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Law Notes Tort Law Notes

Laws301 Lecture Notes Part 3 Notes

Updated Laws301 Lecture Notes Part 3 Notes

Tort Law Notes

Tort Law

Approximately 368 pages

Highly comprehensive notes covering all topics in Torts to the Person (part 1), Property based Torts (part 2), and Negligence (part 3)...

The following is a more accessble plain text extract of the PDF sample above, taken from our Tort Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Duty of Care 3

Origins and Development 3

Donoghue v Stevenson [1932] AC 562 4

Facts 4

Issue 4

Rule 4

Analysis 4

Hedley Bryne & Co Ltd v Heller & Partners Ltd [1964] AC 465 6

Facts 6

Issue 6

Rule – Negligent Misstatement 6

Analysis 7

Home Office v Dorset Yacht Co. Ltd [1970] AC 1004 (HL) 9

Facts 9

Issue 9

Rule 9

Analysis 9

Redeveloping the duty of care test 11

Anns v Merton London Borough Council [1978] ACT 728 11

Facts 11

Issue 11

Rule – two stage inquiry 11

Caparo Industries Plc v Dickman and Others [1990] 2 AC 605 12

Facts 12

Issue 12

Rule: the three-fold test 12

Analysis 13

Result 13

South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 14

Facts 14

Issue 14

Rule: assessing the duty of care in novel situations 14

Analysis 15

The status quo in New Zealand 17

Attorney-General v Carter [2003] 2 NZLR 160 17

Rule 17

Assumption of responsibility 17

The NZ approach to duty of care arising from negligent misstatements 18

Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 19

Facts 19

Issue 19

Rule 19

Analysis 20

Result 20

Couch v Attorney-General [2008] 3 NZLR 725 21

Facts 21

Issue 21

Rule 21

Application 22

Elias CJ’s Dissent 22

North Shore City Council v Attorney General [2012] NZSC 49 23

Examining the duty of care analysis 25

Palsgraf v Long Island Railway Co, 248 N.Y. 339 (1928) 25

Application of the analysis (Categories) 26

Positive acts causing physical damage 26

Mobil Oil Hong Kong Ltd v Hong Kong United Dockyards Ltd [1991] 1 Lloyds LR 309 (PC) 26

Marc Rich & Co v Bishop Rock Ltd [1996] 1 AC 211 27

Omissions 28

Stovin v Wise [1996] AC 923 28

Mental Injury 30

van Soest v Residual Health Management Unit [2000] 1 NZLR 179 30

Misstatements 32

Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321 32

Economic Loss 35

Scott Group Ltd v McFarlane [1978] 1 NZLR 533 (NZCA) 35

Connell v Odlum [1993] 2 NZLR 257 37

Defective Buildings 39

Body Corporate 207624 v North Shore City Council (Spencer on Byron) [2013] 2 NZLR 297 39

Public Authorities 42

X (Minors) v Bedfordshire County Council [1995] 2 AC 633 42

Other Elements of Negligence 45

Standard of Care and Breach 45

Overseas Tankship Ltd v The Miller Steamship Co Pty Ltd (Wagon Mound (No 2) [1967] 617 45

Facts 45

Issue 45

Rule 45

Analysis 45

Goldman v Hargrave [1967] 1 AC 645 47

Facts 47

Issue 47

Rule 47

Analysis 48

Result 48

Bannerman, Brydone Folster & Co v Murray [1972] NZLR 411 49

Facts 49

Issue 49

Rule 49

Analysis 49

Causation and Damages 50

Wilson & Horton Ltd v Attorney-General [1997] 2NZLR 513 50

Facts 50

Issue 50

Rule 50

Analysis/Application 51

Duty of Care

Lecture 36: (11/08/20)

Four elements:

  1. Duty of care

  • The defendant owes the plaintiff a duty of care

  1. Breach

  • The defendant breaches their duty of care and were careless/unreasonable in doing so.

  1. Causation

  • The defendant’s breach then caused damage to the plaintiff

  1. Damages

  • Because of the breach, the plaintiff has suffered loss and incurred costs that they should not be liable for.

  • If there are no costs incurred by the plaintiff, there is no claim for negligence.

Lecture 37: (14/08/20)

Origins and Development

Originally, negligence comes from 12th to 14th Century Trespass

  • In the 12th century, you could trespass if there was a direct and forcible interference with a person or land.

  • In the 13th century, two writs developed – a writ of trespass to the person and one of ‘trespass on the case’.

  • In the 14th century, there was a separation of trespass to the person, and ‘trespass on the case’ (like negligence).

Trespass to the person – assault, battery, wrongful imprisonment.

  • There must be directness

  • There must be fault – interference

  • The plaintiff does not necessarily need to prove damages – strict liability.

Trespass on the case – nuisance and negligence

  • Can be direct or indirect

  • There can be liability without an intention to interfere

  • The plaintiff must prove damages.


Donoghue v Stevenson [1932] AC 562

Facts

The plaintiff alleged that she visited a café with a friend and consumed a tumbler-full of ginger beer, poured from an opaque bottle, purchased by her friend from the owner of the café.

  • A portion of the ginger beer was poured into a glass which was drunk by Donoghue – when her friend poured the remainder of the bottle, a decomposed snail floated out of the bottle.

  • Donoghue claimed that she felt ill from this sight, complaining of abdominal pain/

  • She was subsequently diagnosed with severe gastroenteritis (physical harm) and mental shock (psychiatric harm).

  • The plaintiff sued the manufacturer of the ginger beer in tort.

