Business Law

Week 3

Tort Law
Tort Law – Evolution of the Tort of
Negligence
Topics
1. Development of Negligence as a Universal Remedy in Tort Law
2. Importance of Negligence in Business Law
3. The Duty of Care
4. The ‘Standard’ of Care
5. Breach of Duty
6. Damages
7. Defences and Remedies
1. Development of Negligence as a
Universal Remedy in Tort Law
 Negligence
Definition
•The duty imposed on a person in Tort Law to act with care towards
others.
•If this duty exists and there is a failure to act carefully, and another
person suffers loss, then the tort of negligence is committed.
3. The Duty of Care
 Negligence Action – Three Elements
• First, there must be an identifiable duty of care between the parties. This duty of
care must be owed directly to the plaintiff. There are ‘established’ categories of
relations in which the duty of care is presumed by law (based on the concept of
‘proximity’). Parents and children, teacher and student etc. Additionally, a ‘general’
duty of care has also developed (founded upon the concept of the ‘reasonable
foreseeability of harm’ to others.

• Second, the standard of care expected in each case must be able to be identified
and a decision made as to whether the required standard of care has been
breached.

• Third, the Proof of Damage (physical or financial). The breach of duty caused
damage which was of a kind that was a reasonably foreseeable consequence of the
breach. The damage must flow from the breach and must not be too remote. There
must have been resulting and measurable damage within the risk created. Consider:
Causation and Remoteness as well as any relevant defences.
 When does a Duty of Care come into
existence
‘Established’ categories for the duty
Arise in special categories of relationships which law recognises as capable of
giving rise to a duty of care. These may be contractual, fiduciary or existing
relationships of dependency (or a combination of these). Examples: parent
and child, doctor and patient, lawyer and client teacher and student etc.

Do the facts fit one of the established categories?

Special circumstances giving rise to the duty
•Negligence causing pure economic loss
•Negligence causing mental harm
•Negligent misstatements causing pure economic loss

Special relationships giving rise to the duty

 Established legal relationships give
rise to a duty of care
Professional Relationships
Employer/ employee
Teacher/ student: Commonwealth v Introvigne (1982) 150 CLR 258
Solicitor/ client: Hawkins v Clayton Utz (1988) 164 CLR 569
Doctor/ patient: Rogers v Whittaker [1992] HCA 58
Advisor/ client: Negligent misstatements—in respect to persons being advised,
particularly important in the financial services industry
Local councils— e.g. to persons requiring zoning information

Other Relationships
Parent/ child
Bailor/ Bailee
Further relationships may also give rise to a
duty of care
Manufacturer – Consumer (Product liability)
Manufacturer/Supplier of goods or services - duty owed to those supplied with
goods and consumers. See: Chapter 3, Part 3.5 of the Australian Consumer Law.
Liability is imposed on manufacturers and importers of defective goods.

Occupier- Invitee (Occupier’s liability)

Occupier owes a common law special duty of care to all lawful persons (invited and
uninvited) coming onto the land/entering premises. A person will be regarded as an
occupier of premises if he/she has the occupation and control (possession) of land or a
structure. Premises include moveable structures such as planes. In SA, Vic and WA
legislation now deals with occupier’s liability.
Examples: See Dianne Maree Hackshaw v. George Shaw (1984) 155 CLR 614, Australian
Safeway Stores v Zalunza (1987) 162 CLR 479.

Duty owed to spectators

•Australian Racing Drivers Club Ltd. v. Metcalf (1961) 106 CLR 177
•Bolton v Stone [1951] AC 850
 When does a Duty of Care come into
existence – the General Duty of Care
If the facts do not fit one of the established categories, do the “General
Principles” establishing a duty of care in law apply?

The General Duty of Care

A broad and general duty of care in other relationships - called the ‘neighbor’
principle - as the duty may arise outside the established categories when the
relationship between the parties is sufficiently close to attract the imposition of a
legal obligation
The general duty of care (neighbour principle) may apply where fact situations do
not fit within the ‘established relationships’.

‘Good Samaritans’ and volunteers acting in good faith are exempt, under
legislation, from liability when assisting those in need: Sydney Water Corporation
v. Mario Turano and Anor (2009) HCA 42
Development of the general duty
Donoghue v Stevenson [1932] All ER Rep 1
Here, the remains of a snail were found in a bottle of ginger beer drunk by the
plaintiff. The bottle had been sealed by the manufacturer and the snail’s remains
unknown to the retailer and the ultimate purchaser.
From the ratio of this case the legal principle commonly known as the 'neighbor’
principle has developed.

