UNIVERSITY OF BALLARAT SCHOOL OF BUSINESS. BL FUNDAMENTALS OF LAW First Semester

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1 UNIVERSITY OF BALLARAT SCHOOL OF BUSINESS bl502 tort sem12003 BL FUNDAMENTALS OF LAW First Semester TOPIC TWO INTRODUCTION TO THE LAW OF TORT: WITH THE EMPHASIS ON NEGLIGENCE LECTURE GUIDE WEEKS 4-8 IMPORTANT NOTES TO STUDENTS 1. This lecture guide deals primarily with the tort of negligence. Negligence law is derived from cases. Therefore students MUST know and use cases because THIS IS THE LAW. Tutorials have been designed to assist students to acquire case analysis and writing skills. The key to acquiring these skills is PRACTICE! 2. Only the cases discussed in lectures or noted in the lecture guide and tutorial exercises NEED be known by students. Even from these you can cull some cases as long as you have enough cases so that you can demonstrate your understanding of the principles and how they apply. The best idea is to start a Casebook where you summarise each case guidance is given in the tutorial package. 3. The facts and decision of most of the cases mentioned in the lecture guide are in S&OR or will be given in lectures or tutorials or can be found in the general business law texts of C. Turner, Australian Commercial Law or Pentony et. al. Understanding Business Law or the specialist torts texts listed on the List of References (see Unit Description). There are more texts also on counter reserve and on the shelves. Just be careful to check how up-to-date they are. In order to give some specific guidance for cases not detailed in S&OR, there are references to relevant pages in Turner (23 rd ed) in this guide. 4. This lecture guide is divided into the following sections: A Introduction to the Law of Tort B The Tort of Negligence, (including Occupiers Liability) C Vicarious Liability D Current public liability crisis and recent and proposed reforms to negligence law (see also your essay topic). Week No. Lecture Week 4 Lecture 2 Lecture Topic Complete Topic One Hand out Topic Two TORTS Lecture guide Part A: Introduction to the Law of Tort (brief) Tutorial Topic Statutory Interpretation (see Tutorial Sheets: Introduction to ALS) 1

2 Week 5 Lecture 1 (Test held in Lecture 2) Week 6 Week 7 Week 8 Part B: Negligence Duty of Care (physical and economic loss) Complete Duty Breach Causation Damages, Defences, Occupiers liability Part C: Vicarious liability Part D: Reforms Complete TORT Commence Topic 3 CONTRACT Precedent: Donoghue v Stevenson and link into negligence (see Tutorial Sheets: Introduction to ALS) Circumstances in which a duty is owed Read extracts from Esso case Case study mock trial OBJECTIVES At the end of this topic students should: 1. know what a tort is and what the aims and functions of the law of tort are; 2. know the elements of negligence and how to apply them; 3. understand the policy reasons for limiting liability for pure economic loss and the current position regarding liability for negligent misrepresentation (professional negligence); 4. be aware of the Victorian law of occupiers liability; 5. know the principles of vicarious liability and how to apply them. 6. be aware of the current public liability crisis and current and proposed reforms to tort law. LECTURE GUIDE Reading S&OR ch 2 and ch 3 as indicated below. T= Turner, C. Australian Commercial Law. 23 rd ed. Sydney: LBC, 2001 Pentony = Pentony B. et al. Understanding Business Law. 2 nd ed. Sydney: Butterworths, 1999 A. INTRODUCTION TO THE LAW OF TORT (1) Definition of a tort: a civil wrong, as opposed to a criminal wrong, other than a breach of contract. 2

