Negligence And Pure Economic Loss: Brookfield Multiplex Ltd V Owners Corporation Strata Plan 61288 Essay.

What is Negligence?

Question:

What this Case Teaches About the Issues Considered?

In the case of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 (8 October 2014), a claim of negligence owing to pure economic loss was pursued by Owners Corporation against Brookfield Multiplex Ltd. Through this case, a much awaited decision of the High Court relating to whether or not a duty of care was owed to the subsequent owner by the builder (High Court of Australia, 2014). This case teaches not only about negligence, negligent pure economic loss, but also about the liability or no liability of the builders towards subsequent owners or to the developer of the building (Ellison, 2014).

Negligence is the failure in the discharging the duty of care which an individual owed to another and which results in a loss of injury to the other person (Harvey and Marston, 2009). In order to establish negligence, there has to be presence of certain elements, and these include the duty of care, the breach of this duty, resulting harm or loss, causation, foreseeability and the injury not being remote (Kennedy, 2009). The snail in the bottle or Donoghue v Stevenson [1932] UKHL 100 is the prime case for negligence. In this case, the beer bottle manufacturer was held to owe a duty of care towards the consumer of the bottle, who fell ill due to the dead snail found inside the bottle (British and Irish Legal Information Institute, 2017). Baltic Shipping v Dillon High Court of Australia (1993) 176 CLR 344 presents the example of negligence, which enables the recovery of damages for even mental distress which resulted as the ship sank (Holmes, 2017).

The professional are required to apply professional skill, judgment, and care in the work they undertake. They also have to adhere to the restriction and controls which have been put upon them, as a result of being member of certain organization. Hence, through such professional undertaking, the duty of care is assigned upon the professionals (Holland, 2011).

Negligence pure economic loss is a principle which denotes the economic loss suffered by the individuals, as a result of negligence of some other individual. Though, this loss is not at all related to a physical injury (Palmer and Bussani, 2009). Hence, the loss covered under this principle has to be purely economic in nature. When it comes to negligence pure economic loss, the rule applicable on it is a no-recovery rule. So, this rule dictates that under negligence owing to pure economic loss, the aggrieved party cannot apply for recovery of damages and even if they apply, they would not be successful for the same (Ward, 2010).

This rule was established in the case of Rylands v Fletcher [1868] UKHL 1. In the quoted case, the water from the reservoir of the defendant spread over the working mine of the plaintiff which resulted in heavy damages to the working mine. The judges gave the verdict stating that the defendant could only be held liable for the wrong use of land and not for the recovery of pure economic loss (Rush and Ottley, 2006). This verdict was further supported in the case of Weller v Foot and Mouth Disease Research Institute [1966] 1 QB 569, where the cattle of the plaintiff was infected due to the virus which escaped the premises of the defendant. This rendered the cattle unsellable and the plaintiff sued for loss. But the no recovery rule was applied in this case too (Steele, 2014).

Examples of Negligence

However, since these cases, the no recovery rule has often been discarded and one of such cases is the case of Caltex Oil v The Dredge "Willemstadt" (1976) 136 CLR 529. In this case, the pipeline was damaged while the defendant was dredging. The plaintiff was a user of this pipeline and due to its damage he could not transfer the oil, which was done through the pipeline which was damaged in this case. As a result, he sued for economic loss. However, the judges held that as the defendant was aware about the foreseeability of the loss, he would be liable for the recovery of damages (Sappideen et al. 2009).

Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 also presents the base of circumstances in which builders may or may not responsible to the subsequent owners or to the developers of the building. In proving this point, the court referred to the case of Woolcock Street Investments v CDG Pty Ltd [2004] HCA 16, which acted as a landmark decision of the High Court (Richards, 2014). The decision given in this case relinquished the liability for any defects in the designing or construction of a builder or architect of a commercial building, to a subsequent purchaser. Hence, in case the architects or builders were faced with a legal action by a subsequent buyer, this case proves to be helpful in denying any liability (The Federation Press, 2017).

The court also referred to the case of Bryan v Maloney (1995) 182 CLR 609; [1995] HCA 17. In this case also, the third subsequent owner of the house sued the builder for negligence in exercising the reasonable care needed for discharging his duty of care, as a failed in avoiding the damages which were foreseeable. The court held that it could not be established if the damages were due to normal wear and tear or because of defects in initial construction. However, in this case the duty of care was clearly established due to the proximity between the loss and the negligence of the builder. This was coupled with the foreseeability of economic loss due to inadequately built footings. And so, the builder was held liable for the negligent pure economic loss (Aitken Whyte Lawyers, 2017).

