How Does Douglas Pty Ltd. Have A Duty Of Care To Frank And Belinda?
ISSUES Parties: Frank and Belinda; Marie; Douglas Pty Ltd; Black; Brown & Co
Issue 1: Does any of those parties mentioned above have a duty of care to Frank and Belinda? If so, are they liable for a negligent misstatement for the loss of Frank and Belinda?
Sub Issue 1.1: Does Marie have a duty of care to Frank and Belinda?
Sub Issue 1.2: Does Douglas Pty Ltd have a duty of care to Frank and Belinda?
Sub Issue 1.3: Does Black have a duty of care to Frank and Belinda?
Sub Issue 1.4: Does Brown & Co have a duty of care to Frank and Belinda?
Issue 2: Is there any possible action by Frank and Belinda against those parties? If so, can Frank and Belinda recover any part or all of their loss from any one of them?
Sub Issue 2.1: Can Frank and Belinda have an action against Marie? If so, how much can they recover their loss from her?
Sub Issue 2.2: Can Frank and Belinda have an action against Douglas Pty Ltd? If so, how much can they recover from them?
Sub Issue 2.3: Are there an action by Frank and Belinda against Black? If so, how much can they recover from him?
Sub Issue 2.4: Are there an action by Frank and Belinda against Brown & Co? If so, how much can they recover from them?
RULES
Areas of Law: Negligence; Agency
Rules: …show more content…
1.
First, if Frank and Belinda want to get remedies from those parties mentioned above, they must establish the tort of negligence. The elements of negligence are: a duty of care, a breach of duty of care, and damage suffered by the plaintiff. Regarding duty of care, the common law rules still apply when trying to determining whether there is a duty of care or not. As for breach of the duty of care, the fault element and the civil liability legislation must be considered. As for damage, the plaintiff has to establish on the balance of probabilities any fact relevant to the issues of factual causation and
remoteness.
2. The whole matter of pure economic loss cause through careless misstatements was reconsidered by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. Prior to this case, the law was that actions to recover pure economic loss could be brought only for breach of contract, or fiduciary relation or fraud, but not in tort on the basis of a negligent misstatement, wether spoken or written, could give rise to an action for financial loss, apart from any contract that existed between the parties if the existence of a ‘special relationship’ could be established. However, it was equally clear that an action wouldn’t lie unless it could be established that the maker of the statement owed a duty of care to the recipient.
3. However, in the view of the High Court, a duty of care extended not only to professional advisers but also to persons who give advice in serious circumstances. In L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225, the high court held that a duty of care covered the giving of both information and advice in circumstances where it was reasonable to expect that the recipient might act on such advice. It is obvious that Frank and Belinda had relied on Black, an accountant’s advice before signing the contract.
4. As signers of the purchase contract, Frank and Belinda are also responsible for their losses.
5. For a plaintiff to recover damages for a careless negligence, the plaintiff must establish: A duty of care, a breach of duty, and that there is a connection between the defendant’s omission and the damage they have suffered. Many states have established statutory standard of care for professionals (Vic: Wrongs Act 1958, ss 57-58; NSW: Civil Liability Act 2002, s 5O: Queensland: Civil Liability Act 2003, ss 20, 22; Tas: Civil Liability Act 2002, s22).
6. An agent has both actual authority and implied actual authority, as in Australia and New Zealand Bank Ltd v Ateliers de Constructions Electriques de Chaleroi [1967] 1 AC 86, an agent has authority to do anything that is incidental to or necessary for the carrying out of acts within their actual authority. Marie had been acting as an agent of Douglas Pty Ltd, while Black, although employed by Brown & Co, was giving independent advice.
ANALYSIS
Issue 1 & Sub Issues 1.1 and 1.2: Marie was employed by Douglas Pty Ltd and she advised Frank and Belinda on the authority given by her employer. Therefore, she has no duty of care to Frank and Belinda, while Douglas Pty Ltd, as a professional company has a duty of care to them.
Sub Issue 1.3 and 1.4: although Black was employed by Brown & Co, it can be reasonably assumed that he wasn’t given actual authority to give advice to someone out of his accounting firm, nor was there any implied authority for Black to let him give advice on his employer’s behalf. By the way, it was reasonable to expect that Frank and Belinda would act on Black, a professional accountant’s advice to sign the purchase contract. Therefore Black has a duty of care to Frank and Belinda, but Brown & Co does not.