3 (2) The aim of the law of tort is to compensate the person -who has suffered an injury by awarding money compensation, called damages. But the law only recognises that certain 'injuries' can occur or, put a better way, it only recognises certain 'interests' or rights that a person can ask the law to protect. For example: - the interest or right of a person to physical safety is recognised by the tort of assault and tort of negligence; - the interest or right of ownership or possession of land and goods is protected by the tort of trespass; - the interest or right of a person to protect his or her reputation is recognised by the tort of defamation. - the interest or right of a person to protect the goodwill in a business is recognised by the tort of passing off But the law does not recognise a right to a lovely view - that is, you cannot stop your neighbour, or claim compensation from your neighbour, if he or she builds a two storey house in front of yours and blocks your view! * See the list of particular torts, eg in Turner 796. Negligence is expanded on in T ; the other torts are summarised T T795 and Pentony (ch 16) also notes the difference and overlap between Torts ad Crimes and Torts and Contract. (3) A function of the law of tort is to decide who should bear the loss caused by the actions of another. Centuries ago, the view was that if B directly caused A an injury, B should pay A compensation even if B's action was not deliberate. B's action was a breach of the peace. This is called strict liability. Later the courts recognised that if A was injured because of B's indirect action (the difference between throwing a log at A and hitting him [direct] and carelessly leaving a log on the road which A ran over and suffered injury [indirect]) A ought to be compensated, but only if B was some way at fault. This is known as fault liability. Now the legislatures have recognised that sometimes society as a whole, or a section of society, should bear the cost of compensating injuries. Examples are the no-fault compensation schemes for transport and workplace accidents. Another form of liability is : vicarious liability. This is where one person who is blameless is made responsible for the torts committed by another. The most important example of this is where an employer is made liable for the torts of his or her employee - see section C below. (4) Is there a law of tort or a law of torts? That is, is there a general principle that anyone who suffers injury to his person or property should be entitled to compensation from the person causing the injury unless the law excuses the conduct complained of? OR can a person who has suffered injury only claim compensation if he or she proves the elements of a particular tort eg. negligence, assault, trespass. There is no consensus on this issue. The general principle is very broad and perhaps it is important more for its underlying philosophy than its practical value! For the sake of simplicity we will be dealing with individual torts, concentrating on the tort of negligence. It will be become evident, however, that negligence has expanded over the years, recognising new circumstances and new injuries that should be compensated in reliance on the general principle. 3

4 B. THE TORT OF NEGLIGENCE Negligence defined : Negligence is conduct falling below the standard demanded for the protection of others against unreasonable risk of harm. This means that a party can sue for negligence when he or she is injured by another person who either : (a) did an act which a reasonable person in the circumstances would not have done, or (b) failed to do an act which a reasonable person in the circumstances would have done - and that action or failure to act caused the injury suffered. Elements of negligence - The plaintiff (injured party) must prove, on the balance of probabilities, all of the following:. 1. That the defendant owed a duty to the plaintiff to take reasonable care to prevent him/her suffering injury, loss or damage. 2. The defendant breached that duty, by failing to live up to the standard of care expected. 3. The defendant's breach of duty caused damage to the plaintiff. 4. The plaintiff suffered damage, loss or injury which was of a kind which was reasonably foreseeable ie the damage was not too remote. THE ELEMENTS IN DETAIL ELEMENT NUMBER ONE : S&OR DUTY OF CARE ** THE LEGAL TESTS AND CASES USED FOR DUTY DIFFER DEPENDING ON WHAT TYPE OF DAMAGE HAS BEEN CAUSED IE PHYSICAL, NERVOUS SHOCK OR FINANCIAL. 1. DUTY OF CARE WHERE THE INJURY IS PHYSICAL INJURY * A duty of care is not owed to the whole world. When is it owed? To prove that a duty of care exists where the injury suffered is physical (including nervous shock) the plaintiff must show that two tests are satisfied : (a) That a reasonable person, in the circumstances of the defendant, would have reasonably foreseen that because of his/her actions there was a risk of injury to the plaintiff, or to a class of persons of whom the plaintiff was a member : this is called the reasonable foreseeability test. (Note it is not the actual damage/injury that must be foreseen, it is whether BEFORE the actual damage occurred, a reasonable person could foresee SOME kind of damage COULD occur.) and 4

