Bfa506 | Law | A Assessment Answers

Sam Speed runs a business which provides a re-fuelling service for aircraft at the regional airport at Albury in New South Wales. Sam stores his fuel at a depot he owns in an underground tank. One day, Sam receives a tanker load of 10 000 litres of fuel from his supplier. The fuel is pumped into Sam’s underground tank, and Sam puts a dip-stick into the tank to check that the correct amount has been delivered. Unfortunately, Sam is distracted by a phone call, and forgets to screw the lid back onto the tank, with the result that dust enters the fuel during the night, contaminating it.

The next day, still unaware of what has happened, Sam refuels three light aircraft with the fuel. Each aircraft is owned by a different company, White Ltd, Blue Ltd and Green Ltd.

The aircraft owned by White Ltd takes off successfully, but about 2 km from the end of the runway the engine cuts out because of the fuel contamination and the aircraft, which is worth $ 1 million, crashes onto a road and is totally destroyed, although the pilot miraculously survives without any injury. 

The aircraft owned by White Ltd also destroys a Mercedes Benz car worth $ 75 000 owned by Ms Susan Swift, who usually never parks her car on that street but did so that day because the parking lot she uses was full.

Sam hears on the radio what happened to the aircraft owned by White Ltd, and that the pilot reported a problem with the fuel system to air traffic control moments before the crash. Fearing that the accident might have been due to contaminated fuel, Sam runs across to the aircraft owned by Blue Ltd, waving his arms to attract the attention of the pilot, who is just about to start his engine. Sam tells the pilot that there seems to be something wrong with the fuel and that it could damage the engine, and the pilot decides not to take off for Sydney.  There are no other aircraft able to fly to Sydney, and because the aircraft owned by Blue Ltd does not take off, one of the passengers, Ms Mary Harper, who is a maritime engineer, is unable to get to Sydney to certify that a cargo ship owned by Safmarine Ltd is seaworthy, with the result that Safmarine Ltd loses $ 250 000 in profit because its vessel cannot put to sea that day. 

After alerting the pilot of the Blue Ltd plane, Sam also runs to the aircraft owned by Green Ltd and gives him the same information about the fuel, but the pilot says “Look, mate, I understand what you are saying, but I don’t have time for this. I’m going to take off anyway.  I have to get to Melbourne by 10 am”, and with that the pilot closes his window and taxis towards the runway. As the pilot starts his take-off run, the aircraft’s engine cuts out, it swerves across the runway and suffers $ 200 000 worth of damage.

Accident reports confirm that the aircraft owned by White Ltd and Green Ltd crashed because their engines were damaged by the contaminated fuel. 

Advise Sam on what liabilities he may have to all potential plaintiffs who have suffered loss under the above facts.

Issue

The key issue is to ascertain the liabilities that Sam would have to incur on account of the damages suffered by the potential plaintiffs based on the underlying situation.

Rule

In order to determine if the tort of negligence is applicable, it is imperative that there central conditions must be fulfilled. First, it is essential that the there must a duty of care on defandant’s part towards the plaintiff to be decided by the neighbor test. Second, it is imperative to establish that the breach of the above duty was observed by the defendant by not taking requisite measures to ensure prevention of foreseeable damages. Third, it needs to be established that damages incurred by the plaintiff are attributed to the above breach and could have been prevented in the event the above breach was not done. Before testing these conditions for the given case, we must understand these conditions in some detail.

Duty of Care

The “neighbor test” offers the most convenient manner to determine if the duty of care does exist with regards to a given plaintiff in a particular scenario or not. As per this, neighbor is defined as any entity which the action doer believes may be reasonable impacted or harmed by the choice made by the action doer to either pursue with a particular course of action or inaction in the given context (Davenport & Parker, 2014).  It is essential that duty of care essentially arises on the action doer with only when there is some foreseeable harm or damage that may happen to the plaintiff in line with the verdict advocated in Donoghue v. Stevenson [1932] AC 562 at 580 case. With regards to ascertaining whether a particular injury or damage is foreseeable or not, the courts normally rely on the given circumstances of the situation (Harvey, 2009).