Issue

The question before the House of Lords was whether if the allegations could be proved, the manufacturer owed any obligation of care to the consumer of their products:

  • If there is a contractual basis between a consumer of a product and a manufacturer, negligence is not needed.

  • Here, there was no contractual relationship between both parties, because Donoghue’s friend bought the ginger beer and it was not bought from the manufacturer directly.

  • The minority held that there was no duty, as the manufacturer was only liable in contract to which the plaintiff is not a party of – privity of contract.

Rule

Lord Atkin for the majority recognised that the case was irrelevant to privity of contract as the plaintiff was not suing on the contract but for the defendant’s negligent conduct:

“a duty to take due care arises when a person or property of one was in such proximity to the person or property of another than, if due care was not taken, damage might be done by the one to the other.” – Lord Atkin at 581.

  • An appropriate basis for imposing a legal duty to take care – proximity and foreseeability.

Analysis

General public sentiment dictates that a moral wrongdoer should pay for their carelessness which causes damage:

  • “Love thy neighbour” translates to “you must not injure your neighbour” in law.

  • If Mr. Stevenson had not taken reasonable care to ensure his bottles are safe for human consumption, he should be held liable for the damage that it causes.

“The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.” – Lord Atkin at 580.

  • Although Stevenson was not the plaintiff’s geographical neighbour, he was held to have owed a duty of care as there was no possibility of inspection due to the bottle being opaque.

  • Stevenson was also held to have known that the absence of reasonable care in the preparation or putting up of the ginger beer would result in an injury to the consumer.

It was concluded that in the circumstances, a manufacturer owes a duty to the ultimate consumer to take reasonable care so that products are free from defects likely to cause injury.

  1. Duty of care

  • Stevenson’s ginger beer contained a snail which caused injury to the ultimate consumer.

  • Therefore, the defendant did not comply with the duty of care.

  1. Breach

  • There were no processes for checking and ensuring that snails or other matter does not get into bottles before they are filled with ginger beer

  • This is not reasonable to ensure that bottles are free of defects likely to cause injury.

  • Therefore, there is a breach.

  1. Causation

  • Expert opinion – the snail in fact caused Donoghue’s stomach pain and psychiatric shock.

  • No policy reasons not to extend the principle to this case – there were no laws to protect consumers at this time and imposing liability would meet the needs of ordinary people.

  1. Damages

  • Plaintiff suffered physical injury and psychiatric injury.

Lord Macmillan – the categories of negligence are not closed.

“There are other instances than of articles of food and drink where goods are sold intended to be used immediately by the consumer, such as many forms of goods sold for cleaning purposes, where the same liability must exist.”

What if Stevenson did not produce the ginger beer?

  • During this time, manufacturers often have bottles with their names printed on them.

  • The bottles were re-used. Manufacturers would obtain bottles with other people’s names on them and would sell them with their own product in them.

  • There were multiple manufacturers of ginger beer in this region of Scotland – Stevenson argued at trial that the ginger beer was in fact not his product.

  • The Court did not accept this argument – his name was still on the bottle. If he wants to ensure his product is not being falsely labelled, he must protect his brand.

  • Product liability – if a manufacturer produces a product which is defective in some way, the manufacturer may be liable even if there are multiple buyers before the ultimate consumer.

Hedley Bryne & Co Ltd v Heller & Partners Ltd [1964] AC 465

Lecture 38: (18/08/20)

A duty of care of a negligent statement arising from a pure economic loss might arise when

  1. There is a special relationship between the parties – sufficient proximity

  2. The party giving advice has voluntarily assumed the ability to do that

  3. The third party has relied on advice

  4. It is reasonable for the third party to rely on that advice.

Facts

Hedley Bryne is an advertising agency. They want to enter into a contract with Easipower who will be starting an advertising campaign.

  • Hedley Bryne knows that Easipower’s parent company has gone into liquidation

  • They are worried that Easipower will go into liquidation. They also know that Easipower may want the advertising contract to save their business from going bankrupt.

  • Hedley Bryne contacts their bank National Provincial and ask them to investigate by calling Easipower’s bank, Heller & Partners.

  • National Provincial sends a note to Heller & Partners – "without responsibility on the part of this bank" it said that Easipower was "considered good for its ordinary business engagements".

  • National forwards this to Hedley Bryne, relying upon the statement when entering the contract.

  • Easipower goes into liquidation, and Hedley Bryne suffers economic loss – they sue Heller & Partners for negligence.

Issue

Hedley Bryne argues that Heller & Partners were negligent in providing bad information (misstatements) which breaches their duty of care.

  • Hedley Bryne argues that Heller should be responsible for their pure economic loss under their contract with Easipower, despite Heller not being privy to that contract.

The trial judge held that although Heller was negligent, they owed no duty of care:

  • There were no communications between the plaintiff and defendant. There was also no fiduciary relationship.

  • The Court of Appeal similarly held there was no duty of care.

  • Hedley Bryne appealed this decision and the case came before the Privy Council.

Rule – Negligent Misstatement

Lord Reid began by disposing of the argument that there was no sufficiently close relationship between the parties which gives rise to a duty of care:

  • The defendants had argued that they did not know the precise purpose of the inquiries and did not even know whether National Bank wanted the information for its own use or another’s use.

“I would reject that argument. They knew that the inquiry was in connection with an advertising contract, and it was at least probably that the information was wanted by the advertising contractors. It seems to me quite immaterial that they did not know who these contractors were: there is no suggestion of any speciality which could have influenced them in deciding whether to give information or in what form to give it.” – Lord Reid at 482

  • Here, there was a negligent misrepresentation made directly to the person seeking information, opinion or advice – degree of necessary proximity did not need to be determined.