5 (b) That there was sufficient proximity or closeness between the plaintiff and the defendant : this is called the proximity of relationship test. It is the "neighbourhood" part of Lord Atkin's statement in Donoghue's case. The High Court considered this in more depth in Jaensch v Coffey (1984) 155 CLR 549. See : Donoghue v Stevenson (1932) AC 362 in S&OR and Jaensch v Coffey (1984) 155 CLR 549 mentioned in T plus facts given in lecture - what types of proximity were identified? compared with Levi v Colgate-Palmolive Pty. Ltd. (1940) 41 SR (NSW) in S&OR 2.3 And? (c) Mr. Justice Kirby has argued in previous cases that a third test is necessary ie whether it is fair, just and reasonable for a duty to be owed this brings in a policy dimension. Most other High Court judges have not endorsed this test and for physical injuries, this test will rarely be needed anyway. It is probable that for pure economic loss claims the Courts implicitly or explicitly undertake this balancing task. Your week 7 tutorial exercise looks at this further when it asks you to consider the recent single Victorian Supreme Court judge s decision in Johnson Tiles Pty. Ltd. & Anor. v Esso Australia Pty. Ltd. & Ors [2003] VSC 27. Importance of the proximity test The "proximity test" acts as a check or control on the reasonable foreseeability test. It has been used by the courts to deny the existence of a duty of care, or to restrict its extent, on public policy grounds eg where to recognise a duty of care would be socially undesirable or create liability which is unduly broad. For example for many years claims for compensation for nervous shock and pure financial loss (caused by eg careless advice) were unsuccessful. Gradually principles evolved which allowed a limited range of people to sue in certain circumstances. The difficulties faced by the courts can be seen by looking at the case of Alcock & others v Chief Constable of the South Yorkshire Police [1991] 4 All ER 907. The plaintiffs were suing the police for nervous shock resulting in psychiatric illness alleged to have been caused by seeing or hearing news of spectators being crushed to death at a football match. The plaintiffs were related to those killed; some were at the match in another part of the ground - others only heard of the deaths afterwards. The defendant admitted liability for negligence to those killed or injured during the crush but not to those suffering nervous shock in the circumstances of plaintiffs who only saw or heard of the news afterwards. Note that there is also a possibility that an injured person can sue to recover damages relying in particular on Part VA of the Trade Practices Act 1974 (Cth) (TPA). That Part essentially gives compensation if a person is injured because goods were defective. Look at the summary chart on page 33 of S&OR. You are NOT expected to learn about the TPA here but should be aware of its existence. Later units, in particular BL741 Marketing Law, deal with the TPA in detail. A knowledge of the TPA is ESSENTIAL for all consumers and business people. 5