While giving the judgment in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288, the High Court Justices quoted these two cases for deciding the liability of the defendant based on the vulnerability of the subsequent purchaser, coupled with the reliance placed upon the builder’s actions. The court weighed the salient features of the relationship amongst the involved parties, to drawn upon the vulnerability of the subsequent purchaser. For this, the first thing which had to be established was related to the duty of care, if owed by the builder. If the duty of care is established, the second step relates to establishing the duty of care towards a subsequent purchaser (Wearne, 2014).

This case presented how and when the cases have to be applied to establish a point. So, the case of Bryan v Maloney is used in cases where the parties are unsophisticated and the contractual arrangements are not used in order to modify the risk allocation under the common law. And the case of Woolcock Street Investments v CDG Pty Ltd is used in such cases where the parties are sophisticated and reliance is made on commercial savvy modes, in form of contractual arrangements in order to allocate the risk (Wearne, 2014).

The case of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 presented that the contractual arrangements between the parties had allocated the risk in a manner through which Owners Corporation was denied the clause of being vulnerable or reliant on the actions of Brookfield Multiplex Ltd. This decision of the High Court presented more clarity to the parties regarding the circumstances which lead to a differentiation between the ratio in Woolcock and the case of Bryan v Maloney. It clarifies the situations in which the court does not impose higher financial liability in comparison to the on which is already present in the contract. This case made it clear the point where there is a need for drawing the line for expanding the liability of the parties when it comes to a drawn commercial agreement between the parties.

References

Aitken Whyte Lawyers. (2017) Builder Liable for Negligence to Subsequent Owners of Home for Pure Economic Loss. [Online] Aitken Whyte Lawyers. Available from: https://www.awbrisbanelawyers.com.au/builder-liable-for-negligence-to-subsequent-owners-of-home-for-pure-economic-loss-solicitors-brisbane.html [Accessed on: 10/04/17]

British and Irish Legal Information Institute. (2017) Donoghue v Stevenson [1932] UKHL 100 (26 May 1932). [Online] British and Irish Legal Information Institute. Available from: https://www.bailii.org/uk/cases/UKHL/1932/100.html [Accessed on: 10/04/17]

Ellison, M. (2014) Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36. [Online] Lexology. Available from: https://www.lexology.com/library/detail.aspx?g=01a6cfc5-8a3b-4178-baeb-35c272d18cf6 [Accessed on: 10/04/17]

Harvey, B., and Marston, J. (2009) Cases and Commentary on Tort. 6^th ed. New York: Oxford University Press, p 251-255.

High Court of Australia. (2014) Brookfield Multiplex Ltd V Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36. [Online] High Court of Australia. Available from: https://www.hcourt.gov.au/assets/publications/judgment-summaries/2014/hca-36-2014-10-08.pdf [Accessed on: 10/04/17]

Holland, J.K. (2011) Standard of Care for Design Professionals. [Online] Construction Risk Counsel PLLC. Available from: https://www.constructionrisk.com/2015/09/standard-of-care-for-design-professionals/ [Accessed on: 10/04/17]

Holmes, R. (2017) Mental Distress Damages For Breach Of Contract. [Online] Victoria University of Wellington. Available from: https://www.victoria.ac.nz/law/research/publications/vuwlr/prev-issues/pdf/vol-35-2004/issue-3/holmes.pdf [Accessed on: 10/04/17]

Kennedy, R. (2009) Duty of Care in the Human Services: Mishaps, Misdeeds ad the Law. Victoria: Cambridge University Press, pp 104-107.

Palmer, V.V., and Bussani, M. (2009) Pure Economic Loss: New Horizons in Comparative Law. Oxon: Routledge-Cavendish.

Richards, G. (2014) Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288. [Online] Mills Okley. Available from: https://www.millsoakley.com.au/brookfield-multiplex-ltd-v-owners-corporation-strata-plan-61288/ [Accessed on: 10/04/17]

Rush, J., and Ottley, M. (2006) Business Law. London: Thomson Learning. 

Sappideen, C., at al. (2009) Torts, Commentary and Materials. 10^th ed. Pyrmont: Lawbook Co, pp. 309-311.

Steele, J. (2014) Tort Law: Text, Cases, and Materials. 3^rd ed. Oxford: Oxford University Press.

The Federation Press. (2017). Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 (High Court of Australia). [Online] The Federation Press. Available from: https://www.federationpress.com.au/pdf/Woolcock%20Street%20Investments%20Pty%20Ltd%20v%20CDG%20Pty%20Ltd.pdf [Accessed on: 10/04/17]

Ward, P. (2010) Tort Law in Ireland. The Netherlands: Kluwer Law International.

Wearne, N. (2014) Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36. [Online] Norton Rose Fulbright. Available from: https://www.nortonrosefulbright.com/knowledge/publications/124045/brookfield-multiplex-ltd-v-owners-corporation-strata-plan-61288-hca-36- [Accessed on: 10/04/17]