Analysis

Lord Reid also held that appellant’s argument based on Donoghue v Stevenson did not have any direct relevance to this case – differences between negligent words and negligent acts.

“Apart altogether from authority, I would think that the law must treat negligent words differently from negligent acts… Quite careful people often express definite opinions on social or informal occasions… and they often do that without taking that care which they would take if asked for their opinion professionally or in a business connection… there can be no duty of care on such occasions… But it is at least unusually casually to put into circulation negligently made articles which are dangerous.” – at 483

  • A negligently act will only cause a one-off accident, so it is not difficult to find the necessary degree of proximity between the negligent manufacturer and the injured consumer.

  • However, words can be broadcast without the consent or foresight of the speaker/writer.

  • Speaker should not owe a duty to every ultimate ‘consumer’ who acts on their words to their own detriment.

“In general, an innocent but negligent misrepresentation gives no cause of action. There must be something more than the mere misstatement… The most natural requirement would be that expressly or by implication from the circumstances the speaker or writer has undertaken some responsibility…”

  • Derry v Peek – directors of a company made false statements in a prospectus, investors sued in fraud. House of Lords held that the directors believed their statements were true despite having no reasonable grounds for their belief. The directors were negligent but not fraudulent as there can be no fraud without dishonesty.

  • Lord Reid held Derry v Peek to be a case on fraud as it did not establish any universal rule on negligent misrepresentation.

  • Nocton v Lord Ashburton – a solicitor was sued for fraud. Fraud could not be proved, but solicitor was held liable for negligence.

“The whole of the doctrine as to fiduciary relationships, as to the duty of care arising from implied as well as express contracts, as to the duty of care arising from other special relationships which the courts may find to exist in particular cases, still remains…” – Lord Haldane in Robinson v National Bank of Scotland Ltd

Lord Reid accepts Lord Haldane’s view that a duty to take care should not be limited to fiduciary relationships but exist in other special relationships:

“where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him.

  • This is assessed at the objective standard of what a reasonable person would have done – they would have three options if they knew they were being trusted or relied upon

  1. Keep silent or decline to give information

  2. Give an answer with a clear qualification that they accept no responsibility

  3. Answer without qualification of responsibility

  • If a reasonable person adopts the third option, Lord Reid held that they must have accepted some responsibility for their answer and a duty of care.

  • Heller & Partners had specialist knowledge but had qualified their answer – “without responsibility on the part of this bank"

  • Lord Reid held that the respondents never owed any duty of care when giving their replies.

Lord Morris – if a doctor sees someone who is unconscious and decides to treat them without cost, they are still bound by a duty of care to exercise professional skill and knowledge to treat them.

  • Bankers

  • Lawyers

Lord Devlin – the categories of negligence cannot be firmly and precisely defined. There is a distinction between negligence arising from deeds and negligence arising from words:

“The line is not drawn on any intelligible principle…” – at 517

  • If a financial loss (pure economic loss) is only allowed when it is in consequence to physical injury, there would be inconsistencies that would arise in the law

  • E.g. If a doctor negligently advises a patient that they can safely work when they cannot the patient has a remedy. But if the doctor negligently advises a patient they cannot safely work when they can and the patient loses their livelihood, there is no remedy.

  • In both cases, the doctor has been equally negligent and economic loss have been the same – why should it depend on physical harm?

Home Office v Dorset Yacht Co. Ltd [1970] AC 1004 (HL)

Facts

Ten borstal (juvenile delinquents) trainees were working on Brownsea Island in the harbour under the control of three officers employed by the Home Office.

  • Seven trainees escaped one night at the time the officers had retired to bed leaving the trainees to their own devices.

  • The seven trainees who escaped boarded a yacht and collided with another yacht, the property of the respondents, and damaged it.

  • The owners of the second yacht sued the Home Office in negligence for damages.

Issue

Home Office admitted they would be vicariously liable for any action against the borstal officers:

  • A preliminary hearing found for the Dorset Yacht Co that a duty of care was owed by the home office and that the case could go forward for trial on its facts.

  • The Home Office appealed to the House of Lords, arguing that it could owe no duty of care as there was no precedent for any duty on similar facts.

  • Further, it was argued that there could be no liability for the actions of a third party and that the Home Office should be immune from legal action due to the public nature of its duties (policy).

Rule

Lord Reid found that there was nothing to prevent the House or Lords from proceeding but for a lack of authorities:

“I can see nothing to prevent our approaching the present case with Lord Aitkin’s principles in mind.”

  • He cited Lord Aitken’s judgement in Donoghue v Stevenson as a good statement of principle.

Analysis

The question of whether a duty is owed was determined to be one of remoteness:

“here, the ground of liability is not responsibility for the acts of the escaping trainees; it is liability for damage caused by the carelessness of these officers in the knowledge that their carelessness would probably result in the trainees causing damage of this kind.” – at 1027

  • The officers knew that the trainees were criminals – some of them had previously escaped

  • If the officers did not actually know, they ought to have reasonably known.

  • If the officers did not take reasonable steps, it would be reasonably foreseeable that the borstals would escape.

  • If it was reasonable for the officers to have known that the borstals could try to escape again, it was also held to be reasonably foreseeable that they would cause damage.