6 2. PURE ECONOMIC LOSS: THE DUTY OF CARE WHERE THE LOSS IS FINANCIAL (S&OR 2.4 and ) For policy reasons recovery by a plaintiff of "pure economic loss" (financial loss) was denied by the courts for many years, even though the defendant may have been otherwise at fault. This denial was based on the grounds either that no duty of care was owed (because, applying Donoghue v Stevenson, a duty could only be owed where physical damage was foreseeable) OR that financial loss was a kind of damage which was too remote. Economic loss was only recoverable if it flowed from physical injury to the plaintiffs or damage to their own property. A major reason for restricting recovery for economic loss was that the economic effects of the negligent act may be more extensive than the physical effects : if damages for all foreseeable economic loss were recoverable "an act of careless inadvertence might expose the person guilty of it to claims unlimited in number and crippling in amount. For example a negligently made statement (eg about the financial status of a company) might be read or heard (first or second-hand) by thousands of people, most of whom the maker of the statement would not know were relying on his statement. To allow everyone who suffered financial loss to sue would impose too great a liability on business. Over recent years the courts have gradually recognised that a duty can be owed in some circumstances where the only damage is financial. A recent example is found in the High Court case of Perre v Apand Pty. Ltd. (1999) 198 CLR 180 (see S&OR page 21). However they have relied heavily on the proximity and other tests to narrow the range of people who can successfully sue. Unfortunately the exact tests and circumstances when a duty will be owed are still being developed. The most recent case to consider whether damages could be recovered for pure economic loss is Johnson Tiles Pty. Ltd. & Anor. v Esso Australia Pty. Ltd. & Ors [2003] VSC 27. This case concerned the potential liability of Esso for losses caused by the Longford gas explosion. That case is looked at in the week 7 tutorial WHAT WAS THE OUTCOME AND WHY? In your tutorials (weeks 6-7) you will summarise the types of situations when the courts have decided that a duty is owed and the principles on which those decisions were made. Below is a brief summary of the development of the principles relating to negligent misrepresentation and other cases of pure economic loss. PROFESSIONAL NEGLIGENCE/NEGLIGENT MISREPRESENTATION Development In 1964 that the House of Lords agreed that a duty could be owed where a careless statement caused economic loss. To guard against the liability becoming too onerous, the duty would only arise where a 'special relationship' existed. A special relationship would exist where the maker of the statement knew or ought to have known that the receiver was going to rely on the advice given. The landmark case was Hedley Byrne & Co. v Heller & Partners Ltd. (1964) AC 465 (in S&OR 3.27). Although the 6

7 plaintiff failed in Hedley because of the disclaimer, the obiter of Denning J. has been followed in later cases. There are a number of important Australian cases which have considered, applied and extended the 'special relationship' test. Some of these are: L. Shaddock & Associates Pty. Ltd. v Parramatta City Council (1981) 55 ALJR 713 in S&OR para 3.20 (and T 803). What was the duty test set down in Shaddock's case? (see S&OR pages 43-44) San Sebastian Pty. Ltd. v Minister Administering Environmental Planning and Assessment Act (1987) 61 ALJR 41 in T * How did San Sebastian extend the duty set out in Shaddock's case? * What additional requirement did the High Court in San Sebastian require? When is a duty owed? (a) A duty of care is easy to prove where there is a contract: see S&OR 3.21 and Esso Petroleum Co. Ltd. V Mardon. (b) More difficult are circumstances where there is no contract and which involve THIRD PARTIES. * A classic example is to ask to whom auditors owe a duty of care? See S&OR diagram, page 45. Why do you think the courts might be reluctant to find a duty of care is owed to all the persons in the ballons? (i) Where there is no contract a duty can still be owed: see Shaddock s case but it may be difficult to prove sufficient proximity. (ii) clear. Where there is no contract and third parties are involved, the law is less Until March 1997 the High Court had not had an opportunity to rule on this matter. There had been a few cases decided by the Victorian, New South Wales and South Australian Supreme Courts, most of which restricted the duty to a fairly narrow range of people, emphasising the need for plaintiffs to show that defendants intended their advice/information to be relied on by the plaintiffs and that reliance actually occurred. The former requirement is quite difficult for plaintiffs to prove as shown by the case of Lowe Lippman Figdor & Franck v AGC (Advances) Ltd [1992] 2 VR 671 in S&OR page 47. The High Court approved Lowe Lippman in Esanda Finance Corporation Ltd. v Peat Marwick Hungerfords (Reg) (1997) 142 ALR 750 see S&OR page 47. It is useful to look at the case headnote as the court set out some of the policy issues involved in deciding when a duty should be owed to non clients. What would appear to be the principles now? see S&OR

