The issues raised in this question are as follows. The first issue is whether Adam has a cause of action against Bert for breach of contract and/or misrepresentation, with reasons for or against. If the answer to the above question is in the affirmative, what remedies are available to Adam?
The law applicable to this question in the fact pattern is the law of misrepresentation and specifically fraudulent misrepresentation. Misrepresentation is a false factual statement with the intention and effect of inducing a party into a contract. Specifically, a fraudulent misrepresentation is one that is made with knowledge that it is untruthful or recklessly disregarding its truthfulness (Graw, Parker, Whitford, Sangkuhl, & Do, 2016). As was held in the authoritative pronunciation of Derry v Peek (1889), the constitution of fraud is a false misrepresentation without belief in its truth or recklessly made. There are five elements that must be satisfied to establish whether there was a fraudulent misrepresentation. Firstly, there must be a misrepresentation of fact orally, in writing or by fact (Ramensky, 2017). Even half truths are taken to be complete lies in the eyes of the law (Peek v Gurney, 1873).
Secondly, the maker of the statement must know that it is a falsity. Thirdly, the representor must intend for the representee to rely upon the statement. In CBC v Brown (1972), the case involved misrepresentation of the financial position of a bank’s customer, though the bank was fully aware of the same. The court held that it was a misrepresentation. The fourth element is the actual reliance by the plaintiff on the information misrepresented to his detriment. The defendant may not raise the defence that the plaintiff had the ability of verifying the information that it was correct (Ramensky, 2017). The last element is damage. The claimant must show that because of the misrepresentation, damage occurred as a direct and foreseeable result. The remedies available for fraudulent misrepresentation are damages and rescission pf the contract.
A contract can be discharged through one party’s breach. The breach may be of a condition or warranty. Breach of a condition, which is an essential term of the contract, entitles the innocent party to repudiating the contract and suing for compensation (Graw et al., 2016). Breach of an implied term also entitles a party to termination and suing for damages. Actual breach refers to the state where a party fails to perform as indicated in the agreement. The usual legal remedy available for breach of conditions is damages. In case damages do not suffice to compensate the aggrieved party, the courts may grant equitable reliefs in lieu of the legal damages. These are specific performance, injunction and restitution. The equitable remedy of restitution may apply in a contract situation where an aggrieved party intends to recover monies that were paid of the fair value of the services rendered on a quantum meruit basis (1987).
Based on the information above, the law applies to Adam’s scenario as follows. Bert held out to be a professional builder duly licensed under the New South Wales Fair Trading and that he had applied for mutual recognition registration under the Queensland Building and Construction Commission. This information Bert represented to Adam knowing it to be false and intending for Adam to rely on. Adam relied on the information to his detriment. It was an express term of the contract that Bert would fully restore the roof. Also, it was an implied term of the contract that the work would be in accordance with the professional standards. Bert failed to fully restore the roof in accordance with the expected professional builders’ standard and therefore, breached a fundamental term of the agreement.
In conclusion, Adam has an action against Bert for misrepresentation and breach of contract. The available remedy to Adam for Bert’s misrepresentation is damages. For the breach of contract, the most suitable remedy is restitution for recovery of the monies paid since Bert is not in a position to specifically perform the contract – he is not a licensed builder. In both circumstances, Adam is entitled to rescission of the contract.
In addition to the preceding, the issue in this question is whether Adam has a claim against Bert under the Australian Consumer and Competition Act and the Australian Consumer Law either in general or under the Consumer Guarantee provisions. If the answer to the preceding is yes, what factors must Adam prove to succeed in such an action? What remedies are available to Adam?
Section 18 of the Australian Consumer Law precludes a person in trade and commerce from engaging in misleading or deceptive conduct. The two elements that emerge from that section of the law are, first, the action must be in trade or commerce (Concrete Constructions (NSW) Pty Ltd v Nelson, 1990). Secondly, the conduct must be capable of misleading or deceiving. In determining whether the conduct was deceptive or misleading, the courts have developed a four-step process (Taco Co v Taco Bell, 1982). Firstly, the audience or intended class of persons to whom the information is targeted must be identified.
The courts will assess the impact of the information to all the members of that class whether gullible or experienced and adopts the standard of an ordinary and reasonable member (Parkdale v Puxu, 1982). Hence, unless a claimant took reasonable steps to protect his interests, sections 18 protections will not apply. Secondly, the conduct must be capable of misleading. Thirdly, it is not necessary for the plaintiff to prove that someone has ever been misled. The courts determine the same based on a case by case basis as objectively as possible. Fourthly, the misleading conduct must be the actual reason for the error. The court in Weitman v Katies (1977) defined deceptive to mean causing to believe what is false and misleading with regard to a matter of fact.
Section 3-2 of the Australian Consumer Law provides for consumer guarantees. The law is applicable to both goods and services. Under section 54, the goods must be of an acceptable quality. Section 55 provides that the goods must be in consonance with a disclosed purpose or the reasonably fit quality represented by the supplier of the services. Under section 59, there must be correspondence with any warranty that is given. An aggrieved consumer is consequently entitled to remedies in case of non-compliance with a statutory guarantee. The key issue is whether the non-compliance was a major failure or not. Section 259 (3) and 267 (3) contain provisions for major failures.