Lord Reid then considered whether the law regards the criminal actions of the borstals as breaking the chain of causation between Home Office’s carelessness and the damage to the plaintiff:

  • Novus actus interveniens – where human actions are regarded as breaking the chain of causation, preventing damage from being held to be caused by careless conduct.

“Unfortunately, tortious or criminal action by a third party is often the very kind of thing which is likely to happen as a result of the wrongful or careless act of the defendant…” – at 1028

  • Here, the taking of a boat by the escaping trainees and their unskilful navigation leading to damage of another yacht was the ‘very kind of thing’ the officers ought to have foreseen.

Breach analysis – what would a reasonable person do to discharge their duty of care?

  • The officers went to bed and did not do anything

  • This was not the reasonable thing to do

  • But for this breach, there would be no damages.

No compelling policy reasons.

Redeveloping the duty of care test

Lecture 39: (20/08/20)

Anns v Merton London Borough Council [1978] ACT 728

Facts

In 1962 the local council of Merton approved building plans for a block of houses.

  • The approved plans showed the base wall and concrete foundations of the block to be “three feet or deeper to the approval of local authority”

  • The notice of approval said that the bylaws of the council required that notice should be given to the council both at the commencement of the work and when the foundations were ready to be covered by the rest of the building work

  • The council had the power to inspect the foundations and require any corrections necessary to bring the work into conformity with the bylaws but was not under an obligation to do so.

In 1970, structural movements resulted in cracks in the wall, sloping of the floors and other defects

  • The tenants of the building brought proceedings in 1972, claiming that the damage was a result of the block having been built on inadequate foundations that were two feet six inches depth, as opposed to the three feet or deeper shown on the plans and required under bylaws.

Issue

The plaintiffs claimed damages in negligence against the council for approving the foundations and/or in failing to inspect the foundations:

  • At trial, the plaintiffs were barred by a statute of limitations – the cause of action arose on the first sale by the owner in 1962, more than 6 years before an action was commenced.

  • The Court of Appeal disagreed – cause of action arose after the damage had been discovered or ought to have been discovered in 1970.

  • The Council appealed the House of Lords, arguing that there was no duty of care to inspect the houses and that the statute of limitations was wrong.

Rule – two stage inquiry

Lord Wilberforce formulated a two stage inquiry from the position reached after Donoghue v Stevenson, Hedley Bryne, and Dorset Yacht Co:

“First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter – in which case a prima facie duty of care arises.” – at 751

  • If the Council could reasonably have foreseen that a failure to inspect the houses could lead to damage, then a duty of care will arise.

  • The Council had powers and duties under statute, giving rise to a duty in private law.

  • Under statute, it has the power to inspect new buildings, so the Council has a duty to use discretion in deciding whether to inspect – the duty does not require the Council to inspect.

“Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to be negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise” – at 752

  • Are there policy considerations which reduce the scope of the duty of care?

Caparo Industries Plc v Dickman and Others [1990] 2 AC 605

Facts

Fidelity plc was the target of a takeover by Caparo Industries plc and were not doing well financially:

  • In March 1984, Fidelity had issued a profit warning which in turn halved its share price.

  • In May 1984, Fidelity's directors made a preliminary announcement in its annual profits for the year up to March.

  • This confirmed the position was bad and the share price fell again – Caparo begins buying up the shares in large numbers.

  • In June 1984, the annual accounts (which were done with the help of the accountant Dickman), were issued to the shareholders, which now included Caparo.

  • Caparo reached a shareholding of 29.9% of the company, at which point it made a general offer for the remaining shares, as the City Code's rules on takeovers required.

  • After taking over, Caparo found that Fidelity's accounts were in an even worse state than had been revealed by the directors or the auditors – they had paid too much for overvalued shares.

Issue

Caparo sued Dickman for negligence in preparing the accounts and sought to recover the diminution in value of the company if the accounts had been prepared adequately.

  • The issue before the Court was whether Dickman owed a duty of care to Caparo as a shareholder of the company.

At trial, the judge found that no duty of care was owed:

  • At the time Dickman issued his statement, Caparo was not a registered shareholder and the company statement was not prepared for the public at large.

  • As a result, there was no sufficient proximity, not in the reasonable contemplation.

  • In the Court of Appeal, the majority held that a shareholder is owed a duty of care as Caparo was a shareholder. Dickman appealed to the House of Lords.

Rule: the three-fold test

Following Anns, the House of Lords emphasised the inability for a single, general principle to provide a universal test for whether a duty of care was owed.

The test for negligence was amended to a three part test:

“What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.”

  1. Reasonable foreseeability of harm – it must be reasonably foreseeable that the defendant’s actions or omissions caused the harm in question.

  2. Proximity (reasonable foreseeability of the plaintiff)– there must be physical closeness or previous relationship between the parties.

  3. Fair and reasonable – it must be fair, just and reasonable to impose liability.

Analysis

Reasonable foreseeability of harm:

  • Court held if an auditing company is careless in producing accurate financial reports, it would be reasonably foreseeable people that who rely on that information could be financially harmed.

Proximity analysis – the auditors (Dickman) were held to be proximate to registered shareholders:

“No doubt these provisions establish a relationship between the auditors and the shareholders of a company on which the shareholder is entitled to rely for the protection of his interest…” – at 626

  • Although Caparo was a shareholder, they were acting in a unique capacity when trying to take-over Fidelity – the trial judge found that despite owning stock, Caparo was not a registered shareholder so they were not sufficiently proximate to the auditors (Dickman).

  • The accounts had also not been prepared for the purposes that Caparo used them for – the auditors did not know of the nature of transaction Caparo was engaging with.