Breach of Duty

As discussed above, the duty of care requires that the action doer takes reasonable measures regarding foreseeable damages so that the underlying chances of these occurring to the neighbor are minimized. In this context, it is essential that the extent of care provided to the neighbor must be representative of the extent of risk and its underlying severity. For instance, if it is possible that the neighbor may loss life and significant property, then the duty of care requires that measures taken must also be drastic since the underlying damage could be irreparable (Gibson & Fraser, 2014). Breach of duty may be defined as the absence of reasonable measures which should have been taken by a reasonable person (of average intellect) in order to discharge the duty of care towards the neighbors. It is noteworthy in this context that duty of care does not extent to unforeseeable damages and hence there is always the risk of the neighbor suffering damages despite the extension of the best care. However the damage in these cases do not amount to breach of duty (Latimer, 2016).

Damages

With regards to damages, only such damages are included which can be attributable to the breach of duty on the defendant’s part.  The primary way to ascertain this is to test if the damage would have occurred even if the action doer would not have breached the duty to care bestowed on the action doer (Lindgren, 2011). If on application of the above test, it is ascertained that the damages could have been reasonable avoided if the action doer would have not breached the duty to care then this amounts to negligence on defendant’s part.  It is imperative to note that the damage covered within the ambit of tort of negligence is not limited to physical harm or  monetary loss but also includes mental and emotional harassment caused due to breach of duty. (Gibson & Fraser, 2014).

Application

In the given case, Sam is the owner of the business which is into refuelling business.  The business has a duty to care towards the clients as the quality of fuel is a key determinant of the engine performance. Further, considering the implications of contaminated fuel in terms of loss of life and the high financial damage, it is reasonable to expect in the given situation that the highest level of care would be observed by Sam. Clearly, this is not the case as he forgot to close the lid which led to contamination. Also, there was no checking of the sample by Sam or any representative before passing this fuel to the aircrafts. The aircraft owner and  pilots have no way to ascertain if the fuel is contaminated or not as it is pumped directed into the airplane. Hence, it is apparent that breach of duty has been indeed observed.

White Ltd – The owner of White Ltd has suffered financial damage owing to crashing of aircraft to the tune of $ 1 million. Also, the plane crash has damaged a Mercedes Benz to the tune of $ 75,000. Both these damages are foreseeable and could have been avoided if breach of duty had not occurred. Hence, Sam would be held liable for these losses.

Blue Ltd- Sam notifies the pilot on time owing to which the flight is cancelled and hence no loss of life or aircraft is suffered. However, a passenger owing to this is not able to reach Sydney and cannot certify a ship as seaworthy owing to which the ship owner Safmarine Ltd suffers loss. Clearly, Sam would not be responsible for this damage as this is not foreseeable and is quite less likely.

Green Ltd – Sam notifies the pilot about the contaminated fuel but the pilot ignores his advice and hence the plane suffers damage. Clearly, Sam would not be held responsible for the damage here as if the pilot would have listened to Sam’s advice the damage could have been avoided. Thus, the damage is on account of negligence by pilot.

Conclusion

Based on the above discussion, it is apparent that Sam would be responsible for the losses caused to the plane of White Ltd and also the loss of the Mercedes owner. However, he will not be responsible for the loss of Green Ltd and Safmarine Ltd.

References

Davenport, S. & Parker, D. (2014). Business and Law in Australia (2^nd ed.). Sydney:LexisNexis Publications.

Gibson, A. & Fraser, D. (2014). Business Law (8^th ed.).  Sydney: Pearson Publications.

Harvey, C. (2009). Foundations of Australian law (2^nd ed.), Victoria: Tilde University Press.

Latimer, P. (2016). Australian Business Law CC (1^st ed.). Sydney: LexisNexis Study Guide.

Lindgren, KE. (2011). Vermeesch and Lindgren's Business Law of Australia (12^th ed.). Sydney: LexisNexis Publications.