Interference In Business Conduct: Negligence And Misrepresentation

Negligence in Business Conduct

Discuss About The Interference Party To Conducting Business?

In business situation the two types of torts that are primarily applicable are that of negligence and misrepresentation. The tort of Negligence  an action can be brought against the wrongdoer in the situation where there was a duty of care that was owed to the plaintiff and where due to breach of such duty harm was suffered by the plaintiff. The tort of negligence to be established requires that there should be a duty of care, this duty of care should have been breach, there should be damage or loss suffered by the plaintiff and the cause of such damage or loss in the breach (Henderson & James, 2017). The first being that of duty to care there is management to have existed in a given scenario a duty to care. If there is proximity between the parties it would be considered that there existed a duty to care. In order for establishing that there existed a duty of care which has been breached it is at the standard of care that the court will look into first which would be expected to maintain in a given circumstance.

The test of reasonable foreseeability meaning thereby if the breach was reasonably foreseen by a person in the same place and what a reasonable person would have done or not done in the given situation. If the defendant has acted in a manner that is unreasonable it would be considered to have breached his duties. The negligence is required to be a condition of the harm that has been caused under the rule of causation, and the harm is required to fall within the liability and scope of the defendant. The but for test deals with issues relating to remoteness and causation and is essential when determining whether ‘there would not have been loss that was sustained ‘but for’ the negligence of the defendant’. The ‘but for’ was established in the case of  Cork v. Kirby (Cork v. Kirby, [1952]) wherein the court had opined that the employee’s life would have been saved but for the employer’s negligence and hence there was breach of duty for which the employers would be held liable (Gilo and Guttel, 2017).

The tort of Misrepresentation is when there is a false statement that is made by when party to induce the other party to enter into a contract however, such a statement is actually not contained in the contract (Paterson, Robertson and Duke, 2009). For it to be established that there was misrepresentation the requirements which are to be satisfied are that first in the statement of opinion there should be a statement of fact that is involved  (Smith v Land & House Property Corp, [1884]). second being that where there a statement that has been made with respect to future it may involve a statement of fact (Eddington v Fitzmaurice, [1885]), third that it may also be a statement of law  (Public Trustee v Taylor, [1978]). Fourth being that it is not silence but an actual positive statement that has been made, however where there is a duty of disclosure upon the defendant there is an exception (Davies v London & Provincial Marine Insurance Co, [1878]). The fifth being that reliance is required to be placed by the plaintiff on such a representation for accounting of misrepresentation to be successful. 

Misrepresentation in Business Conduct

With respect to negligence for claiming damages it is required for there to exist between the parties duty of care. There would exist between the parties a duty of care if there is proximity between the parties (Sappideen, Vines and Watson, 2009). Whether there is duty of care which exists is a matter of law. In the landmark case of Donoghue, the test for duty of care was established and was termed as the ‘neighbor test’ as a duty of care is owed to the neighbor (Donoghue v Stevenson, [1932]). In law neighbor is “Someone who is so closely affected by my acts 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).

In the case of Caparo Industries case, the Caparo test states that in addition to the damage being foreseeable, the ingredients which are necessary in a given situation to give rise to their being a duty of care are that there should between the party exist a relationship which under law is characterized as ‘proximity’ and the situation should be such that the court considers it to be just, fair and reasonable that a duty should be imposed by law (Caparo Industries plc v Dickman, [1990]).”

The tort of negligent misstatement is one where there is an “inaccurate statement made honestly but carelessly usually in the form of advice given by a party with special skill/knowledge to a party that doesn’t possess this skill or knowledge" (Willesee Bill, Law management 252, Curtin Handbook 2010).

Tepko Pty Ltd. v. Water Board as stated by Gleeson CJ, Gummow and Hayne JJ:34 (Tepko Pty Ltd. v. Water Board, [2001]):  “[I]t cannot be concluded, in my view, that the Water Board either knew or should have known that the appellants intended to act upon that cost estimate for any purpose, let alone a serious purpose.” it is evident thus, in the given case that for their to exist a duty of care it is important that there should exist immediate relationship between the parties.

The owners of the business premises owe towards the customers as well as the general public who are in the premise a duty of care. It was opined in the case of  Strong v Woolworths (Strong v Woolworths, [2012]) that at the Big W entrance there was a claimant who slipped on a chip which was at the entrance. It was stated by the court that there was a duty of care that was owed by the occupier which was required to be compiled by it. It is essential for removing and inspecting any hazards that might be there leading to slipping within a period of every twenty minutes.

Duty of Care in Business Premises

In the case of Fitzsimmons v Coles Supermarkets Australia Pty Ltd the court required the business to comply with the duty of care. It was opined by the court in this case that there was a liability on Coles towards the woman who slipped and injured herself on the wet floor, despite the fact that there were three signs in the area that stated that the floor was wet (Fitzsimmons v Coles Supermarkets Australia Pty Ltd, [2013]). The employees of Cole had not mopped the spillage sufficiently. Though there were warning signs that were placed around the spill and an employee was asked to bring proper apparatus for cleaning, there was no staff available to monitor the area. There however, was no strict measures taken for ensuring that there was no harm caused.

While providing directions or giving advice to the customer it needs to be ensured that such representation made may form a part of the contract especially if the representor knowledge is greater than the knowledge of the representee. As opined in the case of  Dick Bentley Productions v Harold Smith Motors wherein the statement that was made in respect to the car’s condition by the defendant who was a car trader with specialized expertise. It turned out that this statement was not true, the issue raised was whether this statement was a representation or part of the contract. Due to the specialized knowledge of the trader and Mr. Smith had placed reliance on this expertise it was opined that it was actually a part of the contract (Dick Bentley Productions v Harold Smith Motors, [1965]).            