Issue 2 & Sub Issue 2.1 and 2.2: Frank and Belinda cannot sue Marie, but they can make an action against Douglas Pty Ltd. If they can prove that Marie has provided negligent misstatement about the motel business, such as phone call records, they can ask Douglas Pty Ltd to pay part of their losses. They also need to prove that Douglas Pty Ltd has breached their duty of care to them.
Sub Issue 2.3 and 2.4: When everything was ready Frank said that they could not sign the contract unless Black gave them advice to sign it. Black, a professional accountant indicated them to do so. Therefore, Brown & Co is not liable for Frank and Belinda’s damage, but Black is, because Black has breached his duty of care to Frank and Belinda.
CONCLUSION
Under the tort of negligence, both Douglas Pty Ltd and Black are liable for Frank and Belinda’s losses. Frank and Belinda can sue them and if they can prove that Douglas and Black had given negligent misstatement about profitability of the motel business. For instance, Frank and Belinda need to provide evidence that Black had given unachievable occupancy rate of the motel.
However, Frank and Belinda cannot recover all of their losses, because the decision of buying the business was made by themselves and they were not entirely relying upon Black’s advice. For example, Frank and Belinda didn’t enquire Black wether the occupancy rates given by him was practical or not. Overall, the chance of successfully getting remedies from Black is the largest, while there is also a reasonable chance to win the case against Douglas Pty Ltd. Frank and Belinda can expect to recover $ 15000 from Douglas Pty Ltd, $ 25000 from Black, but the remaining part of their loss, approximately $ 35000 are their own liabilities.
By the way, it would be very difficult for Frank and Belinda to receive any remedy from Marie and Brown & Co even if they chose to sue them. The reason is that Marie was acting her duty as an employee of Douglas Pty Ltd, while Brown & Co did not have any duty of care to Frank and Belinda.
REFERENCES
Articles/Books Reports
Gibson, A & Fraser D. 2012. Business Law 7th Ed. Pearson: Frenchs Forest
Cases
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Australia and New Zealand Bank Ltd v Ateliers de Constructions Electriques de Chaleroi [1967] 1 AC 86
Legislation
Wrongs Act 1958 (Vic)
Civil Liability Act 2002 (Nsw)
Civil Liability Act 2003 (Queensland)
Civil Liability Act 2002 (Tas)
Issue 1: Does any of those parties mentioned above have a duty of care to Frank and Belinda? If so, are they liable for a negligent misstatement for the loss of Frank and Belinda?
Sub Issue 1.1: Does Marie have a duty of care to Frank and Belinda?
Sub Issue 1.2: Does Douglas Pty Ltd have a duty of care to Frank and Belinda?
Sub Issue 1.3: Does Black have a duty of care to Frank and Belinda?
Sub Issue 1.4: Does Brown & Co have a duty of care to Frank and Belinda?
Issue 2: Is there any possible action by Frank and Belinda against those parties? If so, can Frank and Belinda recover any part or all of their loss from any one of them?
Sub Issue 2.1: Can Frank and Belinda have an action against Marie? If so, how much can they recover their loss from her?
Sub Issue 2.2: Can Frank and Belinda have an action against Douglas Pty Ltd? If so, how much can they recover from them?
Sub Issue 2.3: Are there an action by Frank and Belinda against Black? If so, how much can they recover from him?
Sub Issue 2.4: Are there an action by Frank and Belinda against Brown & Co? If so, how much can they recover from them?
RULES
Areas of Law: Negligence; Agency
Rules: …show more content…
1.
First, if Frank and Belinda want to get remedies from those parties mentioned above, they must establish the tort of negligence. The elements of negligence are: a duty of care, a breach of duty of care, and damage suffered by the plaintiff. Regarding duty of care, the common law rules still apply when trying to determining whether there is a duty of care or not. As for breach of the duty of care, the fault element and the civil liability legislation must be considered. As for damage, the plaintiff has to establish on the balance of probabilities any fact relevant to the issues of factual causation and
remoteness.
2. The whole matter of pure economic loss cause through careless misstatements was reconsidered by the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. Prior to this case, the law was that actions to recover pure economic loss could be brought only for breach of contract, or fiduciary relation or fraud, but not in tort on the basis of a negligent misstatement, wether spoken or written, could give rise to an action for financial loss, apart from any contract that existed between the parties if the existence of a ‘special relationship’ could be established. However, it was equally clear that an action wouldn’t lie unless it could be established that the maker of the statement owed a duty of care to the recipient.