The ‘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.’
(per Lord Atkin in Donoghue v. Stevenson (1932) AC 562 at 580)

This principle indicates to whom a duty of care applies, based on the principle of
foreseeability. rather than proximity. The duty of care (and liability) arise only if
the plaintiff and the risk of injury were reasonably foreseeable.
Examples of the General Duty of Care
Some examples of the general duty:
Product Liability - Manufacturer owes a duty of care to ensure that the
product does not cause harm (See Donoghue v. Stevenson)

Road users—to other road users

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.

Tobacco companies—to potential customers for their good health

Dog owners—to by-passers who may be bitten
Special Circumstances and Damages Awards
Negligence causing pure economic loss
• Breach of the duty of care and cases of pure economic loss.
• Loss resulting from:
• negligent misstatement
• flowing from damage to the property of a third party
• a defective product or structure
• professional negligence and economic loss

Negligence causing mental harm

Reasonable forseeability
• Of psychological harm;
• Caused by shock; and
• Resulting in a recognizable illness
Proximity
• Relationship between plaintiff and victim
• Geographic/temporal- plaintiff must have witnessed accident or
aftermath
Negligent Misstatement
Negligent misstatements causing pure economic loss
• Reasonable forseeability
• Proximity
• Physical: How close in time were the defendants’ words to the
plaintiff’s reliance on them?
• Circumstantial: position of trust, and reliance
a. Statement must relate to serious matter
b. Defendant ought to realise reliance by plaintiff on statement
c. Was reliance by plaintiff upon the statement reasonable?
• Causal: how direct is the relationship between statement and loss?

•Negligent misstatements - where the person making it possesses a special skill

or knowledge and the person to whom it was made reasonably acted on it to
their detriment
 Development of the general duty
Duty of care under a contract has long existed as there was recognised a
contractual relationship between plaintiff & defendant where each undertook to
take care in performing their contractual obligation and there was an implied
undertaking within that contract to exercise all reasonable care.

Since Donoghue v Stevenson (1932) AC 562 new categories of duty of care might
arise under two ratios:

•An extended specific duty of care owed by the manufacturer (and retailer) to the
end-product user - So a product liability duty in law emerged

•A broad/general (negative) duty of care that you owe to your neighbour.

The neighbour principle emerged: Your ‘neighbour’ is someone who’s injury
might be reasonably foreseeable in the circumstances and applying a test of
proximity.
So, it covers the negligent invasion of person, property and financial
interests, including occupiers’ liability and product liability.
Reasonable person test
•Would a reasonable person, in the defendant’s position, have foreseen that there
was a real risk that carelessness on their part could cause loss/harm to people in
the plaintiff’s position, such that damage may result from the defendant’s action

Reasonable foreseeability
•Duty of care arises if the plaintiff and risk is reasonably foreseeable.
•Plaintiff can use reasonable foresight in establishing all of the elements.
•In establishing the duty of care, the plaintiff is concerned with an enquiry into
whether the defendant had reasonable foresight of some type of damage that
his/her carelessness might cause to the plaintiff.
•Plaintiff relies on reasonable foresight to establish carelessness and to establish
remoteness.
•Plaintiff demonstrates the kind of carelessness by the defendant might cause the
type of damage they suffered.
 Reasonable Foresight
How much risk should be ‘reasonably foreseeable’ before
attracting liability?

Several issues arise here:

•Does the risk have to be actual, possible, or probable?
•The risk must be more than mere possibility, mere possibility is trivial
•Wagon Mound No 2 (1967) AC 850 – mere possibility of risk will not influence the
mind of reasonable person.
•Wyong Shire Council v Shirt (1980) 146 CLR 40 – unlikely risk of injury may
constitute foreseeable risk where the risk is not farfetched or fanciful. Even a
slight risk may be important if it is real risk.
Historically, there must have been some relationship between the parties,
namely:
• physical proximity
• circumstantial proximity
(i.e. relationship exists between parties)
• causal proximity.

NOTE: Proximity is no longer relevant in establishing a duty of care.

Legislation has been passed by the states and territories effectively codifying
the establishment of a duty of care in the common law.

Section 43 of the Civil Law (Wrongs) Act 2002 (ACT) is illustrative and provides
a three step test.

Civil Law (Wrongs) Act 2002 (ACT)

Section 43 (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.
4. The Standard of Care
 Breach of the duty
The Standard of care
What standard of care is owed?
•Standard of a reasonable person in the defendant’s circumstances?, OR
•Different standard? - If so, what?

Did the defendant breach the standard?

•Was the risk of injury reasonably foreseeable? Consider the ‘Calculus of risk’.
That is:
•The Gravity of the risk, and
•The Likelihood of the risk

Was the defendants’ response reasonable?