The prescribed remedies for a major failure is notice to the supplier that the goods are rejected, sue for compensation and for damages. The procedure for rejection of goods must be adhered to. General remedies for contraventions under the law include injunctions (section 232), damages (section 236) and ancillary remedies (section 243). Among the ancillary orders include ordering refunds and payment for damage or loss, ordering repair or replacement, among others. For major failures, section 263 provides for rejection of the goods, returning them and obtaining a refund, or repudiating the contract.
Accordingly, the information that Bert gave to Adam with regard to his licensure and registration as a professional builder, even though he knew that it was untrue, was misleading and deceptive under the ACL. Bert’s conduct falls within the category of being trade and commerce. The elements that must be proved to sustain an action in court are as enumerated above according to the Taco Co case. The services rendered by Bert are guarantees since even services may be regarded as goods under the ACL. Bert’s representation to Adam of being a qualified builder and yet he was not amounts to infringement of the statutory guarantees of the ACL. The remedies available to Adam are as enumerated above. Adam could sue for damages and for ancillary orders of refund of the monies paid.
In conclusion, Adam has an action against Bert under the provisions of the Australian Consumer Law and the remedies available to him are damages and an order for refund of the monies paid under the contract.
The issue for consideration in this final part is whether Adam has an action for negligence against Bert. The second issue is whether, based on the facts, an action in negligence is likely to succeed and the requirements Adam must prove for success in such an action. What remedies are, therefore, available to Adam? Further, if the defects were caused by the poor workmanship of Bert’s employees how and why can Bert be held liable?
For an action in negligence to arise, the defendant must owe the claimant a duty of care and the complainant must prove having suffered damage as a result of the defendant’s breach of that duty. This was the authoritative deciding in the classical case of Donoghue v Stevenson (1932). Lord Atkin in that case stated that the duty is owed to any person who is so closely affected by one’s actions as to have them in mind. Duty of care is of a legal nature and not social or moral (Agar v Hyde, 2000). Duty of care is central to negligence since it determines the damage recognizable by courts and the kinds of plaintiffs that may be compensated for injury.
As such, the standard is set by a judge as a matter of law and not fact (Hedley Byrne v Heller, 1964). A reasonable professional standard is the standard expected of a professional person. This was the holding in the case of Bolam v Friern Hospital Management Committee (1957). Section 9 (1) of the Civil Liability Act (2003) provides for three elements of breach of duty. The risk must have been foreseeable, significant and a reasonable person should have been able to take precautions. With regard to causation, the injury suffered by the plaintiff should not be remote and must proceed from the breach. Economic loss is an injury recognisable in law. For tortious wrongs, the typical remedy is an award of damages. The rationale is the restoration of the plaintiff to the position he would have been in case the tort was not committed.
It is trite law that an individual may be liable for torts committed by another person. This is the import of vicarious liability (Graw et al., 2016). This occurs where the person committing the wrong is an agent or employee of the other and the wrong must be committed in the course of the agency or employment. Although an employer under common law incurs vicarious liability for an employee’s actions, the same rule does not apply for independent contractors (Quarman v Burnett, 1840). In the more recent decision of Sweeney v Boylan Nominees (2006), the court was of a similar opinion as above – the actions of a negligent contractor do not attract vicarious liability.
To apply the law to the facts, although Bert owes no duty to Adam as a professional, he owes him a duty of care as a person who is directly and closely affected by his actions. Bert breached that duty when he failed to complete the building roof in accordance with the standards he had represented in the contract. Bert’s actions were the direct result of the economic loss sustained by Adam. Adam is therefore entitled to the tortious remedies of damages as a result of Bert’s negligence. The elements that Adam is required to prove in order to succeed in an action for negligence are as above-outlined. Had the structural defects been occasioned by Bert’s employees, he would still be vicariously liable since they were working directly under his employ. However, the exception to this would be in a circumstance where the people working under Bert were independent contractors who were negligent in performing their duties.
In conclusion, Adam has an action in negligence and Bert is (vicariously) liable. The chances of success are high for Adam since all the elements for a negligence action are present.
References
Agar v Hyde (2000) 201 CLR 552
Australian Consumer Law (Sch 2 to the Competition and Consumer Act)
Bolam v Friern Hospital Management Committee [1957] 1 WLR 582
Civil Liability Act 2003 (Qld) s 9(1)
Commercial Banking Co of Sydney Ltd v RH Brown and Co [1972] HCA 24; 126 CLR 337
Competition and Consumer Act 2010 (Cth)
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Derry v Peek [1889] UKHL 1
Donoghue v-Stevenson [1932] AC 562
Graw, S., Parker, D., Whitford, K., Sangkuhl, E., & Do, C. (2016). Understanding business law (8th ed).
Hedley Byrne & Co Ltd v Heller [1964] AC 465
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5
Peek v Gurney (1873) LR 6 HL 377
Quarman v Burnett (1840) 151 ER 509
Ramensky, G. (2017). Fraud and negligence. Findlaw.com.au. Retrieved 25 April 2017, from https://www.findlaw.com.au/articles/134/fraud-and-negligence.aspx
Sweeney v Boylan Nominees Pty Ltd t/as Quirks Refrigeration (2006) 227 ALR 46
Taco Co v Taco Bell (1982) 42 ALR 177
Weitman v Katies (1977) 2 TPC 329.
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