The current case study is based on the general concept of negligence. The essential elements of negligence have been established in the historical case of Donoghue v Stevenson . Further, the general principle of duty of care has been engraved in the case. According to this case, every person owes certain duty of care against other and no person will be allowed to cause harm to others. In case any person held liable for the same, negligent tort case can be applied on them. In Home Office v Dorset Yacht Co Ltd  UKHL 2, it has been established that the government bodies have certain duty of care that should be addressed properly. The doctrine of neighborhood has been established in this case. Further, an incrementalist notion has been taken in this case and it has been decided that in case of a negligent work, it should be decided whether the recognized principles would apply on the same or not. However, according to this case, the exclusion clause of negligence will not be applied on the matter relating to the causing economic loss. Further, it has been observed in case of Anns v Merton London Borough Council  UKHL 4 that the governmental bodies could be held liable if they have failed to meet the standard duty of care. According to this case, the relation in between the wrongdoer and victim should be reasonable and carelessness should be proved to that effect. In Caparo Industries PLC v Dickman  UKHL 2, the court has decided three-fold test for the negligent acts. According to the court, it should be determined whether the harm caused is foreseeable or not, whether the relation in between the parties is proximate or not and whether imposing liabilities is fair and reasonable or not.
Considering the case of Donoghue, the elements of negligence could be divided as duty of care, breach to that duty, causation and remoteness. According to general principle of law, every person should act like prudent person. They should not act in a way that goes against the moral principle and the other person should not suffer losses regarding it. Further, in Cork v Kirby Maclean Ltd  2 All ER 402, it has been observed that the injury should be caused directly by the act of defendant, but in case of negligence, the victim should have to suffer certain losses. The principle of “but for test” has been established in this case. Additionally, the damage caused should be foreseeable in nature and this principle has been observed in the Lamb v Camden LBC  EWCA Civ 7.
According to Home Office v Dorset Yacht Co Ltd, the exclusion clauses of negligence could not be implemented in case of negligence regarding economic loss. The term economic loss observe when a person has sustained financial losses due to the wrongful acts of other person. In this case, physical damage is not necessary. Damage made in the personal property has been included under the heading of economic loss. In case, a person suffered from loss in profitability could be treated as economic loss. The principle of economic loss has been established in Hedley Byrne & Co Ltd v Heller & Partners Ltd AC 465. According to this case, if the relation in between the plaintiff and defendant is proximate in nature and a breach regarding duty of care has been done, the victim can claim for pure economic loss from the wrongdoer. Further, the court has interpreted the consequence of misstatement made by a person as against his duty of care in the case of Smith v Eric S Bush  UKHL 1. According to this case, if a person has relied on the statement of the defendant and incurred losses due to that, he can claim for economic losses from that person. The principle of Hedley Byrne’s case has been extended in this case. Three elements of economic loss have been come out from this case such as vulnerability, control and assumption of reliance. Vulnerability means the loopholes made by the plaintiff in taking reasonable steps as against the negligent acts of the defendant.
In this case, it has been observed that Peter has developed a land that come under the location of Wollongong Council. He purchased a land in that area and the cost of the land was $2 million. He has made a search and it has been observed that the area of land was quite profitable. He has obtained one certificate from the council where it has not been mentioned that the land was coming under the road widening proposal plan. However, Peter had overlook the matter and failed to take any reasonable steps that time. This act has proved the vulnerable mentality of Peter. On the other hand, the council has a duty to let Peter inform about the matter and they had failed to do it. In the light of Hedley’s case, it can be stated that the council had failed to meet all the requirements regarding the duty of care. However, it has been observed that Peter was completely relied on the certificate provided by the council and when the council has refused his projected land, he had sustained financial losses due to it. Therefore, according to the principle established in Smith’s case, it can be stated that the council is responsible to provide compensation to Peter, as he believed on the certificate. It has also been observed that the rate of land has been decreased and Peter has to face loss up to $1 million.
It can therefore be stated that the council has failed to meet their duty of care and Peter can sue the council regarding all the economic losses sustained by him.
Anns v Merton London Borough Council  UKHL 4
Caparo Industries PLC v Dickman  UKHL 2
Cork v Kirby Maclean Ltd  2 All ER 402
Donoghue v Stevenson  AC 562
Hedley Byrne & Co Ltd v Heller & Partners Ltd AC 465
Home Office v Dorset Yacht Co Ltd  UKHL 2
Lamb v Camden LBC  EWCA Civ 7
Smith v Eric S Bush  UKHL