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Law5004- Business And Corporations Law Case Study

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  • Course Code: LAW504
  • University: Charles Sturt University
  • Country: Australia

Question:

Sam Speed runs a business which provides a re-fuelling service for aircraft at the regional airport at Albury in New South Wales. Sam stores his fuel at a depot he owns in an underground tank. One day, Sam receives a tanker load of 10 000 litres of fuel from his supplier. The fuel is pumped into Sam’s underground tank, and Sam puts a dip-stick into the tank to check that the correct amount has been delivered. Unfortunately, Sam is distracted by a phone call, and forgets to screw the lid back onto the tank, with the result that dust enters the fuel during the night, contaminating it.

The next day, still unaware of what has happened, Sam refuels three light aircraft with the fuel. Each aircraft is owned by a different company, White Ltd, Blue Ltd and Green Ltd.

The aircraft owned by White Ltd takes off successfully, but about 2 km from the end of the runway the engine cuts out because of the fuel contamination and the aircraft, which is worth $ 1 million, crashes onto a road and is totally destroyed, although the pilot miraculously survives without any injury. 

The aircraft owned by White Ltd also destroys a Mercedes Benz car worth $ 75 000 owned by Ms Susan Swift, who usually never parks her car on that street but did so that day because the parking lot she uses was full.

Sam hears on the radio what happened to the aircraft owned by White Ltd, and that the pilot reported a problem with the fuel system to air traffic control moments before the crash. Fearing that the accident might have been due to contaminated fuel, Sam runs across to the aircraft owned by Blue Ltd, waving his arms to attract the attention of the pilot, who is just about to start his engine. Sam tells the pilot that there seems to be something wrong with the fuel and that it could damage the engine, and the pilot decides not to take off for Sydney.  There are no other aircraft able to fly to Sydney, and because the aircraft owned by Blue Ltd does not take off, one of the passengers, Ms Mary Harper, who is a maritime engineer, is unable to get to Sydney to certify that a cargo ship owned by Safmarine Ltd is seaworthy, with the result that Safmarine Ltd loses $ 250 000 in profit because its vessel cannot put to sea that day. 

After alerting the pilot of the Blue Ltd plane, Sam also runs to the aircraft owned by Green Ltd and gives him the same information about the fuel, but the pilot says “Look, mate, I understand what you are saying, but I don’t have time for this. I’m going to take off anyway.  I have to get to Melbourne by 10 am”, and with that the pilot closes his window and taxis towards the runway. As the pilot starts his take-off run, the aircraft’s engine cuts out, it swerves across the runway and suffers $ 200 000 worth of damage.

Accident reports confirm that the aircraft owned by White Ltd and Green Ltd crashed because their engines were damaged by the contaminated fuel. 

Advise Sam on what liabilities he may have to all potential plaintiffs who have suffered loss under the above fact.
 
 

Answer:

Issues

In the given scenario, due to the negligence of Sam, three aircraft suffered from losses. All these three crafts faced different situations and losses. Now the issue is to check whether Sam is liable towards all the three defendants or not? Moreover, if yes then what kind of liability?

Rules

Tort is a very significant type of common Law. Under Tort law, a person owns a duty of care towards another person (e-law resources, 2018). It means if a person does not own a duty of care, then in such cases, Tort Law cannot be applicable. Whenever a person breached his/her downed duty of care then the can be held liable to pay damages to the parties suffered. Further, there are many ways in that a person can breach his/her duty of care. The lead ways are negligence, Nuisance, and Defamation. All the mentioned three terms are situations, in which a person will be held liable to breach the duty of care. Negligence is a situation where a person who owns a duty of care, behave negligently and carelessly while performing such duty and due to that, other person suffers from a loss (Laws, 2018). In Conjunction with, this is also necessary to state that damages can be in form of personal injury, financial loss or psychiatric injury under Tort Law. Based on the kind and quantity of loss, the court decides damages in cases under this law.

As per the decision was given in the case of Re Polemis & Furness Withy & Company Ltd. (1921) 3 KB 560, it was held that damages must be related to the act of defendant, i.e. loss accrued to the party must have a direct relation to the act of the defendant. This case gives a mechanism named “remoteness of damages.” In addition to this case, decision provided in the case The Wagon Mound no 1 (1961) AC 388 is also an important one. According to the decision of this case, regardless of the other factor, if damages in a case are foreseeable then the defendant will be held liable for the damages up to the full extent.

