BUS107 Commercial Law

Questions: Assignment Question Peter is a real estate developer. He develops residential apartment complexes in the Wollongong local area. He purchases a large block of land for $2 million and plans to build a large apartment complex on the block at a considerable profit. But Wollongong Council denies his development application on the basis of a road widening proposal that will substantially reduce the size of theblock. This road widening proposal reduces the value of the block of Peter’s land to $1 million. Peter reads the council certificate he obtained from Wollongong Council before he purchased the block of land. If the block of land had been subject to a road widening proposal then it should have been disclosed by Wollongong Council in the certificate. There is no such disclosure in thecertificate. As Peter didn’t bother to read the certificate before he purchased the land, he is relieved to find the council has made this mistake. He secretly knows that if Wollongong Council had been careful and included the road widening disclosure in the certificate, he would not have seen it and gone ahead with the land purchase anyway.   Peter now wants to sue Wollongong Council in negligence for economic loss. Wollongong Council claims that negligence only applies to physical actions, not written words, and is only applicable to physical damage to people or their property, not economic loss.   Answers:  Issue: the issue in this question is if Peter can sue Wollogong counsel in negligence for the economic loss suffered by it as a result of the negligent misrepresentation made by the Council. In this regard needs to be noted that Peter was aware of the fact that the certificate has been issued negligently and in fact there was a road widening proposal. Rule: The law provides that there are certain circumstances, where liability in tort may arise regarding a false statement that has been made negligently and where the other person has relied on the statement to its detriment. In such a case, the remedy available to the party, to whom the statement was made, is damages in tort. Such liability is an example of the liability that arises under the tort of negligence (San Sebastian Pty Ltd v The Minister, 1986). That ability is imposed on a person who has a duty of care and such duty has been breached by acting negligently and the result is that the other party has suffered a loss. However in this context, a politician has to be made, to a limited extent, the liability regarding negligent misstatement has been the subject of judicial decision that may be considered as being some particular principles in this field. In this way, the tort of negligent misstatement can be described as an inaccurate statement that has been made honestly carelessly, generally in the form of advice given by the party that has special skills or knowledge and to the party that does not have the skills or knowledge. There are certain common elements of torts, including the tort of negligence. Fault: it has to be established that a tortuous act has been committed by one party, intentionally or negligently.   Actual damage: the plaintiff has established that actual damage or loss has been suffered as a result of such tortuous act. Remedy: because the law of torts is primarily concerned with compensating the victims instead of punishing the wrongdoer, it is important that the courts try to place the victim in the same position in which he or she would have been if the wrongful act did not took place. In this regard, it is required that one party should initially have a duty of care towards the other so that such party can be held liable in the negligence. In this context, duty of care can be described as the duty to exercise reasonable care and skill that would have been exercised by any normal, reasonable person (Spring v Guardian Assurance plc., 1995). Hence it is for the plaintiff to establish that the other party owed the duty of care. For this purpose, the plaintiff may be required to consider the three-step test for the purpose of establishing that defendant had a duty of care towards the plaintiff. For this purpose, it has to be considered: Foreseeability: If it was reasonably foreseeable for the alleged wrongdoers that the conduct is likely to cause harm to the other party. Proximity Test: if there was a physical, factual or circumstantially present between the parties. Vulnerability: needs to be seen if the plaintiff was vulnerable to harm due to the conduct of the defendant. These requirements need to be fulfilled in order to establish that the elements of duty of care existed in a case related negligent misstatement (B.T. Australia and another v Raine and Horne Pty Ltd., 1983). The facts of Shaddock V Parramatta City Council (1981) ALR 385 are similar to the facts of the present case if this is the issue before the court to decide the circumstances where the local council can be held liable regarding information supplied by the general public. It was held in this case that duty of care is applicable regarding a person who provides information or advice to the other party if the person carries on business or profession, and in the course of it, is providing information on advice of the particular kind that requires the exercise of skills and competence or is otherwise, the person professes to have the skill and competence and provides information or advice when such person is aware that the other party is going to rely on such information (Esanda Finance Corporation Ltd v Peat Marwick Hungerfords, 1997). In this case, the court had relied on an earlier judgment delivered in Mutual Life v Evatt (1968) 122 CLR 556 regarding the question when the duty of care comes into existence for the purpose of holding the defendant liable for negligently making a wrong statement. Therefore the relevant rule in this regard is that whenever information or advice is given by a person the other regarding a serious matter and under circumstances where the party giving advice realizes that the other party is going to act and rely on such advice or information, there is a duty on the part of the party giving the advice to exercise reasonable care while providing the information or advice (Caparo Industries Plc v Dickman, 1990). The term contributory negligence is used for describing the actions of an injured person who may also have contributed or caused the injuries suffered by him or her. In this way, the concept of contributory negligence is used for characterizing the conduct that results in an unreasonable risk to the person. The idea behind this concept is that it is also the duty of the individual to act as a reasonable person. Where a person does not act as a reasonable person and suffers an injury, such person can be held completely or partially responsible for the injuries suffered by him even if another party was also involved in the accident.  Voluntary assumption of risk: it is a defense available in case of negligence. In this case, it is said that the plaintiff had assumed the risk of injury if the plaintiff had voluntarily entered a dangerous situation being fully aware of the risk involved in it. The principle that is applicable behind this defense is that the plaintiff, who had voluntarily given certain sense to an activity, cannot be allowed to later sue the other party if the plaintiff suffers an injury. In this case the requirement of voluntary means that the person should have assumed the risk having a choice to avoid it. On the other hand, if the person did not have any choice to avoid the dangerous activity, it cannot be stated that the person had assumed the risk voluntarily. Application: In the present case, a real estate developer Peter had asked Wollongong Council, if there was any road widening proposal, because the proposal will significantly reduce the size of the block. The Council gave a certificate that there was no such proposal. Had there been any proposal, it should have been mentioned in the certificate. However, Peter did not bother to read the certificate before purchasing the land. Moreover, he is aware of the fact that in fact a mistake has been made by the Council and the road widening disclosure should have been made in the certificate. Therefore in this case, even if the negligent misstatement has been made by the Council but it needs to be mentioned that Peter had not relied on such misstatement (Goodwill v British Pregnancy Advisory Service, 1996). Moreover, Peter was already aware of the fact that a mistake has been made by the Council and the road widening disclosure should have been made in the certificate. Under these circumstances, it is clear that even if a negligent misstatement had been made by the Wollongong Council, but Peter cannot do the Council for economic loss in negligence. Conclusion: in the present case, Peter cannot sue Wollongong Council for economic loss suffered by because in this case, we have not relied on the negligent misstatement and moreover he was aware of the fact that this statement has been made negligently. References B.T. Australia and another v Raine and Horne Pty Ltd [1983] 3 NSWLR 21  Caparo Industries Plc v Dickman [1990] 2 AC 605   Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 71 ALJR 448  Goodwill v British Pregnancy Advisory Service [1996] 2 All ER 161   Mutual Life and Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 566  San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340   Shaddock and Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225  Spring v Guardian Assurance plc [1995] 2 AC 296