prove that there was breach of duty of care. It can be said that there was a breach as the risk was serious, reasonably foreseeable and could be controlled.

This can also be proved based on the case of Donoghue V Stevenson (1932) AC 562 where May Donoghue’s friend purchased a ginger beer contained in a dark bottle for May, and after finishing the drink, May Donoghue found the remains of a snail, she fell ill and sued for the injury caused to her. In the present case, Leo Cusseo provided defective bottle caps which harmed the plaintiff and the probability, likely seriousness of harm was high and Leo did not take any reasonable precautions to avoid this harm. * The plaintiff in the present case has suffered damage as a result of defective bottle cap which could have been avoided, had care been taken. Hence Leo was liable under common law. * Even under Wrongs Act 1958 (Vic), Leo can be held liable as the risk was foreseeable, significant and he had not taken any reasonable precaution to avoid such harm. Therefore he is liable under statutory law too. Conclusion: –

Based on the application of both statutory law and civil law factors, it can be held that Leo Cusseo is responsible for negligence towards Andrew. b. If there was a warning on the bottle which stated “Open carefully, inner plastic stopper may eject”, would your answer to A be different? Though there was a warning on the bottle, the tests discussed above would apply to arrive at a conclusion whether Leo Cusseo was liable under negligence to Andrew :- * Even if there was a warning on the bottle, Leo Cusseo still owed a duty of care to Andrew. The ‘duty of care’ in negligence is a legal duty to take reasonable care to prevent foreseeable harm.

It is not a mere ‘moral obligation, or social responsibility, but a legal duty of care, breach of which might result in damages…for any injury suffered in consequences of the breach’ * A mere warning on the bottle does not protect the defendant as they are expected to take reasonable care to prevent harm occurring to plaintiffs and the action is under control of the defendant which establishes his duty of care owed to plaintiff Andrew. * Secondly, there has been a breach of duty of care as discussed above. * Thirdly, the plaintiff has suffered damage as a result of defective bottle cap which could have been avoided, had care been taken. Hence Leo was liable under common law.

Even under Wrongs Act 1958 (Vic), Leo can be held liable as the risk was foreseeable, significant and he had not taken any reasonable precaution to avoid such harm. Therefore he is liable under statutory law too. * The presence of warning on the bottle is not sufficient to refute claims of negligence by Leo. However, he can use Contributory negligence as main defence to protect himself under s 26(1) of the Wrongs Act 1958 (Vic). In order to prove contributory negligence the defendant has to prove that the plaintiff was at least partially at fault and the fault effectively contributed to the loss, damage or injury. The defendant can argue that he had provided warning and Andrew did not follow the warning contributing to his loss or injury by failing to take reasonable care. Conclusion: –

It can be concluded that though there is presence of warning on the bottle, it does not relieve Leo Cusseo from the duty of care he owed to Andrew. However, the same can be used as a defence in the form of contributory negligence by not following the warning. c. Can Mary bring a successful negligence claim against Leo Cusseo too? Explain. To prove negligence of Leo Cusseo towards Mary, we would need to apply the same tests of duty of care, breach of duty of care and arising of injuries or damages as a result of such breach. * Firstly, we have to establish a duty of care of Leo towards Mary. Applying ‘neighbour principle’ to determine the existence of duty of care.

Though there was no contract between Mary and Leo Cusseo, According to Lord Atkin, as per the neighbour principle, the defendant must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbor. Neighbour is a person who is so closely and directly affected that they need to be in mind as being so affected that directing our mind to the acts or omissions which are called into question. *

The concept of reasonable foreseeable risk of injury (and, therefore, the determination of the persons to whom a duty of care can be owed) now encompasses nervous shock or the psychiatric consequences that can result from seeing or hearing about injuries to those close to you. (Pentony et. l 2011) * Mary could bring a successful negligence claim against Leo Cusseo as evident from Jaensch V Coffey (1984) where Coffey suffered psychiatric consequences as a result of seeing and hearing about injuries to her husband. Hence duty of care of Leo can be established based on the above case. *

Secondly, there has been a breach of duty of care as discussed above. * Thirdly, the Mary has suffered post-traumatic disorder as a result of seeing her husband’s accident. Hence Leo was liable under common law. * Even under Wrongs Act 1958 (Vic), Leo can be held liable as the risk was foreseeable, significant and he had not taken any reasonable precaution to avoid such harm. Therefore he is liable under statutory law too. Yes, based on the points discussed above, Mary can also bring a successful negligence claim against Leo Cusse. Question 3 (10 marks)

Annie saw the following advertisement in a shop window: ‘Today’s Special Offer: Michael Jackson CDs $2. 99 each. ’ Annie went into the shop and said she would take five. The shopkeeper said: ‘That’s $64. 95, thank you. ’ When Annie pointed out that the sign in the window said ‘$2. 99’ the shopkeeper said that his assistant must have made a mistake as the price was actually $12. 99 each. Which of the following is the most correct? Explain your answer using relevant legal principles: a. Annie and the shopkeeper have a contract for the sale of the five CDs at $2. 99 each. b. Annie and the shopkeeper have a contract for the sale of the five CDs at $12. 99 each. c.

There is no contract because no one has made an offer. d. There is no contract because no one has accepted an offer. There is no contract because no one has accepted an offer. This case involves contract law, in particular offers and acceptance and distinction between an offer and invitation to treat. In order to analyze the above question, we first have to analyze whether a contract exists between the shopkeeper and Annie. A contract may be described as an agreement or set of promises that the law will enforce. Not every promise to do something will be enforced and the law has to determine which promises give rise to legal obligation or merely moral obligation.

In order to verify whether a contract exists, there needs to be essential elements of a formation of contract i. e. agreement (Offer and acceptance), consideration, intention to create legal relations, certainty of terms. In the present case there was no contract as there was no agreement. There was no offer. First of all, the advertisement in a shop window was not an offer but an invitation to treat. An invitation to treat is merely an expression of interest in doing business and carries no legal obligation. It is not a positive undertaking but merely an expression of willingness to enter negotiations. The display of goods on shop shelves, in catalogues and advertisements are not offers but invitations to treat.

This means that if a person responds to an advertisement for goods but is not able to purchase them because, for instance, the seller has run out of stock, no remedy is available in contract. This can be proved based on the case Pharmaceutical Society of Great Britain V Boots Cash Chemists (Southern) Ltd (1953) where display of priced goods on a shelf was held not to infringe a state prohibiting the sale of drugs except under the supervision of a registered pharmacist. Similarly the display of goods in the present case was merely an invitation to treat and not an offer to sell; when Annie went into the shop, the shopkeeper could either accept or reject the offer.

An invitation to treat covers all those aspects of the negotiating process falling short of the final offer. Secondly, shop keeper can argue that the advertisement was not meant to be taken seriously but was a mere advertising puff and hence there was no intention to create a legal relation.

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