7159AFE Principles of Business and Contract Law

Law

A suit for negligent misstatement can be filed by a party in case a false statement is made to another party due to failing to maintain a standard of care which resulted in causing injury or loss to another party who relied upon such misstatement. The adviser has the liability for the negligent words made to another party. In order to establish a suit for negligent misstatement under the common law, certain elements must be established by the parties. Firstly, a duty of care must be owed by the party who is making the statement. Such duty must be violated because the party failed to ensure that a standard of care which any reasonable person would while operating in the particular position. In the case of Hedley Byrne & Co Ltd v Heller and Partners Ltd, the court provided that if advice is given by a party, then a duty of care is imposed on such party. The person who has “special skills” is under a duty to ensure the accuracy of the advice or information given to another party. Section 35 of the Civil Liability Act 2003 (Qld) provides that the public or other authority owes a duty of care which is violated if a standard is not maintained while exercising the standards by the authority.

In Shaddock v Parramatta city council case, a duty was violated by the municipal council since the wrong information was given to a party who suffered loss due to the negligent misstatement. Another good example was given in MLC v Evatt case which applies in this case as well. In Tepko Pty Ltd v Water Board case, the court provides that the Water Board did not owe a duty of care because the claimant did not emphasised on the importance of the accuracy of the information. In San Sebastian Pty Ltd v Minister case, the court provided that other elements of the tort of negligence must be fulfilled in a suit for negligent misstatement. Other elements of negligence include causation which is necessary to be present which provides that the damages of the party must be caused due to the failure of another party to maintain a standard of care. The injury or loss which is suffered by the party must not be too remote or else a claim for negligent misstatement cannot be filed by the party. The common law provides the provision of vicarious liability. As per this provision, the employer can be held liable by a third party for the loss suffered to such party due to the negligence of the employee who was acting within the appropriate authority.

Application

In the given case study, Bruno and Maria wanted to start a new business in Rocklea, Brisbane by purchasing an existing business which was for sale. During a seven day cooling off period, the couple found out that the Brisbane City Council is planning to build a light rail line through Rocklea. The information regarding where the rail line will be situated is not mentioned in the report, therefore, the couple decided to collect more information regarding the project. In order to collect more information, the couple emailed the Town Planning Department of Brisbane City Council. As discussed in Tepko Pty Ltd v Water Board case, the duty was owed by the council since the couple clearly mentioned in the letter regarding the importance of the accuracy of the information because it would have caused them serious loss. A response was given by the Brisbane City Council in which it was included that the light rail route will not traverse Ipswich Road which was the location of the new bakery of Bruno and Maria. The letters sent by the Brisbane City Council was signed by a Senior Planning Officer who provided that it is highly unlikely that the rail line project will block the access to the bakery in the foreseeable future. However, a mistake was made by the Senior Planning Officer since he gave the information from an object report given by the Planning Committee; however, a new report was issued by the committee which the Senior Planning Officer did not read.

As discussed in Hedley Byrne & Co Ltd v Heller and Partners Ltd case, the adviser owed a duty of care especially when he/she poses “special skills” on which other parties are relied upon. In this case, Hedley Byrne relied on the advice of the bank while making an investment in a company; however, due to the negligent misstatement, he suffered substantial loss because the company went into liquidation. The court provided that a duty was owed by the party to ensure that a standard is maintained and such duty was violated. Similar views were given in MLC v Evatt case in which the company was held liable for making negligent misstatement to the policy holder which resulted in causing financial loss. The court provided that the policy holder has the right to claim compensation for the loss. In this case, the Senior Planning Officer owed a duty to ensure that he provides accurate information to Bruno and Maria since he was acted with special authority. Bruno and Maria relied on his statement due to which they suffered a loss. A duty was present, and such due was violated due to the negligence of the Senior Planning Officer because he failed to read the latent report sent by the Planning Committee. Moreover, the duty is also violated under the Civil Liability Act which provides under section 35 that the public authorities or officers should ensure that a standard is maintained by them while they are discharging their duties. Since people rely on the advice given by them, they have to ensure that they provide accurate information to them while maintaining a standard of care.

