Negligence And Economic Loss In Tort Law Essay Explores Elements.

Your manager has asked you to prepare a report on whether there may be a basis to sue Billy Jean using the tort of negligence. She has specifically asked you to address the following matters in your report:

(1) What are the elements of a cause of action in negligence? Provide a brief description of what each one means/requires and apply each of the relevant legal principles to the relevant facts (using IRAC method).

(2) Is it likely that a court will find that Billy Jean owed Donald & Co a duty of care to avoid purely economic loss? What other facts (if any) would be relevant to your opinion on whether or not Billy Jean is likely to owe Donald & Co a duty of care to avoid purely economic loss for the latent defects? Explain your reasoning.

Basic Elements of Negligence in Tort Law

The issue related to this scenario is whether a cause of action will be maintained in the tort of negligence against Billy Jean for the latent defects in Petersberg Dreaming.

As per the Law of negligence, there are a few existing elements that results in the cause of action. The term negligence refers to a situation when due to the activities of an individual, damage or injury is caused to another person. Such a situation results in negligence. The doctrine of negligence was well established in the case of Donoghue V Stevenson [1932]. The primary outcome of this case stated that due to lack of duty to care by the manufacturer, Mrs. Donoghue had suffered injuries and damages. Thereafter, this particular case dealt with the existing causes of negligence and the available remedies to it. The basic elements associated with the cause of negligence are a) duty to care b) breach of duty to care  c) causation d) remoteness.

As per the relevant rule or legislation, if all these essential elements are clearly established in the case then tort of negligence will be held against the person. However, this rule of Donoghue V Stevenson was first applied in the case of Grant v South Australian Knitting Mills and Others [1936]. Similar scenario occurred in this case and the essential elements of negligence was applied. Therefore, the first element involved in the tort of negligence is breach of duty to care that mentions that there should be a duty of care present and needs to be breached. The duty of care refers to a situation when an individual must take proper care so that he can avoid acts that can highly result in the injuries and damages to his neighbor. In order to determine the case of duty of care, the Courts generally apply a two- part test. Any damages that have been suffered by the plaintiff needs to have a direct result of the breach of duty of care (Epstein and Sharkey 2016). The breach will only be established when the defendant’s breach of duty has caused any kind of damage or loss to the claimant. Such a situation can be observed in the case of Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428. When the duty of the Court is to check whether there was an establishment of causation then the ‘but for’ test needs to be applied. If the causation has caused loss or damage or injury to the claimant then the defendant will be charged for committing tort of negligence. The standard of care must be proved by the claimant though. Once the causation of the incident is proved by either of the parties or the claimant then comes the last element of remoteness (Henderson, Kysar and Pearson 2017). This refers to a situation where a set of rules exist that limits the amount of the compensatory damages for a wrong. Therefore, the test of causation requires the loss or damage that have been sustained by the claimant and was not too remote. This test will have an effect on the decision that will be taken by the Court. Therefore, these are the basic elements of a cause of action in negligence.

Pure Economic Loss in Tort Law

As per the Law of Negligence, the elements of a cause of action in negligence have been mentioned in the rule and can be applied in the given scenario. As observed from the facts provided in the case study, it can be said that Billy Jean can be sued for committing the tort of negligence as there was latent defects in the construction of Petersberg Dreaming. Due to the defects  Donald & Co. had suffered an injury. Sergei was the original owner and developer of the land where the construction was taking place. Billy Jean on the other hand was the builder who had formed the contracted with Sergei. Lack of duty to care has caused the damage or the loss and therefore, he has breached one of the elements of negligence. As mentioned in the case of Barnett v Chelsea and Kensington Hospital Management Committee, the claimant suing the other party for causing the tort of negligence. Billy Jean being the builder as per the contract should have provided the sufficient care towards the claimant. Mostly, all the elements of negligence have been mentioned in the case scenario.