Defenses are also a significant element of Tort Law. Defenses are the excuses that a defendant can make to reduce the level of damages. Following are the major defenses that are available with a defendant under this Law

  1. Volenti non fit injuria:- A defendant can take this defence in that situation where the plaintiff himself/herself accept the risk in a transaction (Turner, 2013, p. 106). Whenever the plaintiff accepts the risk voluntarily, then the defendant will not be liable to pay off any damages to such plaintiff. This defense is also known as “Voluntary assumption of risk”.
  1. Contributory Negligence:- It was held in the case of Davies v Swan Motor co(1949) 2 KB 291 that when along with defendant, the claimant also fails to take reasonable steps for his/her security, the defendant can ask for this kind of damages (Findlaw, 2018). In such a situation, although the defendant will be liable to pay the damages but amount of damages will be reduced up to a level.

Exclusion of liability and ex turpi causa non oritur action are also other defense that a defendant can use under Tort Law (Dam, 2013, p. 255). 

 

Application

In the given case, three situations are given. Although on all the three-situation rules related to, negligence will be applicable. In the given case, Sam being a responsible person for re-fuelling of aircraft owned a duty of care towards the aircraft owner companies. One day due to the negligence of Sam, aircraft of there companies have refueled with a dusty fuel. Therefore, in the studied case, Sam owned a standard of care in respect of all three aircraft owned by various companies such as White Ltd, Blue Ltd., and green Ltd.

In case of aircraft owned by White Ltd., the engine cuts off and due to such cut off company has suffered from a loss of worth $ 1 million. The lead reason of such cut off was impure fuel. Further, the aircraft also met an accident with Mercedes Benz car and cause of this accident, the car worth $ 75 000 was destroyed. In this situation, Sam owned a duty of care towards the White Ltd but not the car owner. Further, applying Re Polemis & Furness Withy & Company Ltd car loss was not a direct consequence of fuel contamination.

In the second situation, when Sam comes to know about the fact that the fuel he has refilled in aircraft is not pure, then he took reasonable steps to prevent the accident and stop the aircraft owned by Blue Ltd, by taking off to Sydney. Due to his pre-caution, the accident has prevented, however, one of the passengers of the flight has suffered from a loss worth $ 25000 as she could not complete his business transaction cause of cancellation of the flight. In this situation, no duty of care was there between Sam and the passenger as Sam owned this duty towards Aircraft Company not it is passengers.

In the third situation, Sam has tried hard to stop the aircraft and to prevent the future possible accident. Sam has informed the pilot of the aircraft owned by Green Ltd. about the quality of fuel and gives the same a warning, but the pilot did not listen to Sam and take off the aircraft. Here, the defence of Voluntary non fit injuria will be applicable. Although the duty of care has existed on the part of Sam, yet he has taken al the reasonable steps to prevent the loss but defendant was no fault as he accepted the risk even after knowing all the possible consequences.

Conclusion

To conclude the asked issues, it can be stated that-

  1. Sam will be responsible to pay out damages to White Ltd. up to the volume of loss and will not be responsible for any liability in respect of loss accrued to the car,as it was not the result of the engine cut off.
  2. Sam needs not to pay any damages to the passenger,as he has no standard of care in respect to her.
  3. Sam owned a duty of care but will not be held liable for any damages as the defendant has taken the voluntary assumption of risk in the case and Sam has taken all the necessary steps to prevent loss alike a reasonable person. 
 

References

Dam, C, V (2013). European Tort Law, Oxford: OUP Oxford.

Davies v Swan Motor co (1949) 2 KB 291

e-law resources. (2018).  Negligence - duty of care. Retrieved from: https://e-lawresources.co.uk/Duty-of-care.php

Findlaw. (2018). Contributory and Comparative Negligence. Retrieved from: https://injury.findlaw.com/accident-injury-law/contributory-and-comparative-negligence.html

Laws. (2018). Negligence tort at a glance. Retrieved from: https://tort.laws.com/negligence-standard-of-conduct/negligence-tort

Re Polemis & Furness Withy & Company Ltd. (1921) 3 KB 560

The Wagon Mound no 1 (1961) AC 388 

Turner, C (2013). Unlocking Torts, Oxon: Routledge.

OR

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