8 OTHER CASES OF PURE ECONOMIC LOSS The High Court has found a duty in a number of cases where only pure economic loss was suffered, however, there does not appear to be a clear test yet. The most well known cases are: Caltex Oil (Aust) Pty. Ltd. v The Dredge Willemstad (1976) 136 CLR 529 (pipeline cut by dredge; duty owed to owner of pipleline for having to transport oil by road) in S&OR page 20 Junior Books Ltd. v Veitchi Co. Ltd. (1983) 3 All ER 201 (floor of factory defective; duty owed by subcontractor) Bryan v Maloney (1995) 69 ALJR 375 (cracks in house; duty owed to third owner by builder) Perre v Apand Pty. Ltd. (1999) 198 CLR 180 (see above and S&OR page 21). A Victorian Supreme judge, Gillard J., in Johnson Tiles Pty. Ltd. & Anor. V Esso Australia Pty. Ltd. & Ors [2003] VSC 27 has set out what he considers the principles to be. See tutorial week 7 work. ACTIVITY * What do YOU think about the direction that the law is taking in the area of duty owed for financial loss? * What do YOU think the duty test should be? * What risk management strategies can business use? 3. NOTE THAT THERE ARE SOME SITUATIONS WHERE A DUTY OF CARE IS READILY RECOGNISED for general knowledge (a) By the Common Law Employers owe a duty to employees to provide a safe working environment. This entails providing competent staff, safe equipment and a safe system of work: Wilson & Clyde Coal Co. Ltd. v English [1938] AC 57 (T ). In schools, once a teacher-pupil relationship exists a teacher owes a duty of care to his or her pupils. This entails providing a safe physical environment. Drivers owe a duty to others using the road (and their property). Occupiers of land owe a duty to those entering their property (even trespassers in certain circumstances Hackshaw v v Shaw (1984) CLR 614). Professional persons owe a duty to their clients. Manufacturers owe a duty to the ultimate consumers of their product. Bailees (eg those given good for safekeeping whether for payment or not) owe a duty to the bailor (person owning/giving the goods). (b) By Statute. Parliaments have on occasions added occasions where a duty is owed, clarified the common law duty, restricted access to common law rights or altered the actual standard of care owed once the duty has been established. See for example the occupational health and safety, workers compensation, occupier s liability and product liability.legislation. The latter is dealt with in S&OR in chapter 2 but we won t be dealing with it here. It is dealt with in BL741 Marketing Law and to a lesser extent in BL503 Commercial Law. 8

9 ELEMENT NUMBER TWO: BREACH OF DUTY S&OR Defendants will breach their duty of care when they fail to live up to the standard of care expected in the circumstances. The standard expected is set objectively by asking "what would a reasonable person have done or not done in the circumstances?". The High Court has said this involves a two-stage process: (a) (b) would a reasonable person believe that the risk of injury to the plaintiff was reasonably foreseeable. If the answer is yes, ask would a reasonable person have responded to that risk at all and, if so, how would a reasonable person have responded (ie what would he/she have done). In order answer this see the heading below 'Factors taken into account in assessing the standard of care' and S&OR 2.5. THEN the actions and omissions of the defendant are compared with those that the reasonable person would have done or not done. If the conduct of the defendant is equal to, or better than, the reasonable person there is no breach of duty. If he/she falls below the reasonable person standard there has been a breach of duty of care. See the diagram to be done in the lecture. * What is the difference between an objective and subjective test? The degree of care expected in any particular case depends on all the surrounding circumstances and may vary according to the amount of risk to be encountered and the seriousness of the injury foreseen. If the defendant professed to have special skills eg as a medical specialist, an accountant or a systems analyst, then the standard of care expected is higher than for a person-in-the-street. The defendant would be expected to live up to the standard of the "reasonable expert in that field". * Describe the "reasonable person" - see T Factors taken into account in assessing the standard of care: (a) (b) (c) the probability or reasonable foreseeability of the risk of injury occurring see Bolton v Stone (1951) AC 850 in T 809; Pentony para the seriousness (gravity) of that injury see Paris v Stepney Borough Council (1951) AC 367 in T 809; Pentony para the practicability and cost of eliminating risks see Latimer v AEC Ltd. (1953) AC 643 in Pentony para 15.38; * Compare Latimer with Paris v Stepney : why was the plaintiff successful in one but not the other? (d) (e) (f) the age and capacity of the plaintiff - compare the care required when dealing with adults, children or disabled persons the social value or utility of the defendant's action see Watt v Hertfordshire CC [1954] 1 WLR 835 noted in T810, more detail in Pentony para common practice 9

