Law of torts..

Negligent misstatements
Hedley bryne v Heller & partners (1964)

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case
on pure economic loss resulting from a negligent misstatement. Prior to the decision, the notion
that a party may owe another a duty of care for statements made in reliance had been rejected,
[1]

with the only remedy for such losses being in contract law.[2] The House of Lords overruled the

previous position, in recognising liability for pure economic loss not arising from a contractual
relationship, introducing the idea of "assumption of responsibility".

Judgment[edit]
The court found that the relationship between the parties was "sufficiently proximate" as to create
a duty of care. It was reasonable for them to have known that the information that they had given
would likely have been relied upon for entering into a contract of some sort. That would give rise,
the court said, to a "special relationship", in which the defendant would have to take sufficient
care in giving advice to avoid negligence liability. However, on the facts, the disclaimer was found
to be sufficient enough to discharge any duty created by Heller's actions. There were no orders
for damages. Lord Morris of Borth-Y-Gest,[3]

I consider that it follows and that it should now be regarded as settle

person who, as he knows or should know, will place reliance upon it

...in my judgment, the bank in the present case, by the words which

Issue(s):
Did Heller owe Hedley a duty of care?

Does the duty of care apply to statements that cause pure economic loss?
Ratio:

A duty of care can arise with respect to careless statements that cause pure economic loss
(obiter)
As noted later, in Queen v Cognos Inc, [1993] 1 SCR 87, the Hedley Byrne test has 5 general
requirements:

1. There must be a duty of care based on a special relationship between the representor
and the representee.

2. The representation in question must be untrue, inaccurate, or misleading.

3. The representor must have acted negligently in making said misrepresentation.
4. The representee must have relied in a reasonable manner, on said negligent
misrepresentation.

5. The reliance must have been detrimental to the representee in the sense that damages
resulted.
Analysis:
The court dismissed the case since there was no duty of care based on the facts
Significant obiter: A duty of care can arise with respect to careless statements that cause pure
economic loss

AgencyDuties of an Agent
Avoid Acquisition of Undisclosed Profits: Regal (Hasting) Ltd v
Gulliver (1967)
It must be noted that a director or an officer of a company can legally acquire profits
so long as these profits are disclosed to the enterprise.

The fiduciary duty of the director and officer can be breached in instances when they
acquire profits in a secret manner.
Also, a breach can be made even if the profit may have a substantial or
unsubstantial effect to the company.
It is also necessary to acknowledge if the said profit had also benefited the
enterprise.
This can be presented in the case of Regal (Hasting) Ltd v Gulliver (1967).
Case Brief:
Regal has a cinema in Hastings, England. The directors of Regal want to acquire
their competitors in Hasting.

The directors then established a subsidiary company for the purchase of their
competing cinemas.

However, the land where the competitors cinemas were built required 5000 as
payment, but Regal does not have the financial resources to provide the amount.
Regal only had 2000 pound for the payment.
Therefore, the solicitor and the directors contributed 300 to the funds of the
subsidiary, making them share owners of subsidiary company.
The directors and the solicitor then sold their shares of the subsidiary company.
The new directors of Regal sued the former directors, including the solicitor on the
grounds that they breached their fiduciary duty, and they also want the accounts of
the directors and the solicitor about the sales of their shares.
Case Significance:
The case is important as it presents that officers and directors the strictness of
acquiring personal profit.
It is also important as the ruling suggest that the directors could have protected
themselves by informing the company of their plan to sell their shares.

Remedies for breach of contract

Commonwealth v amann aviation pty ltd (1991) 174 CLR 64

Expectation damages - Commonwealth v Amann Aviation Pty

Ltd (1991) 174 CLR 64
I was involved in a matter yesterday where the parties were debating whether loss of profit is capable
of being recouped in a contractual damages claim where there is no defined contract price for the
term of the contract. This reminded me of the discussions in Commonwealth of Australia v Amann
Aviation Pty Ltd (1991) 174 CLR 64, and I thought I would give a brief case note on this.
Amann was a company that entered into a contract with the Commonwealth to provide aerial coastal
surveillance for 3 years. The contract provided that if Amann failed to carry out the contract or comply
with a condition to his or her satisfaction, the Commonwealth had power to give notice to Amann to
show cause why the contract should not be cancelled.
Amann spent a lot of money purchasing aircraft for the contract, however when Amann commenced
work under the contract, it didn't have enough aircraft to perform the work. The Commonwealth
served a show cause notice, which was invalid. Amann alleged that the show cause notice was a
repudiation of the contract and Amann terminated the contract. Amann sought damages for breach.
The primary Judge held that if the contract ran its full term Amann would have made a profit of
$820,000 but because there was a 50% chance of the Commonwealth terminating the contract, the
damages had to be reduced by half. The primary Judge awarded Amann damages for loss of profit
but declined to award wasted expenditure, which represented the bulk of the damages claim. On
appeal the Full Court awarded Amann damages inclusive of wasted expenditure. On appeal to the
High Court, Amann was allowed wasted expenditure.
Referring to Robinson v Harman (1848) 1 Ex. 850, Mason CJ and Dawson J (at p80) set out the
principle for the recovery of expectation damages (which usually takes the form of loss of profit):
The general rule at common law, as stated by Parke B. in Robinson v Harman, is "that where a party
sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the
same situation, with respect to damages, as if the contract had been performed". This statement of
principle has been accepted and applied in Australia.
The award of damages for breach of contract protects a plaintiff's expectation of receiving the
defendant's performance. That expectation arises out of or is created by the contract. Hence,
damages for breach of contract are often described as "expectation damages". The onus of proving
damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with
the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say,
a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome,
as a result of performance of the contract, had a likelihood of attainment rather than being mere
expectation.
In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter
into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of
gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the
discharge of its contractual obligations. It is for this reason that expectation damages are often
described as damages for loss of profits. Damages recoverable as lost profits are constituted by the
combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations
and any amount by which gross receipts would have exceeded those expenses. This second amount
is the net profit.

