1. Corporations and Trusts Law Chapter 2
Negligence and Risk

2. 2.1 Meaning of a Tort
DEFINITION TORT - a wrong by an individual against another.
The law of tort protects individuals against infringements of their rights against person, property or reputation.
There are many different torts including : -
trespass
defamation
nuisance
negligence.
BASIC PRINCIPLE - members of society we all have a legal obligation to avoid causing injury to others by our actions or lack of action (carelessness).
The law states that if an injury is caused to another by a person failing to take care, the wrongdoer should provide a remedy to the injured party, usually monetary compensation.

3. 2.2 What Law Applies to Negligence?
The law of torts has historically evolved through the common law.
‘Tort law crisis’ of the early 2000’s was a result of a huge increase in litigation and an inevitable rise in the cost of insurance premiums.
This ‘crisis’ saw many businesses and some non- profit organizations forced to close because they were unable to afford insurance.

4. Law Applicable to Negligence

5. 2.3 Elements of Negligence
To establish the tort of negligence, there are three prerequisites:-
A duty of care must be owed by one person to another.
There must be a breach of that duty.
Loss, injury or damage must have resulted as a result of that breach.

6. Elements of Negligence
1. Duty of Care- The Good Neighbour Principle,
Foreseeability, Proximity, The ‘Vulnerability and Control’ Test
2. Breach of Duty of Care- QUESTION - Has there been a breach of duty?
3. Loss, injury or damage must have resulted as a result of that breach- Causation, Remoteness of Damage, Eggshell Skull Rule

7. Elements of Negligence
Duty of Care
The common law position with respect to duty of care did not change under the civil liability reforms.
The various pieces of legislation simply try to clarify what amounts to a duty of care and reiterate that negligence does not arise in every case where a foreseeable risk occurs.
Defendants are entitled to disregard some risks as insignificant and then consider whether a reasonable person would have taken action to avoid or reduce the risk.

8. Elements of Negligence
Breach of Duty of Care
Standard of Care
Once it has been established that a duty of care is owed by the defendant to the plaintiff, the plaintiff must then establish the standard of care that applies in the circumstances and whether that standard has been breached.
Civil liability legislation uniformly sets out factors which should be considered by the court in deciding whether a reasonable person would have taken precautions against the identified risk.

9. Elements of Negligence
Civil Liability Act 2002 (NSW) – s5B 5B General Principles (2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): (a) The probability that the harm would occur if care were not taken. (b) The likely seriousness of the harm. (c) The burden of taking precautions to avoid the risk of harm. (d) The social utility of the activity that creates the risk of harm.

10. Elements of Negligence
(a) The probability that the harm would occur if care were to be taken.
(b) The likely seriousness of the harm.
This is essentially a restatement of the ‘gravity of harm’ concept.
The more serious the harm is likely to be, the more likely a reasonable person would have taken precautions against the risk of the harm occurring.
If the activity in which the plaintiff is concerned is particularly hazardous, a warning should be given.

11. Elements of Negligence
c) The burden of taking precautions to avoid the risk of harm.
The plaintiff must identify the precautions the defendant should have taken, and then show, on the balance of probabilities, that the burden of cost, difficulty and inconvenience to the defendant was not unreasonable in the circumstances.

12. Elements of Negligence
(d) The social utility of the activity that creates the risk of harm.
The social utility of the defendant’s conduct must be assessed as against the seriousness of the risk of injury.
In some situations, the benefit of the conduct may outweigh the risk of injury and may change the duty of care ascribed to the person involved.

13. Elements of Negligence
Wrongs Act 1958 (Vic) - s 49 Other Principles In a proceeding relating to liability for negligence: (a) The burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible. (b) The fact that a risk of harm could have been avoided by doing something in a different way, does not of itself, give rise to, or affect liability for the way in which the thing was done. (c) The subsequent taking of action that would, (had the action been taken earlier), have avoided a risk of harm, does not of itself give rise to or affect liability in respect of the risk, and does not of itself constitute an admission of liability in connection with the risk.

14. Elements of Negligence
Res ipsa loquitur – ‘The Facts Speak for Themselves’
This is a rule of evidence that allows the plaintiff to treat the actual facts of the case as evidence of the defendant’s negligence – i.e. ‘the facts speak for themselves’.
For res ipsa loquitur to apply, the following conditions must be present:
The injury suffered by the plaintiff would ordinarily not have happened if proper care had been taken.
The plaintiff was injured by an act or omission exclusively within the control of the defendant.
There is an absence of any other explanation and no room for interference.