10 ACTIVITY: S&OR set out in paras different circumstances in which a breach can occur: summarise these circumstances and the cases. OCCUPIER S LIABILITY NOTE THE SIMILARITY BETWEEN the common law standard of care above and that prescribed by the Occupier s Liability Act 1983 (Vic) amending the principal Act, the Wrongs Act 1958 (Vic). Note that the Act is another example of legislation overriding case law previously the standard of care varied according to type of entrant (invitee, licencee etc.). All businesses, public authorities and community members who have control over premises/outdoor areas MUST take reasonable care to ensure that their premises are safe. ELEMENT NUMBER THREE: BREACH CAUSING DAMAGE S&R 2.12 In addition to proving that the defendant owed the plaintiff a duty of care and breached that duty, the plaintiff must also prove that that breach caused his or her injuries. Whether there has been causation is a question of fact. The main (but not exclusive) test to determine whether the breach caused the damage is the "but for test" formulated by Denning LJ in Cork v Kirby Maclean [1952] 2 All ER 402 (see Pentony para for the facts) ie "If you can say that the damage would not have happened but for a particular fault, then that fault is in fact a cause of the damage; but if you can say that the damage would have happened just the same, fault or no fault, then the fault is not a cause of the damage". A classic case is Barnett v Chelsea and Kensington Hospital Management Committee (1968) 1 All ER 1068 in Pentony para Note, however that where a number of independent factors contribute to the plaintiff's injury, the "but for test" may not be conclusive - see Lindeman Ltd. v Colvin (1946) 74 CLR 313 (facts & decision in lecture plus in V&L (7th ed) para 10.41, page 372; (8th ed) para page 415). This was expressly recognised by the High Court in March v E & MH Stramare Pty. Ltd. (1991) 171 CLR 506 where the test stated to be whether the defendant s act or omissions materially contributed to the plaintiff s loss. The importance of having to prove each element is illustrated by Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310. In this case a breach of duty by the auditors was proven and damages of $145 million awarded! However, on appeal, the Court of Appeal in NSW found that there was no causal connection between the breach and the losses suffered. Another independent factor had intervened (recession) and the auditors were found not liable. Compare this with: Kenny & Good Pty. Ltd. v MGICA (1992) Ltd. (1999) 73 ALJR 901 in S&OR page 49. See also S&OR 2.12: Chapel v Hart (1998) 72 ALJR

11 ELEMENT NUMBER FOUR: S&OR 2.12 AND 3.26 DAMAGE Once the plaintiff has established that damage was caused by the defendant's breach, the plaintiff must prove that (a) the damage was of a kind recognised by law; (remember that for many years only physical damage was recognised), and (b) that the damage was not too remote a consequence of the breach, that is, the defendant will not be responsible for all damage caused. That is, the defendant will only be liable for damage which was of a kind which was reasonably foreseeable. Damage will be reasonably foreseeable when the risk of damage is a real risk which would occur to the mind of a reasonable man in the defendant's situation and which he or she would not brush aside as far-fetched. This is sometimes referred to as the remoteness of damage rule and it was formulated in the Wagon Mound cases (see T813). See Kenny & Good Pty. Ltd. V MGICA (1992) Ltd. (1999) 73 ALJR 901 in S&OR page 49. Once it has been decided that the damage is of a kind which is reasonably foreseeable, the defendant will be liable to the full extent of that damage - even if the extent of damage was greater than was foreseeable. Defendants "must take their victims as they finds them" and pay damages accordingly. This is called the "Egg-shell Skull Rule". (See also Pentony para ) A good illustration of the damage principles is found in Hughes v Lord Advocate (1963) 1 All ER 705- facts and decision in lectures. USE OF EXCLUSION CLAUSES A carefully drafted exclusion clause can form part of a contract or be effective if brought clearly to the attention of the other party. Note, however, that the Goods Act 1958 (Vic) and Trade Practices Act 1974 (Cth) make exclusion clauses in some contracts illegal these Acts should be checked first. (Dealt with in BL503 and BL741.) Since the insurance crisis and the Review of Negligence Report, changes have been made to the Wrongs Act 1958 (Vic) and this Act should also be checked. PROVING NEGLIGENCE The burden of proof is on the plaintiff to prove all the elements of negligence. 11

