Duty Of Care Notes

Duty of Care How NZ Courts approach the question of whether to impose a duty of care in a novel situation: Whether a duty of care is owed in a situation not covered by authority is determined, ultimately, on the basis of whether the imposition of a duty would be fair, just and reasonable. The Courts determine this question in terms of proximity and policy. Proximity concerns the nature of the relationship between the litigants, whereas policy concerns the wider legal issues and other considerations that support or undermine a duty of care. The Court of Appeal in Rolls Royce emphasised the open nature of this test; policy and proximity provide a general framework for determining a duty's existence and scope, rather than a straitjacket restricting the Court from determining the 'ultimate question.' This implies that the current approach does not presume a duty's existence, which the defence must rebut, once proximity is established. This change from Anns and South Pacific Manufacturing is consistent with the idea of a duty's existence being ultimately contingent on fairness, justice and reasonableness, but the Supreme Court has so far reserved its decision on this matter (Couch). Winterbottom v Wright: where the negligent conduct complained of constitutes a breach of a K, only a party to that K can sue. Donoghue v Stevenson Established duty of care to prevent positive acts causing injury/damage to person/property, liability's extent adjudged by test of remoteness. Didn't limit range of liability based on the type of damage caused, but left in place different common laws that did this. Satisfaction of neighbourhood principle is necessary but not sufficient. Sufficient for P to belong to a class of persons to whom harm was reasonably foreseeable Expansion of the duty of care Hedley Byrne v Heller D may be liable for negligent statement causing P PEL by relying on statement to its detriment in a loss producing business transaction. Weakened two exclusionary rules; bar on recovering for PEL and negligent statement exclusions. Interpreted narrowly. Require: Negligent statement causing PEL where 'special relationship': 1. Voluntary assumption of responsibility by D to P for the accuracy of the statement 2. Reasonable detrimental reliance by P. Led to rapid expansion of scope of liability. Anns v Merton London Borough Council [1978] AC 728 - Two Stage Test Similar facts to Bowen v Paramount Builders, land holders suing council for negligently inspecting faulty foundations. Council claimed no relevant loss (damage was to defective building itself) and the no actionable conduct (no liability for negligent omissions) HL: To establish a duty of care, not necessary to show facts are within precedent. Approach in two stages: 1. Whether P can show relationship of proximity/neighbourhood between so that in D's reasonable contemplation, carelessness is likely to cause P damage Raises prima fade duty of care. 2. Whether D can show policy considerations which should negative/reduce/limit the scope of the duty/class of potential Ps/damages to which a breach may give rise . Gartside v Sheffield, Young & Ellis: CA Testatrix contracted solicitors (D) to write will benefitting Gartside (P). Testatrix died before D executed the will. P sued D in negligence, claiming value of bequest. D claimed no duty owed: loss was PEL not under Hedley Byrne, K covers promises to perform future actions, not tort, and P not privy to K. P claimed solicitors owe duty of care to beneficiaries of proposed will to fulfil instructions w due diligence + execute will within reasonable period. Sufficient degree of proximity? 1. Designated beneficiary (particularly when testatrix's circumstances dictate urgency) obviously + foreseeably likely to be closely + directly adversely affected by solicitor's carelessness that solicitor should reasonably have his interests in mind. 2. Proximity not strengthened by P's actual reliance; detrimental reliance on D's assurances not essential; P is harmed without reliance, solicitor can reasonably foresee that negligence will bring loss about. 3. Duty extends to liability for foreseeable PEL regardless of absence of physical damage/injury/danger thereof. Policy reasons affecting the existence of duty Against: 1. Eroding privity of solicitor-client contract (but DvS, many cases say k duties do not prevent tortious 3 duties arising) 2. Solicitor-client privilege means solicitor may not be able to defend self (remote possibility though, estate would waive privilege) 3. Flaws in cause of action; possible dual distribution under negligence + FPA/Testamentary Promises Act. (but can take this into account when quantifying damages) For: 1. Serves two important social objectives: compensate deserving Ps (can spread risk w insurance), promote professional competence. 2. Duty would enhance solicitor-client relationship; K is for benefit of third parties, so negligence disappoints client's expectations. K duty and T duty aligned. 3. Framework of this duty is defined and limited: only for breaches in limited period to beneficiaries, liability limited by size of estate. House of Lords backtracking : The Caparo threefold test Caparo Industries plc v Dickman [1990] 2 AC 605, 617-618 After Anns, the PC and HL emphasised the inability of any single general principle to provide a universal, practical test for whether a duty of care of a given scope is owed. Three necessary ingredients giving rise to a duty of care: 1. Foreseeability of damage 2. A relationship of 'proximity' or 'neighbourhood' These two do not give rise to a prima facie duty of care 3. Fair, just and reasonable that the law should impose a duty. Emphasised categorisation of duties of care into distinct, recognisable situations as guides for existence + scope + limits. Extending duty cautiously and incrementally, not through massive swathes limited only by negativing policy considerations; - endorsed Brennan J in Sutherland Shire Council v Heyman (1985) HCA Followed by... Murphy v Brentwood District Council [1991] 1 AC 398 HL: Anns was wrong on its facts, overruled. Remedy for building defect is PEL, so recoverable only under Hedley Byrne; the Caparo application