15. Elements of Negligence
Standard of Care for Professionals – Civil Liability Acts
The state legislation addresses both the standard of care required of professionals and a defence for professionals if accused of breaching that standard of care.
Essentially, a ‘professional’ refers to a person practicing a certain profession and includes doctors.
The standard of care required of persons professing a particular skill is to be determined by the court as that reasonably expected of a person professing that skill, in the circumstances at that time.

16. Elements of Negligence
Civil Liability Act 2002 (NSW) – s5O S50 Professional Duty of Care (1) A person practicing a profession (‘a professional’) does not incur a liability in negligence from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion, as competent professional practice. (2) However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational.

17. Elements of Negligence
Civil Liability Act 2002 (NSW) – s5O S50 Professional Duty of Care (3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section. (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted.

18. Elements of Negligence
Establishing Causation As under common law principles, establishing causation between the breach of a duty of care and the loss or harm suffered by the plaintiff, is central to proving a claim in negligence. The civil liability acts provide definitions of harm and all include the following: • Damage to property. • Economic loss. • Personal injury, including: • Loss of life. • Physical injury – e.g. broken leg, disfigurement or disease. • Psychological injury.

19. Elements of Negligence
Establishing Causation
Two elements must be established by the plaintiff: -
That the negligence was a necessary condition of the occurrence of the harm (factual causation).
That it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused (scope of liability).

20. Elements of Negligence
Civil Liability Act 2002 (WA) – s5C 5C General Principles (1) A determination that the fault of a person (the tortfeasor) caused particular harm comprises the following elements- (a) That the fault was a necessary condition of the occurrence of the harm (factual causation). (b) That it is appropriate for the scope of the tortfeasor’s liability to extend to the harm so caused (scope of liability).

21. Elements of Negligence
Factual causation – This is essentially the ‘but for’ test. If the defendant has acted carefully would the plaintiff still have suffered the damage? This question focuses on conduct. Scope of liability – This is essentially the ‘remoteness’ test. Is it appropriate for the liability of the negligent person to stretch as far as the particular harm suffered? This question focuses on outcomes and consequences. What is considered foreseeable should be based on the type of injury suffered.

22. 2.4 Negligent Misstatement
If a person is giving advice in a professional capacity or holding themselves out as an expert, they owe a duty of care to the person they are advising.
This clearly applies to doctors, lawyers, accountants, auditors, engineers etc.
Being aware of this serious legal responsibility is of utmost importance in the professional and financial services world.
As such, any client seeking tax, financial or business advice from financial service professionals is clearly owed a duty of care that the advice they receive is accurate, current, appropriately researched and reliable.
To protect against the potential consequences many professionals obtain professional indemnity insurance policies.

23. Negligent Misstatement

24. 2.5 Pure Economic Loss
In some situations the defendant’s negligence will cause no physical injury or damage directly to the plaintiff or the plaintiff’s property, but the plaintiff will incur financial loss as a result of the defendant’s acts or omissions.
Over time, the courts have allowed plaintiffs to recover pure economic loss in certain limited circumstances: -
Loss to the Plaintiff as a Consequence of Damage Suffered by a Third Party.

25. Pure Economic Loss
2. Loss as a Result of a Defective Product or Structure
A plaintiff can recover pure economic loss if the loss suffered was a result of defective goods or substandard services.

26. 9.6 Defences to Negligence
Contributory Negligence
Is only a partial defence to a claim of negligence.
Once negligence by the defendant is established, they may argue that the harm caused to the plaintiff was partly their own fault.
To succeed in this argument, the defendant must establish that the plaintiff failed to take reasonable care for their own safety, or their own property, and that the failure to take care contributed to the damage suffered.
The burden of proof falls upon the defendant, and the court apportions the damages awarded to the plaintiff based on comparing the plaintiff’s apparent lack of care to the standard expected of the reasonable person.

27. Defences to Negligence
Volenti non fit injuria - Voluntary Assumption of Risk
This is a particularly difficult defence to establish, however, at common law it is a complete defence.
The defendant must prove that the plaintiff has voluntarily assumed the risk of negligence- that the plaintiff was specifically aware of the risk and danger of injury of the defendant’s conduct and accepted that risk.
If this is proved, the defendant is not liable in negligence. “No wrong is done to the person who consents”. Where activities carry inherent risk, the parties involved assume the risks associated with the normal pursuit of that activity only.

28. Defences to Negligence
Vicarious Liability
Vicarious liability is where one party is liable for the actions of another, because of the relationship between the wrongdoer and the person held responsible.
For example, an employer will be responsible for an employee’s acts and omissions that occur within the employee’s normal employment.