  • The House of Lords agreed with the trial judge – the accountants were held to not owe a duty of care to Caparo as it was not reasonable for them to foresee a takeover by a shareholder (Caparo) or the public.

Fair, just and reasonable?

  • The accounts had been prepared for the corporation as required by statute, not for the benefit of would-be shareholders.

“Shareholders of a company have a collective interest in the company’s proper management and in so far as a negligent failure of the auditor to report accurately on the state of a company’s finances deprives the shareholders of the opportunity to exercise their powers in general meeting to call the directors to book and to ensure that errors in management are corrected, the shareholders ought to be entitled to a remedy.

  • In practice, because the interest of the shareholders in proper management of the company is indistinguishable from the interest of the company itself, any losses will be recouped by a claim against the auditors by the company, not is individual shareholders.

  • It would not be fair, just and reasonable to impose a duty of care on the auditors.

Result

No duty of care was owed.

  • There was not sufficient proximity between Caparo and the auditors

  • The auditors were not aware of the existence of Caparo, nor the purpose for which the accounts were being used by them.


South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282

Facts

Laings claimed insurance after business fire. Insurer hired a private investigator Mortensen to investigate arson.

  • Mortensen reported that he believed that the Laings lit the fire intentionally and the insurance pay-out is refused.

  • The Laings sued Mortensen for negligence.

Issue

The issue before the Court was whether the private investigator owed a duty to the insured party to take reasonable care in investigating.

Rule: assessing the duty of care in novel situations

The Court of Appeal clarified its approach to assessing whether a duty of care arises in novel situations not clearly covered by existing authority:

“the proper approach is to look at all the material facts in combination, in order to decide as a question of mixed law and fact whether or not liability should be imposed.” – Cooke P at 293

  • The Court does this but focusing on two broad fields of inquiry, with the third step of the Caparo inquiry now being the overriding concern.

  1. The degree of proximity or relationship (internal)

  • Foreseeability (of the plaintiff) is a relevant factor but is not determinative

“Proximity reflects a balancing of the plaintiff’s moral claim to compensation for avoidable harm and the defendant’s moral claim to be protected from an undue burden of legal responsibility.” – at 306 per Richardson J

  • The concept of proximity reflects balancing the moral claims of both parties – general sentiment of moral wrongdoing requiring compensation per Lord Aitken in Donoghue v Stevenson.

  1. Other policy considerations which reduce or increase the scope of the duty (external)

  • These include public policy considerations such as the moral claims of different groups if a duty is imposed onto a wide class of persons.

Analysis

Proximity

The Court of Appeal was satisfied that the relationship between the parties was sufficiently proximate to establish a prima facie duty of care:

“The insured was directly within the contemplation of the defendant when the defendant carried out the insurance investigation and reported to the insurer. He must have known that an adverse report would be likely to lead to a denial of the claim by the insurer and that if he carelessly and wrongly attributed the fire to the plaintiffs, the plaintiffs would be likely to suffer harm – at 307

  • There was a direct and close nexus between the defendant’s negligence and the plaintiff’s loss.

“Further, the plaintiff’s moral claim is stronger where they are at arms length with the defendant in the investigation and have no obvious means of protecting themselves against the risk of carelessness on his part and in other aspects of the investigation and reporting… It is not suggested that there is any significant conflict between [the defendant’s] obligations to the insurer under the contractual duty of care and any obligations to the plaintiffs under the common law duty of care. It is not suggested that the cost of being careful… and making his report with due care would have been unfairly onerous.” – at 307

  • Imposition of a duty of care would not expose the defendant to a burden which is disproportionate to their moral culpability.

“the important point is that the relationship between investigator and the subject of investigation is recognised as sufficiently proximate in its likely effects on those investigated to call for legislative oversight.” – at 307

  • The statute under which the defendant’s company operated under reflects a public interest in the competency of investigators.

There were clear parallels with two categories of cases where duty of care had been recognised:

“In those two cases as here, the defendant assumes a responsibility to act carefully in undertaking an activity; in each there is a similar dependence and power relation between the plaintiff and the defendant; in each there is a high degree of likelihood that careless performance of that responsibility will cause harm to the plaintiff.”

  • Gartside v Sheffield (duty owed by a solicitor to a designated beneficiary under a will, solicitor accepted instructions to prepare will for execution but failed to do before testatrix died

  • First City Corporation v Downsview Nominees (duty owed by a receiver appointed by a debenture holder, value of which is adversely affected by receiver’s conduct)

Policy

Despite a prima facie duty of care being established, The Court held there were overwhelming policy reasons for denying a duty of care:

“a plaintiff who has had the opportunity under her or his primary contract to obtain full contractual protection against that kind of loss cannot expect society to provide further protection through tort law” – at 309

  • Superimposing a duty of care in tort on top of an immediate contractual relationship would interfere with the operation of contractual remedies and the sanctity of contract.

  • The building was commercial premises and the insurance contract was negotiated through commercial brokers.

  • If the insured do not have an adequate remedy, they should have paid a higher premium to receive greater protection.

  • Contracts should ordinarily control the allocation of risk when they cover two relationships unless special reasons warrant tortious liability – Simaan General Contracting

“To allow a duty of care in this class of case would cut across related areas of tort law and would deprive the defendants of protections which those laws specifically provide.” – at 309

  • Defamation would be a more appropriate cause action – investigator carelessly and incorrectly reports than the insured was responsible for the fire

  • Redress of harm to reputation is the proper function of defamation, to which various defences represents the balancing of competing values (qualified privilege, honest opinion, truth)

  • A negligence claim would not be subject to these defences which would undermine defamation.