12 The standard of proof is "on the balance of probabilities", ie that it was more probable than not that the breach of duty occurred (compare with criminal offences which have to be proven "beyond reasonable doubt"). MAIN DEFENCES : T ; S&OR page Voluntary assumption of risk (ie consent or in Latin, Volenti Non Fit Injuria). This is a complete defence. The rationale is that no wrong can be done to a person who consents. It is not enough, however, for the defendant to show that the plaintiff knew of the risk - the plaintiff must have fully appreciated the risk and accepted the risk freely and willingly. Consent is rarely successful as a defence to a negligence action. 2. Contributory Negligence. This is a partial defence. If the defendant can prove the plaintiff failed to take precautions for his or her own safety and this failure contributed to the plaintiff's injuries, then the amount of compensation awarded to the plaintiff will be reduced. Therefore, if a plaintiff was awarded damages of $100,000, but was found to be 10% to blame for his injuries, the $100,000 would be reduced by 10%. Read for general knowledge THE MEASURE OF DAMAGES (OR AMOUNT OF DAMAGES) ** note : changes made by the recent amendments to the Wrongs Act 1958 (Vic) cap (limit) the amount of damages recoverable in certain circumstances. The aim in awarding damages (money compensation) is to compensate. That is, so far as money can do, the plaintiff is to be put in the position he or she would have been in had the negligence not occurred. As in contract, the plaintiff has a duty to mitigate his losses. (a) For personal injury claims the plaintiff must sue "once and for all" for his loss : past, present and future (compare with workers compensation payments). Thus a "calculated guess" has to be made about future losses. Damages can be classified as: (i) Special ie damage which is capable more-or-less of exact calculation and consists of two types : out-of-pocket expenses (eg medical expenses) and loss of earnings up to the date of the verdict. (ii) General ie damage which is not capable of exact calculation. It is divided up into: economic loss in the future, loss of enjoyment of life, past & future, pain and suffering, past & future, and loss of expectation of life. (b) Property damage claims are treated in a similar manner to personal injury claims. The loss claimed to restore the plaintiff to his original position usually is measured by the difference in value before and after the accident (eg the cost of repair or replacement). 12

13 In addition consequential loss may be claimed, eg pending the repair or replacement of the damaged or destroyed "profit-earning" item (eg car or tools of trade), the cost of hiring a substitute item may be claimed provided the consequential loss is not too remote. C. VICARIOUS LIABILITY 1. Definition Vicarious liability is where the law holds one person responsible for the misconduct of another, although the former is himself/herself free from personal blameworthiness or fault. The most usual example of this is seen in the employment context where an EMLOYER is liable for the TORTS of his EMPLOYEE committed in the COURSE OF HIS/HER EMPLOYMENT. 2. Rationale Economic: employers are usually insured, can afford to pay from the profits of their activities; employees are usually men (people) of straw Safety: making employers responsible provides an incentive for employers to choose staff carefully and provide training etc. Policy: employers profit from their enterprise and therefore should have responsibility if their enterprise causes others loss Note: employers could ask their employees to indemnify them so check your contract! 3. Requirements: (a) committal of a tort (eg negligent act or advice): don t forget this the employee must have done something wrong! (b) by an employee not an independent contractor (use eg the control and multifactor tests) (c) acting in the course of his/her employment ask what the employee was employed to do and an employer will be responsible for what is done in that area or incidental to it AND if the employer otherwise authorised the wrongful act. 4. Requirements discussed (a) committal of a tort: we have dealt only with negligence in detail. See above requirements to prove the defendant employee was negligent. 13