In the given case study, the Senior Planning Officer was acting on behalf of the Brisbane City Council, and he owed a duty to ensure that accurate information is given to the party who rely on such information while taking any actions. Such duty was violated by the Senior Planning Officer because he failed to provide the correct information to Bruno and Maria regarding the light rail line project which affected their business adversely. Another relevant case regarding this issue is Shaddock v Parramatta city council case in which duty was violated by the municipal council. In this case, a local municipal council failed to disclose the information regarding a road widening project in the certificate which was issued by the council. Before making the investment, the purchaser relied on the information included in the certificate. The purchasers later found out that the road widening project resulted in reducing the value of the investment made by him which resulted in causing him the substantial loss. The court provided that a duty was owed by the municipal council which was violated since the information regarding the road widening project was not included in the certificate. The municipal council is a public authority, and people relied on the information included in the certificate before making major investment decisions.

Thus, the court issued an order to pay the damages of $170,000 to the claimant for the liability of the municipal council for a negligent misstatement which was made in the certificate. Similarly, in this case, a duty is owed by the Brisbane City Council which is violated due to the negligence of the Senior Planning Officer. Other elements of negligence were present in this case as well which is important as given in the judgement of San Sebastian Pty Ltd v Minister case. Moreover, the damages suffered by Bruno and Maria are caused directly due to the negligent misstatement of the Brisbane City Council since they would have rejected the decision to invest if correct information was given to them by the Senior Planning Officer, thus, the element of causation is present in the case. Moreover, the risks are not too remote since it was clearly that after establishing the light rail line, it would be difficult for the customers to visit their bakery. Based on the element of vicarious liability, the Brisbane City Council is liable for the negligence of the Senior Planning Officer which was conducted during the course of employment. Therefore, Bruno and Maria and held the Brisbane City Council liable for the loss suffered by them under the common law and the Civil Liability Act, and they can claim compensation from the council to compensate their loss.

Conclusion

In conclusion, Bruno and Maria have the right to take legal action against the Brisbane City Council for the loss suffered by them due to the negligent misstatement. 

Issue

The legal issue raised in this case is whether King of Ovens is liable for violating any provisions of the Australian Consumer Law?

Law

The Australian Consumer Law 2010 (Cth) provides provisions regarding the protection of the interest of customers for the unfair trading practices of the corporations operating in Australia. Section 18 of this act imposes a duty on the corporations and individuals to ensure that they did not make any false statement to customers. It provides that the entities and individuals operating their business in Australia should not make any false claims regarding trade or commerce which is misleading or deceptive or which is likely to mislead or deceive. Section 236 of the act provides penalties for the violation of the provisions given under this section. It provides that a person who suffered a loss due to the conduct of another party is liable for claiming the amount of the loss or damages by the party. The doctrine of unconscionable conduct was established in Australia from Blomley v Ryan case based on which the contract can be set aside. In Commercial Bank of Australia v Amadio case, the court provided that a contract is formed based on poor English knowledge of the party is not enforceable based on the principle of unconscionable conduct. In Louth v Diprose case, the court applied the doctrine of unconscionable conduct to give back the property to the plaintiff which was purchased in the name of the defendant. The court provided that the principle of unconscionable conduct did not apply in the case of Kakavas v Crown Melbourne Ltd because there was no valid disadvantage of the party.

As discussed above, the liability of the actions taken by the employee can be imposed on the employer if such actions are taken by the employee during the ordinary course of employment and with proper authority.

Application

In the given case study, Bruno and Maria wanted to purchase new ovens in order to produce more croissants to meet the demand of customers. In order to purchase the ovens, the couple visited the showroom of King of Ovens which offered both new and second-hand ovens to its customers. Steve was a representative in the showroom, and he knew the fact that the couple did not speak English well. He also knew that due to a health condition Bruno was in pain. Steve wanted to take unfair advantage of this situated due to which he sold two faulty ovens to the couple. While selling the products, Steve told that couple that the ovens worth $3000 each. He hides that fact that both ovens are faulty. As given under section 18 of the Australian Consumer Law, the parties are prohibited from making any claims regarding the products or services which are misleading or deceptive or likely to do so. While selling the products, Steve did not tell Bruno and Maria that both the ovens are faulty. He hides this fact on purpose to sell the faulty ovens since he was unable to sell them before. A false statement is made by Steve regarding the ovens which are misleading and deceptive which adversely affected the interest of Bruno and Maria.