“It is not in the public interest to allow a prospective plaintiff to bypass [the requirements of malicious prosecution] by bringing a claim in negligence.”

  • Mrs Laing was prosecuted for arson due to the investigator passing on information to the police, so they could sue on the basis of malicious prosecution

  • However, malicious prosecution requires proof of malice so there are policy reasons for a cautious approach to be adopted when determining whether a third party is responsible.

“Finally, the imposition of the duty of care contended for could not reasonably be confined to insurance investigators and other related professions and its ambit would be inherently expansive and unacceptable indeterminate.” – at 309

The proposed duty category was held to be uncertainly expansive which would have indeterminate consequences for the public interest.

The status quo in New Zealand

Lecture 40: (01/09/20)

Attorney-General v Carter [2003] 2 NZLR 160

Maritime law – involves the liability of a surveyor (or their employer), where the negligent discharge of a statutory survey resulted in economic loss to a vessel owner or third party.

Rule

The Court of Appeal summarises general principles of common law negligence:

“Whether it is fair, just and reasonable to hold that a duty of care is owed by defendant to plaintiff in a situation not covered by authority is conventionally addressed in terms of proximity and policy.” – at [22]

  • Unless the facts are exactly the same as a previous case, the Court must engage in two broad fields of inquiry – proximity and policy.

“Proximity is concerned with the nature of the relationship between the parties whereas policy is concerned with the wider legal and other issues involved in deciding for or against a duty of care” – [22]

  • Proximity – if the defendant does not take reasonable care, is it foreseeable that the plaintiff will suffer harm?

  • Policy – if there is legislative environment, the terms and purpose of the legislation is a major factor in whether a duty of care should be imposed.

Assumption of responsibility

In negligent misstatement, proximity focuses on the assumption of responsibility, foreseeable reliance, and reasonable reliance:

  • There are difficulties with the notion of assumption of responsibility

  • Assumption suggests a voluntary act, but obligations are imposed in tort cf assumed in contract.

“whether the defendant should in any situation be required to assume responsibility to the plaintiff for negligently causing loss is simply another way of expressing the conventional inquiry whether it is fair, just and reasonable impose a duty of care” – at [24]

  • “Deemed assumption of responsibility” – in certain circumstances, the law requires responsibility to be assumed.

Reliance is also involved in determining whether there is an actual or deemed assumption of responsibility:

  • In rare cases, the defendant’s assumption of responsibility is voluntary – defendant is found to have taken reasonable care, it is both reasonable and foreseeable for plaintiff to rely.

  • In most cases, there is no voluntary assumption of responsibility – the law will deem the defendant and find proximity if the defendant foresees or ought to foresee that the plaintiff will reasonably place reliance of what is said.

“Whether it is reasonable for the plaintiff to place reliance on what the defendant says will depend on the purpose for which the statement is made and the purpose for which the plaintiff relies on it.” – at [26]

  • If a statement is made for particular purpose, it will generally be unreasonable for plaintiff to rely on it for another purpose.

The NZ approach to duty of care arising from negligent misstatements

The Court of Appeal notes two different approaches alleged in relation to duty of care arising from negligent misstatements:

  1. Conventional two broad fields of inquiry approach – proximity and policy

  2. Hedley Bryne approach – emphasises special skill of the individual giving advice

“The outcome of a duty of care issue should not depend on what analytical method is employed. The ultimate inquiry is whether it is fair, just and reasonable to require the defendant to take reasonable care to avoid causing the plaintiff loss or damage of the kind for which compensation is being sought. Each case will have its own particular combination of circumstances against which the necessary judgement must be made.” – [30]

  • The Court rejects this dual formulation – there is a single test which emphasises different features based on the circumstances of the case.

Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324

Facts

The plaintiff Carter Holt have entered into a contract (cogeneration contract) with Electricity Corporation NZ to establish a cogeneration plant:

  • In 1995, ECNZ subcontracted (turnkey contract) with Rolls-Royce to construct the plant – this contract provided that any disputes should be arbitrated.

  • Carter Holt is not a party to the turnkey contract – there is no direct contractual relationship.

  • The plant was not built to specifications and Carter Holt suffered economic loss as a result.

In 1999, ECNZ and Carter Holt enter into a second contract, agreeing that the terms of the first contract (performance and reliability of plant) have not been met.

  • Despite this, Carter Holt initiated an action against ECNZ for a breach of contract (claiming that the plant was defective and did not conform) and Rolls Royce for negligence.

  • In response, Rolls Royce applied for a strike out order on the basis that Carter Holt’s action was unsustainable at law.

Issue

The question for the Court was whether Rolls Royce owed a duty to take reasonable care:

  • This duty would be to ensure that the plant was constructed in accordance with contractual specifications – a contract to which Carter Holt was not a party.

“A duty formulated in such terms is essentially contractual in nature and therefore cannot be owed to one who is not a party of the contract.” – at [66]

  • Before applying the ‘fair just and reasonable’ test, the Court notes that the claim could not succeed as there is no duty in tort to take reasonable care to perform a contract.

Rule

In applying the ‘fair just and reasonable’ test, the Court noted the following factors for proximity:

  • Foreseeability of harm – balancing plaintiff’s moral claim to compensation for avoidable harm and defendant’s moral claim to be protected from undue legal responsibility. Also consider the defendants burden of taking precautions and the whether the risk of consequences is out of proportion to defendant’s moral blameworthiness.