TORTSDuty of Care

Woolcock street investments pty ltd v CDG pty ltd (2004) HCA 16

INTRODUCTION

Woolcock Street Investments v CDG Pty Ltd [2004] HCA 16 (Woolcock Street Investments) will undoubtedly be
remembered as one of the more significant decisions handed down by the High Court in 2004. In it, the court was
asked whether a builder or architect of a commercial building can be held liable to a subsequent purchaser of the
building for defects in the building's design or construction that cause the subsequent purchaser 'economic loss'.
The court decided that a builder or architect cannot be held so liable.
.
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DECISION

In the Queensland Supreme Court, and in the Court of Appeal, Woolcock Street Investments had failed in its
attempt to sue the engineering company and the civil engineer. The Queensland courts held that, although the
High Court's decision in Bryan v Maloneyestablished that the builder of a private dwelling may owe a duty of care
to later purchasers, those who build or design commercial buildings do not.
The High Court, by majority (Justice Kirby dissenting), dismissed the appeal from the Queensland Court of
Appeal. The High Court held that the engineering firm and the civil engineer did not owe a duty of care to
Woolcock Street Investments.
The High Court confirmed that, in cases involving claims for economic loss, vulnerability in the sense of a
plaintiff's inability to protect itself from the consequences of a defendant's lack of reasonable care is an
important consideration. In this case, the majority held that Woolcock Street Investments could have taken steps
to ensure that the sale contract contained warranties, or an assignment of any rights the original owner may have
had, in respect of claims for defects. Woolcock Street Investments therefore did not rely upon the engineering
firm or the civil engineer's expertise, nor was it vulnerable in the relevant sense.
A further difficulty for Woolcock Street Investments was that it was not alleged at any stage before the
Queensland courts that the engineers had breached any obligation to the original owner, the trustee company.
During the complex's construction, the trustee company had asserted a great deal of control over the project,
including the scope of investigations undertaken by the engineers. The engineering firm had recommended to the
trustee company that extensive subsoil tests should be conducted, but the trustee company, citing cost
constraints, decided that only the usual tests and surveys would be conducted.
The High Court decided that as there was neither reliance by the owner nor assumption of responsibility by the
engineers, Woolcock Street Investments' action must fail.
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IMPLICATIONS OF THE DECISION

The question remains: has the decision, once and for all, ruled out actions by subsequent commercial building
owners against builders, designers and engineers of commercial buildings?
The answer must be a clear no.
The majority pointed out that it is wrong to blindly demarcate commercial buildings from residential ones and
decide that there is no duty of care owed by builders, architects or designers of the former. Indeed, such an
exercise could, as the majority pointed out, lead to errors (majority judgment at [17]). How, for example, would
that test be applied for mixed-use commercial and residential buildings?
The correct approach is still to look to the concepts of reliance and vulnerability. What Woolcock Street
Investments establishes is that it will be difficult for the owner of a commercial building to establish that the
builder, architect or designer owes them a duty of care,though not impossible.
There are a number of lessons that commercial property purchasers and investors can take away from the
decision:

have comprehensive building assessments carried out well before contractual obligations crystallise;

have vendors insert contractual warranties relating to the structure of the building, or, better yet, have
the vendor assign any rights that they may have against the builder, architect or designer to the
purchaser; and

be ready to factor into the purchase price any discovered defects that will limit the earning potential of
the building.

Consumer Protection.Loss or Damages, Misleading

Murphy v overton investments pty ltd (2004)

Murphy v Overton Investments Pty Ltd [2000] FCA 801

Catchwords:
Trade Practices, misleading or deceptive conduct, unconscionable conduct, loss or damage, negligent advice,
estoppel, contract.

Key Facts:
The respondent who owned and operated a retirement village granted the applicants a lease of a unit in the
retirement village. The applicants claimed that prior to entering into the lease, misleading statements were made
on behalf of the respondent concerning the extent of their liability under the lease to contribute to the expenses of
operating the retirement village. Further, the applicants submitted that those statements induced them to enter

into the lease and that, as a consequence, they suffered loss or damage. The issue was whether applicants had
suffered any loss or damage as a result of the respondent's conduct.

Key Findings:
Emmett J found that if the applicants had suffered any loss or damage as a consequence of the conduct of the
respondent, they did so when they entered the lease. His Honour could find no evidence of any loss or damage
at that time. There was no evidence that, as at that date, the lease was worth anything less than the
consideration paid by the applicants to obtain it. Additionally, the applicants failed to show that if there had been
full disclosure by the respondent, they would have been able to negotiate a more favourable lease. Accordingly,
the proceedings against the respondent were dismissed.