3. However, in the view of the High Court, a duty of care extended not only to professional advisers but also to persons who give advice in serious circumstances. In L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225, the high court held that a duty of care covered the giving of both information and advice in circumstances where it was reasonable to expect that the recipient might act on such advice. It is obvious that Frank and Belinda had relied on Black, an accountant’s advice before signing the contract.
4. As signers of the purchase contract, Frank and Belinda are also responsible for their losses.
5. For a plaintiff to recover damages for a careless negligence, the plaintiff must establish: A duty of care, a breach of duty, and that there is a connection between the defendant’s omission and the damage they have suffered. Many states have established statutory standard of care for professionals (Vic: Wrongs Act 1958, ss 57-58; NSW: Civil Liability Act 2002, s 5O: Queensland: Civil Liability Act 2003, ss 20, 22; Tas: Civil Liability Act 2002, s22).
6. An agent has both actual authority and implied actual authority, as in Australia and New Zealand Bank Ltd v Ateliers de Constructions Electriques de Chaleroi [1967] 1 AC 86, an agent has authority to do anything that is incidental to or necessary for the carrying out of acts within their actual authority. Marie had been acting as an agent of Douglas Pty Ltd, while Black, although employed by Brown & Co, was giving independent advice.
ANALYSIS
Issue 1 & Sub Issues 1.1 and 1.2: Marie was employed by Douglas Pty Ltd and she advised Frank and Belinda on the authority given by her employer. Therefore, she has no duty of care to Frank and Belinda, while Douglas Pty Ltd, as a professional company has a duty of care to them.
Sub Issue 1.3 and 1.4: although Black was employed by Brown & Co, it can be reasonably assumed that he wasn’t given actual authority to give advice to someone out of his accounting firm, nor was there any implied authority for Black to let him give advice on his employer’s behalf. By the way, it was reasonable to expect that Frank and Belinda would act on Black, a professional accountant’s advice to sign the purchase contract. Therefore Black has a duty of care to Frank and Belinda, but Brown & Co does not.
Issue 2 & Sub Issue 2.1 and 2.2: Frank and Belinda cannot sue Marie, but they can make an action against Douglas Pty Ltd. If they can prove that Marie has provided negligent misstatement about the motel business, such as phone call records, they can ask Douglas Pty Ltd to pay part of their losses. They also need to prove that Douglas Pty Ltd has breached their duty of care to them.
Sub Issue 2.3 and 2.4: When everything was ready Frank said that they could not sign the contract unless Black gave them advice to sign it. Black, a professional accountant indicated them to do so. Therefore, Brown & Co is not liable for Frank and Belinda’s damage, but Black is, because Black has breached his duty of care to Frank and Belinda.
CONCLUSION
Under the tort of negligence, both Douglas Pty Ltd and Black are liable for Frank and Belinda’s losses. Frank and Belinda can sue them and if they can prove that Douglas and Black had given negligent misstatement about profitability of the motel business. For instance, Frank and Belinda need to provide evidence that Black had given unachievable occupancy rate of the motel.
However, Frank and Belinda cannot recover all of their losses, because the decision of buying the business was made by themselves and they were not entirely relying upon Black’s advice. For example, Frank and Belinda didn’t enquire Black wether the occupancy rates given by him was practical or not. Overall, the chance of successfully getting remedies from Black is the largest, while there is also a reasonable chance to win the case against Douglas Pty Ltd. Frank and Belinda can expect to recover $ 15000 from Douglas Pty Ltd, $ 25000 from Black, but the remaining part of their loss, approximately $ 35000 are their own liabilities.
By the way, it would be very difficult for Frank and Belinda to receive any remedy from Marie and Brown & Co even if they chose to sue them. The reason is that Marie was acting her duty as an employee of Douglas Pty Ltd, while Brown & Co did not have any duty of care to Frank and Belinda.
REFERENCES
Articles/Books Reports
Gibson, A & Fraser D. 2012. Business Law 7th Ed. Pearson: Frenchs Forest
Cases
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Australia and New Zealand Bank Ltd v Ateliers de Constructions Electriques de Chaleroi [1967] 1 AC 86
Legislation
Wrongs Act 1958 (Vic)
Civil Liability Act 2002 (Nsw)
Civil Liability Act 2003 (Queensland)
Civil Liability Act 2002 (Tas)