14 (b) Is the defendant an employee of the employer. There are a number of tests that seek to determine the answer to this. Two main ones are set out below. This issue is discussed in more depth in BL642 Employment Law. (i) the control test- Can the employer tell the employee what to do, how to do it, when to do it? Does the employer have the power of dismissal, provide the equipment, pay holiday pay/workers compensation? In Zuijs v Wirth Bros Pty. Ltd. (1955) 93 CLR 561 a circus performer was held to be an employee why? (ii) the multi-factor test In Australia the High Court in Stevens v Brodribb Sawmilling Co. Pty. Ltd. (1986) 160 CLR 16 said that on some occasions the control test may not be appropriate. A worker is likely to be an independent contractor and NOT an employee if he/she: - owns and maintains his/her own equipment - is paid by results - takes the chance of profit or loss - has the right to delegate the work to someone else - has the right to work for others during the contract period - is not entitled to sick pay or workers compensation benefits, sick leave or superannuation - does not have PAYE tax instalments deducted. (c) Was the negligent conduct by the following employees in the course of their employment (and hence the employer was vicariously liable for the loss caused?) I. Contrary to his employer s instructions, a driver employee raced his bus against another company s, damaging the bus (Limpus v London General Omnibus Co. (1862) 158 ER 993). II. A conductor drove a bus (turned it around ready to leave) and negligently injured the plaintiff (Beard v London General Omnibus Co. (1900) 2 QB 530) III. A customer in the defendant s hotel knocked over several glasses of beer, used filthy expressions and slapped the barmaid in the face. The barmaid assaulted the customer (ie went further than self defence) (Deaton s Pty. Ltd. v Flew (1949) 79 CLR 370 IV. A petrol tanker driver lit a cigarette in the vicinity of a tanker, threw the match away carelessly, and there was a fire, explosion and damage to the petrol tanker, car and surrounding houses (Century Insurance Co. Ltd. v Northern Ireland Road Transport Board [1942] AC

15 V. A fur coat was sent to the defendants for cleaning. The employee entrusted to do this stole it. (Morris v C.W. Martin & Sons Ltd. (1966) 1 QB 716) Would it have been different if the coat was stolen from the storage area by the receptionist? D. PUBLIC LIABILITY INSURANCE CRISIS AND REFORMS - Why is there apparently an insurance crisis? - What are some of the causes supposed to be? - What other views are expressed? - What are some of the proposals for reform? - What did the Victorian Review of Negligence Law by Ipp and others suggest should happen? - What are the pros and cons of their suggestions? - What changes have been made to the Wrongs Act 1958 (Vic) as a consequence? - What is your view: are the changes good, should any more be made? What sort and why? Since one of the essay topics covers this area, this issue will only be dealt with briefly in class! A good source of information is the Australian Financial Review (newspaper). In September 2002 the Panel set up to review the law of negligence, chaired by the Honourable Justice David Ipp, handed down its final report: the Review of the Law of Negligence Final Report. The full report and submissions made to the Panel can be found at You are NOT required to read the full report but a flick through may be useful. Before and after the Report was handed down State and Territory government made changes to the law which affect who can sue whom and for what concerning negligence. Not all of the changes reflect the recommendations of the Panel s Report. In Victoria the changes were made by amending the Wrongs Act 1958 (Vic). 15