Further in the case of Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2), it was stated by Elliott J (Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2), [2014]),  “In this case there has been a real controversy. The claims made by Telstra have been strenuously opposed. In my view, it is appropriate that declarations be made in circumstances where the court has found that Optus has deliberately engaged in conduct that significantly contravened the Australian Consumer Law for a material period of time. The declarations will clearly identify the contravening conduct, will publicise the type of advertising that constitutes a contravention and provide a warning to business not to engage in misleading or deceptive conduct, or make false or misleading representations. In particular, the declaratory relief will aid in consumers being protected from making ill-informed decisions concerning long-term contracts for mobile phone plans.”

Examples of Business held Responsible for Tortious Acts

If an action is brought for negligence by a party that is aggrieved then only compensation can be made under law for the damages that have taken place. For misrepresentation on the other hand there are two remedies that are available the party can either at the time when the party becomes aware of the misrepresentation choose to rescind the contract or the party can sue the other party for the damages that have been caused due to the misrepresentation (Witting, 2009).

A recent and controversial illustration where a business was made liable for negligent misrepresentation was the James Hardie case (ASIC v Macdonald (No 11), [2009]). There were two subsidiaries that were involved in making asbestos products although in 1987 the production stopped there were various asbestos related injury which developed. The estimated liability of the company increased due to this. In response to this James Hardie Group was restructured so as to minimize the asbestos related harm on the assets. Also a Medical Research and Compensation Fund was set up and statement was made stating that the funds were sufficient to care of the damage caused. There was also an agreement entered into that the parent company James Hardie Industries Ltd  would not be held liable for the suits related to damage caused by asbestos. The government intervened in this case to make it possible for claimants under tort to receive the compensation which was due to them.

When it comes to negligence and misrepresentation that are various statutory regulations that need to be complied with as well. The Sale of Goods Act, The Australian Consumer Law and The Corporations Act ensure that there is no negligent or misleading conduct. The Australian Competition and Consumer Commission is a statutory body which can bring an action in case of breach by the businesses of the statutory provisions. For example in the case of ACCC v Singtel Optus Pty Ltd where an advertisement that was misleading with respect to internet broadband plan a penalty of  $5.26 million was ordered (ACCC v Singtel Optus Pty Ltd (No 4), [2011]).

There certain defences which are available when it comes to negligence, the first being that of ‘voluntary assumption of risk’ whereby a person knowing the risk for action placed himself in such a situation, no damages for injury can be incurred in such a situation. Reeves v Commissioner of Police "The choice made must be free and unconstrained - ie voluntary, deliberate and informed"; the second being that of ‘contributory negligence’ wherein there was a contribution by the plaintiff himself for the damage being caused (Froom v Butcher, [1990]); and finally that of ‘dangerous recreational activities’ wherein the person undertakes a recreational activity with obvious dangers attached there cannot be any compensation sought for the injury caused (Fallas v Mourlas, [2006]).

The defence for misrepresentation is that if the person making the statement can prove that on reasonable he believed that statement was true or it was someone else who had made the statement and there was no reason for him to believe that it was not true.

Though, misrepresentation and negligence are the primary tortious activities that a business maybe liable of. There are other torts as well for which liability may arise such as trespass by interfering wrongfully into someone else’s property in a commercial setup this would occur when there is interference by a party to conducting of a business or fulfilling of a contract or nuisance as opined in the case of Cambridge Water Co Ltd v Eastern Counties Leather plc that for tort of nuisance to exist there is required to be reasonable foreseeability similar to establishing of tort of negligence (Cambridge Water Co Ltd v Eastern Counties Leather plc, [1994]).

References

ACCC v Singtel Optus Pty Ltd (No 4) [2011]FCA 761.

ASIC v Macdonald (No 11) [2009]NSWSC 287.

Bonnington Castings v Wardlaw [1956]AC 613.

Cambridge Water Co Ltd v Eastern Counties Leather plc [1994]1 business-law.

Caparo Industries plc v Dickman [1990]UKHL 2.

Cork v. Kirby, [1952]2 All ER 402.

Davies v London & Provincial Marine Insurance Co [1878]8 Ch D 469.

Dick Bentley Productions v Harold Smith Motors [1965]EWCA Civ 2.

Donoghue v Stevenson [1932]UKHL 100.

Eddington v Fitzmaurice [1885]29 Ch D 459.

Fallas v Mourlas [2006]NSWCA 32.

Fitzsimmons v Coles Super markets Australia Pty Ltd, [2013]NSWCA 273.

Froom v Butcher [1990]1 QB 286.

Gilo, D. and Guttel,, E. (2017). Negligence and Insufficient Activity: The Missing Paradigm in Torts. Michigan Law Review, 108(3).

Henderson, J. and James, A. (2017). Learned Hand's Paradox: An Essay on Custom in Negligence Law. California Law Review, 105(1), p.168.

Paterson, J., Robertson, A. and Duke, A. (2009). Contract: Cases and Materials. 11th ed. Lawbook Co,.

Public Trustee v Taylor [1978]VR 289.

Sappideen, C., Vines, P. and Watson, P. (2009). Torts: Commentary and Materials. 10th ed. Lawbook Co.

Smith v Land & House Property Corp [1884]28 Ch D 7.

Strong v Woolworths [2012]HCA 5.

Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2) [2014]VSC 35.

Tepko Pty Ltd. v. Water Board [2001]HCA 19.

Witting, C. (2009). Liability for Corporate Wrongs. 6 Company and Securities Law Journa.