The Law of Negligence states that if all the elements of negligence have been fulfilled and if there is a breach of duty to care then it will result in economic loss. As per the rule or legislation, no duty of care owed by the builder can avoid the causing of pure economic loss to owners corporation. Such a situation has been observed in the matter of Brookfield Multiplex Ltd. V Owners Corporation Strata Plan [2014] HCA 36. In this particular case, the Court had held that the builder of strata titled apartments did not owe any duty of care to the owners corporation for avoiding pure economic loss that was caused by the latent defects in the property (Glannon 2015). This will only be possible if it has been found that a subsequent purchaser is not in a reasonable position to protect itself from the negligence of a builder. When the building is said to be a commercial development with the contracts, where it has been negotiated between the parties. Therefore, it will result in a situation when the parties will be appearing in the Court to be in a position for protecting themselves. Hence, no duty of care will be owed. Further, it was observed that for the owners’ corporations in the commercial properties, the decision had substantially condensed the rights to sue in negligence that they might have it against the builders. Economic losses were determined at a very early stage during the development of tort law. Therefore, it can be recoverable if it is brought by the tortuous interference with some interest other than that in the maintaining wealth. The breach of duty of care has resulted in the damage or loss of the individual. Breach of duty of care has been established in the case of Barnett v Chelsea. The loss of is generally not connected to any of the physical harm to the person or the property. This case law have well illustrated this concept. Economic loss thus refers to the monetary loss caused to the plaintiff due to the activities of the defendant. Similarly, it was observed in the case of Best V Samuel Fox Co. Ltd. This particular case stated that when an individual suffers from any kind of harm as a consequence of the conduct of the defendant and he therefore suffers harm in the consequence then the latter harm will be considered to be as secondary. This situation can be referred to as a personal harm caused to the claimant. These secondary losses are the indirect issues that purely cause economic loss (Ross 2017). Due to the economic losses, an individual will only go through the economic losses. It can be stated that when a purely economic loss is occurred because of an interference with a person’s contractual relationship exists with a third party. The other relevant rule that can be applied are the other elements of a cause of action in negligence.

Application

From the above mentioned rule and facts, it can be applied and stated that Billy Jean can owe a duty to Donald & Co. for a duty of care to avoid pure economic loss. Depending on the circumstances and situations, the duty owed will be applicable. However, if the relevant law is applied then Billy Jean can avoid the purely economic loss for the latent defects. If Billy Jean is at fault and his activities has caused monetary loss to the Donald & Co. then he will be held liable for purely economic loss. Thus, if the damage is caused to the property then Billy Jean will be not be liable to compensate or pay for the economic loss caused to Donald & Co. In such a situation duty of care can be avoided purely for the latent defects.

Conclusion

It can be concluded stating that if economic loss has been caused to Donald & Co. and not any physical injury or damage then Billy Jean will be held liable for duty of care.

References:

Barnett v Chelsea

Best V Samuel Fox Co. Ltd.

Brookfield Multiplex Ltd. V Owners Corporation Strata Plan [2014] HCA 36

Donoghue V Stevenson [1932]

Epstein, R.A. and Sharkey, C.M., 2016. Cases and materials on torts. Wolters Kluwer Law & Business.

Glannon, J.W., 2015. Examples & Explanations for The Law of Torts. Wolters Kluwer Law & Business.

Goldberg, J.C., Sebok, A.J. and Zipursky, B.C., 2016. Tort Law: Responsibilities and Redress. Wolters Kluwer law & business.

Grant v South Australian Knitting Mills and Others [1936]

Henderson, J.A., Kysar, D.A. and Pearson, R.N., 2017. The torts process. Wolters Kluwer Law & Business.

Luntz, H., Hambly, D., Burns, K., Dietrich, J., Foster, N., Grant, G. and Harder, S., 2017. Torts: cases and commentary. LexisNexis Butterworths.

Ross, H.L., 2017. Settled out of court: The social process of insurance claims adjustments. Routledge.