•Burden of precautions
•Utility of the defendant’s activity, and
•Any relevant standards
How do we determine a breach?
Basic Questions:
What standard of care is required in order to discharge the duty?
What constitutes a breach?

Standard of Care
•Duty of care imports a certain standard of care.
•‘Standard’ of care refers to what precisely was required of a person (on whom
the duty is imposed) in a given context to discharge the duty.
•The extent of the care required may be gauged by reference to standards set
down by statute or by what is expected of a reasonable person. The standard is
ordinarily measured by what the reasonable person of ordinary prudence would do
in the circumstances: Paris v Stepney Borough Council [1951] AC 367, Cook v Cook
(1986) 162 CLR 376
•In some cases, the standard of care required of a defendant may be reduced, e.g.
if the plaintiff has special knowledge or skill.
•Negligent conduct is that which falls short of the standard of care for protecting
others against unreasonable risk of harm.
How do we determine a breach?
To establish a ‘Breach’ of the ‘Standard:

•Plaintiff must establish that there was a ‘degree’ of foreseeable

risk created by defendant’s conduct. Here, we ask whether the risk
of injury to the plaintiff or damage to property was reasonably
foreseeable.

•Look at the reasonableness or otherwise of the defendant’s

response to the risk. If the risk was reasonably foreseeable, then
was the defendant’s response to the risk reasonable?
 How do we determine a breach?
Reasonable Foresight & Risk of Injury Relationship
•It is the defendant’s knowledge of the risk that is the issue.
•It is the degree of the foreseeable risk, rather than the foreseeability of risk, that is
in issue.
•The higher the degree of risk, the less reasonable it is for defendant to fail to take
steps to prevent risk occurring.

Reasonableness of response of defendant to the risk is determined by

reference to:
•The cost and practical burden imposed on the defendant to remove the risk.
•The public or social utility of defendant’s conduct associated with creation of the
risk (is defendant’s action useful in social terms and worth the risk taken?)
The reasonableness of the response
Standard of care expected (i.e. the amount of care that must be taken in
particular circumstances) varies.
To determine whether defendant’s conduct in dealing/responding to a real risk
results in breach of the standard of care required in the circumstances, courts
balance several factors:
•Likelihood of the occurrence of injury
•Seriousness of the risk and gravity of injury
•Effort (cost / expense, inconvenience and burden) required to remove the risk
of injury and avoid harm
•Social utility of defendant’s conduct (balance risk against measures necessary
to eliminate the risk)
•Background peculiar to the defendant (the circumstances)
•Dangerous nature of the activity
•Current state of knowledge in the community (expert or layman)
•Prevailing standards of safety in the field
Reasonableness of response
Factors in determining whether defendant’s conduct in response
to the risk is a breach:
•magnitude of the harm
•risk of injury itself determines whether the standard of care has been breached.

The greater the risk the greater the effort demanded

The cost and burden the defendant must bear in response to the degree of risk
involved:
•Cost in monetary and practical / difficulty term
•Bolton v Stone (1951) AC 850 – lady hit by a cricket ball, risk foreseeable but cost
not justified by degree of risk
•Where there is a dangerous substance, court takes stricter view of defendant’s
need to eliminate risk
 Establishing the standard of care –
legislative enactments
The standard of care for personal injuries caused by negligence is now defined by
legislation:

Civil Law (Wrongs) Act 2002 (ACT)

Section 43 (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.
6. Damage
 Damage
Damage must flow from the breach of duty of care
•Damage is at the heart of a claim in negligence because cases before the courts
are claims in damage, and a claim in negligence is not complete until damage is
proven.
•Plaintiff will not succeed without proof of damage to the person to whom the
duty is owed.
•Must have actual damage.

Types of damage:
Physical loss
Economic loss:
•loss of wages, profits, loss of expected legacy under a will, expenses (legal or
medical) incurred as a result of act of negligence.
Psychological damage
•nervous shock - injury caused by the impact on the mind, through the senses of
external events (McLoughlin v O’Brien)
Damage needs to satisfy 3 requirements
(1) Is the damage a kind recognised by the courts?
The type of damage resulting must have been reasonably foreseeable.
•Rule 1 – courts will only recognise damage that has already occurred, mere risk of
damage is not sufficient, must prove damage occurred. Actual damage or injury
must be evident.
•Rule 2 – courts only recognise damage that is reasonably foreseeable if the
relationship of proximity makes it possible

(2) Was the damage caused ‘in fact’ by the defendant?