  • The extent that of the plaintiff’s vulnerability – whether a defendant with special skills has power over a vulnerable plaintiff, whether there were other realistic remedies.

  • The nature of loss – Courts less willing to impose a duty of care when there is economic loss compared to physical damage to property or physical injury (non-NZ jurisdictions).

  • Legislative context – policy considerations.

Analysis

When there is negligent misstatement, the proximity analysis focuses on whether someone with special skills assumes responsibility for that statement:

  • So that it is foreseeable and reasonable for the plaintiff to rely on the statement.

  • See Attorney General v Carter

The Court notes the strongest factor towards finding sufficient proximity is that of foreseeability:

  • It was clearly foreseeable that if Rolls Royce did not take reasonable care, it would cause loss to Carter Holt – the type of damage is also foreseeable

  • No concerns about there being indeterminate liability – direct and close relationship between alleged negligence and plaintiff’s loss due to contractual structure.

  • There was also a very high degree of direct contact between Carter Holt and Rolls-Royce

  • Rolls-Royce had special skill in the design and construction of cogeneration plants.

The Court then discuses factors pointing against proximity:

  • Although the contractual structure made Carter Holt’s loss foreseeable, it was unusual.

  • ECNZ was never intended to be directly involved in design and construction – Rolls-Royce was effectively the only contractor, not a subcontractor.

  • Carter Holt could have entered into a contract with Rolls-Royce alongside ECNZ – all parties were sophisticated commercial entities with equal bargaining power.

  • Carter Holt also have an indirect contractual remedy – they can sue ECNZ who can then arbitrate with Rolls-Royce.

  • The contract between Carter Holt and ECNZ and the subcontract with Rolls-Royce do not mirror one another – there was a limitation clause in the contract between Roll-Royce and ECNZ that Carter Holt knew about and understood before entering into contract with ECNZ.

“Carter Holt certainly cannot expect to have the standard of care set by reference to the contract while at the same time denying… that the limitation clauses apply” – [114]

The Court then discusses policy concerns:

“The main policy factor mitigating against a duty of care is the need for commercial certainty.” – [117]

  • Commercial parties are entitled to expect that the risk allocation they have negotiated for (and paid consideration) will not be interfered with by the Courts – freedom of contract.

  • Commercial parties are capable of looking after their own interests in this context.

Result

The Court concluded that it was not fair, just or reasonable to impose a duty of care.

Couch v Attorney-General [2008] 3 NZLR 725

Lecture 41: (03/09/20)

Facts

Ms Couch was seriously injured when a parolee (Bell) robbed the RSA where she worked – 3 others were killed, and the parolee was convicted for their murders and attempt:

  • The offender was on parole after having served 3 of 5 year sentence for aggravated robbery

  • The Attorney General acknowledge that the probation supervision of bell was insufficient – Probation service was under sourced, officer was inexperienced and overworked, management was inadequate and training deficient.

  • As a result, programmes, assessments and counselling the parolee was required to undertake to address alcohol abuse were not available.

Issue

Having received compensation for personal injuries via ACC, Couch claimed exemplary damages against the A-G for grossly deficient supervision of the parolee by the Probation Service:

“to succeed in a claim for exemplary damages based on negligence,.. the departure from the standard of care reasonably to be expected constituted ‘truly exceptional and outrageous conduct.’” – Elias CJ at [11] citing Bottrill v A [2003] 2 NZLR 721 (PC) per Lord Nicholls

  • She argues that if the probation officer had acted with a standard of care reasonably expected of those with statutory obligations to supervise a known violent offender with a high risk of reoffending, she would not have been injured.

  • The claim was brought under negligence for harm caused by breaches of duties of care owed to Couch by the Probation Service.

  • Couch claims that with knowledge of Bell’s background and deficiencies in supervision, the officer should not have permitted Bell’s work placement at the RSA (alcohol and cash), and should have warned the RSA of the risk the parolee posed (which they did not).

  • Strike out application – the Court concluded that it is possible for Couch to establish that Probation Services had sufficient power and ability to control Bell that could have prevented Couch’s injury – a factual inquiry.

Rule

The law is generally cautious when imposing a duty of care for an omission by a public authority, where a third party’s actions are the immediate cause of harm:

“the plaintiff seeks to hold a public authority liable for omissions which have allegedly enabled a third person to harm the plaintiff. It is the voluntary and independent conduct of the third person that has been the immediate cause of loss or damage suffered by the plaintiff.” – at [81] per Tipping J

  • The causative link between defendant’s conduct and plaintiff’s harm is the failure of Probation Services to exercise an available power of control over the immediate wrongdoer

  • Or failure to warn of the risk posed by the parolee.

  • Here, the Probation Service’s ability to control Bell only related to where he was to be employed – no basis for owing a duty to warn anyone not connected to Bell’s employment.

  • The Court held it is possible to establish that the Probation Services had sufficient power and ability to control Bell in a way which would have prevented Couch’s injuries – special relation.

The Majority then examines the relationship between the Department and the plaintiff:

“That relationship must also be special in the sense that there is sufficient proximity between the parties to render it fair, just and reasonable… to impose the duty of care in issue.” – at [85]

  • Harm suffered by the plaintiff must be foreseeable – assess nature of the risk, more specific and obvious the risk is, the more likely a duty of care is owed.

  • Dorset Yacht – there was a special risk, the officers were supposed to supervise the trainees which they did not. It was reasonably foreseeable that if the officers did not supervise the trainees, they would escape and cause mischief in the harbour (boats).