is narrow + restrictive. New Zealand Courts' Response Study study Page 8 New Zealand Courts' Response South Pacific Manufacturing Co Ltd v NZ Security Consultants & Investigations Ltd; Mortensen v Laing[1992] 2 NZLR 282 (CA) Laings claimed insurance after business fire . Insurer hired D (Mortensen PI) to investigate arson. D believed P committed arson; payout refused. Issue: whether PI who has k with insurer to investigate a fire in property insured by insurer owes a duty to the insured party to take reasonable care in investigation. Court's approach to assessing the duty of care in novel situations Caparo's third step is now the overriding concern: ultimate Q is whether in circumstances of case a duty of care of this scope incumbent on the D is just and reasonable. Two broad fields of inquiry: 1. Degree of proximity or relationship Not just foreseeability; also analogising with precedent cases (recognising Caparo), assessing competing moral claims (following Lord Atkin in DvS) i.e. Balancing P's moral claim to compensation for avoidable harm vs D's moral claim to be protected from undue burden of leg al responsibility. 2. Other policy considerations which negative or restrict or strengthen duty in this class of case. Public policy considerations; i.e. Moral claims of different groups if duty is imposed widely. Didn't adopt Caparo wholesale because: considers same factors; precise methodology not of critical significance, and 14 years of following Anns had been satisfactory. Application Proximity established a prima facie duty of care: 1. Direct + close nexus between D and P. Foreseeability of harm established (if arson report given, no cover), Moral claim strengthened: no obvious means of protection from liability. 2. D's moral culpability Burden of duty of care not out of proportion with moral culpability ; no conflict with k obligations, not unfairly onerous (already must take care). 3. Relevant legislation: public interest in proposed duty (Act showed P considered proximity called for legislative oversight); [more of a policy call?] 4. Clear analogy with precedent Like Gartside and Downside (debenture holder + receivers) (1) D voluntarily assumed responsibility to act carefully in activity [more than P in Hedley Byrne, voluntarily undertook task which might impact D adversely] (2) Dependence/power relationship like Gartside - no actual reliance necessary (Hedley), P was vulnerable, dependant on D's due care. (3) High likelihood that careless performance would cause harm [restatement of close nexus point) Wider policy concerns justify denying the duty of care: 1. Undesirability of disturbing k relationships: insurer/insured + insurer/investigator. Ps have k remedy against insurer; if not, because they bargained for lower premium. Not justified in allowing greater recover y in tort than contract. Ks cover both pertinent relationships: they should ordinarily control allocation of risk (unless special reasons)- Simaan General Contracting e.g. Oligopolistic trade practices or other market failures causing substantial inequality of bargaining power. P with opportunity under primary k to obtain k protection from loss cannot expect society to provide unbargained tort protection. 2. Duty would cut across other areas of tort law, deprive Ds of lawful defences. Defamation: can't import duty of care - Balfour, would have qualified privilege defence (legal + moral duty of D, legitimate interest of insurer) Malicious prosecution - must prove malice. 3. Duty could not be reasonably confined; inherently expansive, unacceptably indeterminate. CA: didn't abandon Anns approach, but influenced by HL, watered down Anns by importing features of Caparo test, application consistent with Caparo. Rolls Royce NZ v Carter Holt Harvey [2005] CA CHH k'd w ECNZ to establish a cogeneration plant (cogeneration k). ECNZ k'd with RR to construct plant (turnkey contract). Construction lacked quality, CHH suffered PEL. Test to be applied Ultimate question: whether in circumstances imposing a duty is just and reasonable. Test is a general framework, not straitjacket; raises no presumptions. - contra Richardson J in South Pacific. The important object is to weight all relevant factors, not important at which stage of inquiry they are considered. Ultimate question used to conclude. 1. Proximity Foreseeability main factor, but insufficient alone. Degree of analogy with precedents (development should be principled, cohesive); [implicit policy consideration there] Balancing moral claims: D's moral claim: Burden of taking precautions (are consequences of burden disproportionate to fault?). D's right to freedom of action. P's moral claim: Extent of P's vulnerability, (especially if D has special skills, power over P. Alternative remedies of protection/deterrence?) (Bargaining power/market realities) (What could P have reasonably done to protect interests?) Nature of loss: PEL compensation= mere transfer of wealth, which compensating harm to person/property is better as involves net loss to social wealth. Statutory background: is this the kind of relationship which P intended would involve a duty of care? Contractual background: can also give rise to wider policy issues, so two stages merge here. Assumption of responsibility; if D with special skills has assumed responsibility for some matter, and P has reasonably and foreseeably relied upon this, a factor. For: Foreseeability, direct + close relationship. Liability for duty would be determinate. D's highly specialised skill (diminished by P's sophisticated, commercial nature.) Against: Strongest factor: k structure showed intention that k rights were exhaustive, likely chosen by CHH; No inequality of bargaining power. CHH not vulnerable: had a k remedy, could sue ECNZ. K limitation clauses: P has paid only for what protection it bargained for, should not expect society to provide more in tort. Neutral Building Act 1991: Parliament left development of law in this area to the Courts. 2. Wider Policy Factors Strongest: commercial certainty. Precedent: no tort liability for defects in quality in commercial construction cases. Study study Page 9

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