Connection between question of fact and law:
•The cause is a question of fact and
•Criteria to determine this is a question of law
 Damage needs to satisfy 3 requirements
(3) Is the damage too remote in law?
•For plaintiff to succeed he must prove damage suffered is sufficiently proximate
in law to the defendant’s act or omission, so it must not be too remote
•The defendant is not liable for damages that are too remote.

Causation and remoteness of damage

Issues of fact: Causation
•Would the damage have happened ‘but for’ the defendants’ actions?
•Does Novus Actus Interveniens (intervening factors) apply?
•Common sense: did the negligent breach cause or materially contribute to the
plaintiff’s harm?
Issues of Law : Reasonable foreseeability
•The law uses a test of ‘reasonable forseeability’. If the damage was reasonably
foreseeable by the defendant, then liability will flow. Could the defendant have
reasonably foreseen that type of loss?
Causation
Tests for Determining the Effective Cause (in fact)
Causation based on the “But for” test
That is, 'But for the conduct of the defendant, would the damage have been suffered?’
Plaintiff should be able to answer that the damage would not have occurred but for that
act or omission.
Under civil liability legislation, the onus of proving causation is on the plaintiff.

Intervening factors (novus actus intervenium)

Has damage followed a severing of the chain of causation (Acts of God, or third
party)? An act of a human being may itself render the damage too remote,
breaking the chain of causation.

Three possible intervening factors:

•voluntary human conduct (including the plaintiff’s conduct) done with knowledge
of likely consequences
•independent event(s) coincidental
•events occurring after defendant’s conduct.
•The test is something unreasonable or unwarrantable as a new cause.
 Causation
If the plaintiff fails to take reasonable care (was careless) for their own safety,
they are also negligent:

•Contributory negligence on the part of the plaintiff can be seen as at least a

partial defence
•e.g. The Insurance Commissioner v Joyce (1948) 77 CLR 39
•Contributory Negligence can also be implied as a partial defence
Defences to action in Negligence
Contributory Negligence
•Failure of a plaintiff to take reasonable care to avoid injury
(damages pro rata)
•Legislation permits the reduction of liability by up to 100% if it is
‘just and equitable’.
•Legislation establishes a presumption of contributory negligence
if the plaintiff is intoxicated
Test:
•Did the plaintiff act as a reasonable person (exercising
reasonable care) would have acted under the circumstances? If
the plaintiff fails to take reasonable care (were careless) for
their own safety, they are also negligent
•Did the plaintiffs contribute to their own damage/loss/injury?
7. Defences and Remedies
4. Defences to action in Negligence
Voluntary Assumption of Risk -volenti non fit injuria
•Plaintiff voluntarily assumes the risk of negligence (complete defence—no
damages)
•A plaintiff who voluntarily accepted the risk of that injury cannot recover
damage.
•There will be no liability when a plaintiff takes an ‘inherent risk’ or an ‘obvious
risk’.
•The legislation acknowledges this common law defence.
•We ask whether plaintiff well and truly consented to the risk of a tort

Test is subjective; it is a question of fact

•Did the plaintiff perceive the danger?
•Did the plaintiff fully appreciate the danger?
•Did the plaintiff voluntarily accept the risk?

Illegality
•Illegality is a defence in certain circumstances
Remedies for unintentional torts
Damages
•Tort Law provides remedies in the form of “damages” as financial compensation,
to place the plaintiff in the position that they would have been in, had the tort
not taken place.

Duty to mitigate
•Plaintiff has a duty to mitigate their loss as a result of defendant’s tortious act.
The duty is not an enforceable duty on the plaintiff.

Damages under civil liability legislation:

•Note legislation restricts the award of damages for personal injuries in
negligence: Limits economic loss claims and abolishes exemplary (punitive) and
aggravated damages
•Aggravated damages: plaintiff has suffered in an unusual way, e.g. conduct
which shocks the plaintiff
•Contemptuous damages / exemplary damages / punitive: given for conduct
which is shocking to the court, reprehensible conduct, damages are given above
ordinary and aggravated damages
 Remedies for unintentional torts
What damages could the plaintiff seek?

Compensatory damages / Ordinary damages / General damages

•Plaintiff proves they have suffered a loss
•Personal injury – this comprises pecuniary (money) and non-pecuniary
damages (includes pain and suffering, mental stress, loss of enjoyment of life,
loss of some amenity e.g. not being able to engage in a pleasurable activity
etc.)
•Economic loss is where the economic interests of the plaintiff are injured, e.g.
loss of income or loss profits, cost of repairs to damaged property, expenses
incurred as a result of the loss or injury, e.g. medical expenses;

Nominal damages where the plaintiff proves entitlement but has not
suffered financial loss, a token sum of money may be awarded