  • Overseas jurisprudence – probation services do not owe general duties to the public, but there may be duties owed to particular classes of individuals if it is reasonably foreseeable that failure to take due care could lead to their harm in a particular way.

  • Modbury – Criminal behaviour is by definition unpredictable which means they are not foreseeable. However, there are circumstances in which criminal conduct may be foreseeable against individuals who are “specially vulnerable” (not the general public).

“To establish a duty of care, Ms Couch must demonstrate that, either as an individual or as a member of an identifiable and sufficiently delineated class, she was or should have been known by the defendants to be the subject of a distinct and special risk of suffering harm of the kind she sustained at the hands of Bell. The necessary risk must be distinct in the sense of being clearly apparent, and special in the sense that the plaintiff’s individual circumstances or her membership of the necessary class rendered her particularly vulnerable to suffering harm of the relevant kind.” – at [112]

Application

The Court held there was material which could be pleaded in a way which would give rise to an arguable case that Couch was under distinct and special risk of being harmed by Bell:

  • Defendants knew Bell had a high risk of reoffending – unusual feature of previous robbery was an attempt to inflict gratuitous and random violence on a person present at the scene

  • Bell was known to be in constant need of money to fuel alcohol addiction and was allowed to work at premises in which large amounts of cash were present

  • Bell was able to find out about security arrangements at the RSA, making the premises a predictable target for future robbery

  • Hence, anyone present in the premises at the time of such a robbery is at greater risk than general public and particularly vulnerable because Bell has a tendency for random violence when committing a robbery.

Elias CJ’s Dissent

Elias CJ delivered a dissenting judgement which comes to the same conclusion as the majority but with different reasoning:

  • Tipping J held that probationary services can only owe a duty if there is control over Bell and a special risk to an identifiable and sufficiently delineated class

  • Elias considers that this analysis to be ‘relationally rigid’

    Instead, a modified Anns approach should be adopted.

  • Statutory concerns about proximity and policy? General reliance approach.

North Shore City Council v Attorney General [2012] NZSC 49

Lecture 42: (08/09/20)

The majority of the Supreme Court discusses the difficulty in formulating a test for duty of care:

In England, the approach appeared to be settled by Lord Wilberforce in Anns:

  1. Consider whether there was a sufficient relationship of proximity, involving the foreseeability of resulting harm

  2. Consider whether there are any features which reduce or limit the scope of duty

  • Court notes the difficulty of a staged formulation – some matters may be assessed at either stage, some need to be assessed at both stages.

  • E.g. If the defendant has a statutory function to the plaintiff, is that internal to their relationship (step 1) or is that external (step 2) – it is both, which is problematic.

  • Glazebrook J in Rolls Royce – the 2 broad field of inquiry only provide a framework.

New Zealand Courts have adopted a modified Anns test:

“The important insight found in Canadian and New Zealand cases is that when a court is considering foreseeability and proximity, it is concerned with everything bearing upon the relationship between the parties and that, when it moves to whether there are policy features pointing against the existence of a duty of care – that is, whether it is fair, just and reasonable to impose a duty – the court is concerned with externalities – the effect on non-parties and on the structure of the law and on society generally.” – Majority at [156]

  • The first stage of the inquiry is concerned with the relationship between the parties

  • The second stage of the inquiry is concerned with externalities

“Where the person who has suffered an injury or loss… it will remain necessary to satisfy the court that the loss was a reasonably foreseeable consequence of the plaintiff’s act or omission.” – at [157]

  • The Court notes that foreseeability in novel cases is at best a screening mechanism to exclude claims which must obviously fail.

“Assuming foreseeability is established in a novel situation, the court must then address the more difficult question of whether the foreseeable loss occurred within a relationship that was sufficiently proximate.” – [158]

  • Concept of proximity is ‘notoriously elusive’ and difficult to satisfy

  • The court considers the closeness of the connection between the parties to identify whether the defendant is most appropriately placed to take care in to avoid harming the plaintiff.

“Richardson J has observed that the concept of proximity enables the balancing of the moral claims of the parties: the plaintiff’s claim for compensation for avoidable harm and the defendant’s claim to be protected from an undue burden of legal responsibility.” – at [159]

  • Imposing liability could be disproportionate to the defendant’s carelessness and harm suffered

  • Imposing liability could expose the defendant to indeterminate liability – better examined at 2nd stage of inquiry?

“At the final stage of the inquiry, the court will find no duty of care exists notwithstanding that the loss was foreseeable and that the relationship sufficiently proximate. It will do so because a factor or factors external to that relationship would make it not fair, just and reasonable to impose the claimed duty of care…” – at [160]

  • Court assesses the wider effects of imposing a duty of care on society and the law generally

  • Considerations include whether parties can insure against the liability, the likely behaviour of other potential defendants if liability is imposed, and the consistency of imposing liability with other areas of law.

Examining the duty of care analysis

Palsgraf v Long Island Railway Co, 248 N.Y. 339 (1928)

Plaintiff was standing on a platform of the defendant’s railroad after buying ticket:

  • Train bound for another place stopped at the station – two men ran forward to catch it while it was moving, one man makes it.

  • Guard helps the other man on train, dislodging the man’s package which falls.

  • The plain package had fireworks in it which explodes, causing a shock wave which knocks over some scales that hits Mrs Palsgraf on the head, causing injuries.

  • Palsgraf sues the Railway for negligence.

The Court held that the guard could not reasonably foresee that...

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