Therefore, Steve has violated the provisions given under this act since he had made a misleading and deceptive claim to Bruno and Maria which resulted in causing loss to them because they were not able to produce enough croissants to meet the demand of the customers. Moreover, the parties signed a 20-page document contract while purchasing the ovens. It was included in the contract that they acknowledged that the ovens may or may not be in working conditions. The court provided in Blomley v Ryan case that a contract can be set aside by the parties if it is made based on unconscionable conduct. In this case, the court provided that intoxication has the ability to preclude the capacity to contract. As per the judgement given in Commercial Bank of Australia v Amadio case, the parties can set aside this contract based on the principle of unconscionable conduct. In this case, Mr and Mrs Amadio were Italian migrants who had limited English writing skills, but they could not speak English properly. Both of them guarantee a mortgage which was issued in favour of the appellant bank. This guarantee was given by them for the debts of the company of their son. However, their son induced them to give guarantee by making certain misrepresentations.

While taking the signature of the parties, the bank manager did not provide any explanation about the document or the terms of the mortgage. The bank issued many cheques to the company which raises the overdraft from $189,000 to over $270,000. Shortly after issuing the cheque, the company becomes insolvent, and it went into liquidation. The bank filed a claim to recover the damages from Mr and Mrs Amadio. When the parties failed to give the money to the bank within the set deadline, they exercise their powers to sale the property which was guaranteed under the mortgage. A suit was filed, and the court found out that Mr and Mrs Amadio believed that they are signing the contract for a liability of $50,000. They believed that their liability is limited to $50,000 and it is for a period of six months. This belief was induced due to the misrepresentations made by their son. It was found by the court that Mr and Mrs Amadio would not have signed the document if they knew the true effect of the contract. The High Court provided that the contract can be set aside based on the principle of unconscionable conduct. The court provided that an unfair advantage was taken of an innocent person by relying on the fact that their English skills were poor.

Thus, the court set aside the contract for a guarantee of the mortgage given by Mr and Mrs Amadio. Similarly, in this case, faulty ovens were sold by Steve to Bruno and Maria by taking unfair advantage of the fact that they had limited English skills. Steve induced them to sign the documents by making certain misrepresentations regarding the working quality of the ovens. Steve did not disclose the fact that both the ovens are faulty to Bruno and Maria. While signing the documents, Steve did not disclose that the document contains a term in which it is written that parties agree with the facts that the ovens might be in the working condition or not. The purpose of hiding these facts was to sell the faulty ovens to Bruno and Maria by taking unfair advantage of the fact that they did not understand proper English. As discussed in Commercial Bank of Australia v Amadio case, the parties have the right to set aside the contract based on unconscionable conduct. They were not aware of the fact that the ovens did not work while signing the contract. The couple would not have signed the contract if they knew the fact that both ovens are faulty. While implementing the provision of unconscionable conduct, the parties are required to prove their disadvantages as given in Kakavas v Crown Melbourne Ltd case. In this case, the party was able to make rational decisions even after suffering from a gambling addiction based on which the court rejected the claim.

However, in the given case study, the parties did not know English due to which they were not able to understand the terms of the contract. Moreover, as given in Louth v Diprose case, the parties have the right to bring back the property which is purchased in someone else name due to unconscionable conduct. Similarly, Bruno and Maria have the right to set aside the contract formed with King of Ovens since it was formed based on the misrepresentation made by Steve. Steve has also made a false claim regarding the product, therefore, Bruno and Maria can hold him liable for violation section 18. The couple can claim the amount of damages under section 236 of the act by holding Steve liable for unfair trading practices made by him. They can hold Steve liable for making misleading and deceptive claims regarding the ovens since the material facts were hidden by Steve while selling them the ovens. Both the parties were not aware of the fact this term which was included in the contract, and no explanation regarding this term is given by Steve while they were signing it. The couple can hold King of Ovens liable for the actions of Steve since he takes the actions during the ordinary course of employment. He was also operating with appropriate authority, thus, the principle of vicarious liability applies in this scenario.

Conclusion

In conclusion, Bruno and Maria can hold King of Ovens liable for the violating the provisions given under section 18 of the Australian Consumer Law because Steve sold them faulty ovens by making false misrepresentation and the documents signed by the party can be set aside based on the principle of unconscionable conduct.