Discuss about the Tort Law in Australian Business.
A tort may be defined as a civil wrong that is committed by one individual against another. There is no specific legislation or a statute that defines the term as it has evolved mainly through common law or judge made laws. Tort law in Australia is heavily influenced by the common law of other countries such as the United Kingdom owing to the colonial heritage of Australia. However, there have been modifications in the tort law with the enactment of the statute ‘Civil Liability Acts’ in several Australian states. Some of the common torts in Australian Law includes negligence, trespass, misrepresentation, breach of statutory and public duties, interference with employment and family relations, intentional damage to economic interests, private nuisance, defamation, etc (Leon 2015).
The torts applicable in business situations are known as economic torts. Economic or business torts are wrongful acts that are committed against the business entities. Such wrongful acts are often committed deliberately and sometimes they result from recklessness or negligence, which causes some kind of pecuniary loss to the aggrieved party. Although these torts are not criminal offenses but some acts may amount to criminal offences as well such as restraint of trade (Little et al. 2014). The wrongful acts that leads to financial loss in business as a result of intentional negligent acts, the aggrieved party or the business is entitled to bring a civil compensation in the civil court and seek monetary compensation or obtain an injunction order with a view to prohibit the defendant from committing such unlawful activities.
The most common form of torts that is applicable in business situations includes the tort of negligence and the tort of misrepresentation. Negligence may be defined as the failure of an individual to exercise duty of care towards a person he owed such duty. The principle that an individual owes a duty of care to his neighbor has been established in the Donoghue v Stevenson’s case. The term ‘neighbor’ refers to the person who would be affected by the acts or omissions of the person committing such acts or omission. The risk of harm that would result from the action or omission of the person must be reasonably foreseeable and the person must take reasonable steps to avert such risk.
In order to establish a claim against a person for negligence, the aggrieved must establish the essential elements of the tort of negligence. The aggrieved party must establish that the defendant owed a duty of care and has caused a breach of that duty. The plaintiff has suffered damages and sustained injuries as a result of such breach. The damage caused must be the direct result of the consequence of such breach as was held in Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. Further, it is imperative to establish for the aggrieved party that the loss resulted was the consequence of breach and the risk was reasonably foreseeable. Any reasonable person could have foresee the risk if he was in the position of the defendant, under same circumstances. This principle was introduced in the case Wagon Mound No 1 [1969] AC 388, where the court ruled that if the defendant were liable for the loss that was foreseeable, he would be completely liable for the loss.
An instance of tort of negligence in business situations may be exemplified in a case Oyston v St Patricks’s College [2011] NSWSC 269, where a student won a negligence case against his school where the school failed to exercise its duty of care. Jazmine Oyston brought a legal action against her former high school, St. Patrick’s College, in New South Wales, on the ground of negligence. Jazmine alleged that she was injured at the time of enrolment and was subject to harassment, bullying which caused her to suffer from panic attacks, depression, and anxiety. She alleged that the policies and practices of the school failed to safeguard her from the foreseeable and recognized harm. The court held that the risk of harm was foreseeable and the school had foreseen the same that the students were often bullied and harassed by some of the pupils in the school.
The court laid emphasis on the fact whether the school policies or other reasonable steps taken by the school as sufficient to ensure that the school has fulfilled its duty of care that it owed to Oyston. In this scenario, the court stated that the school was have failed to exercise its duty of care as despite the implementation of the policies of the school related to bullying, the school has failed to take reasonable steps to safeguard Oyston from being subject to bullying or harassment when the school was aware of the problem. The policies were inadequate and consequently, Oyston sustained injuries (Stickley 2016).
The judge further stated that any reasonable person would have initiated investigation of the complaints made by Jasmine and would have arranged for strict monitoring of the actions of the pupils. In terms of causation, the judge held that the injuries sustained by Oyston in the form of psychological injury, is the direct result of the failure of the College to take reasonable steps to prevent Oyston from being injured due to such bullying or harassment. The court has awarded damages to Oyston.
In this present scenario, it can be observed that the plaintiff, Oyston, had established that the college owed a duty of care to her, it had failed to exercise such duty of care, and such breach has directly caused her damages. The college failed to take reasonable steps to prevent such risk when it was reasonably foreseeable by the college.
The torts of misrepresentation refer to the false statement of law or fact that induces a representee to enter into an agreement. A statement that is made during negotiations is classified as representation and when the statement turns out to be false, it is classified as misrepresentation. In case, any contractual term turns out to be a misrepresentation, the contract becomes voidable which implies that the representee is entitled to set aside or rescind the contract (Sandeen 2015). In order to establish a claim of the misrepresentation, the aggrieved party must establish the essential elements of misrepresentation. One of the significant element of misrepresentation is false statement with respect to any fact or law as oppose to opinion or estimate of future events. This element was considered as an essential element in Esso Petroleum v Mardon [1976] QB 801. If the person making false statement is aware of the fact that the statements are false, he shall be held liable for committing misrepresentation as was observed in Smith v Land & House Property Corp [1884] 28 Ch D 7.
The other essential element of misrepresentation is that the aggrieved party has relied on the false statement made by the representator and have entered into the contract. If the aggrieved party has not relied on the false statements made by the representator, or was not induced to enter into a contract, he shall not be entitled to bring a claim of misrepresentation (North and Flitcroft 2016). There are three types of misrepresentation, which includes fraudulent misrepresentation, negligent misstatement, and innocent misrepresentation.
An instance of misrepresentation from recent business scenario can be observed in the Joystick Company Pty Ltd where the Australian Competition and Consumer Commission (ACCC) has initiated legal proceedings against the Joystick Company in the Federal Court on the ground that the company has been engaged in misrepresentation of products. The company has been alleged for making false statements to its customers that the products of the company do not contain any formaldehyde or toxins. The commissioned tests conducted against the company reveal that the tested e-cigarette product of the company contains toxic chemicals including acrolein, acetaldehyde that is carcinogenic to humans. The court held that the director of the joystick company is aware of the fact that the products of his company contains toxic chemicals that is injurious to the human health and still the company makes false statements to induce the consumers purchase their products (Corones 2014).
In Australia, the Competition and Consumer Act 2010 was introduced to safeguard the rights of the consumers with respect to the conduct of the seller in relation to trade and commerce. The statute prohibits individuals, businesses form engaging into any unfair practices under section 18 of schedule 2 of the Act that deals with Australian Consumer Law that involves misleading or deceptive conduct, unconscionable conduct, unfair terms, false, or misleading representations, bait advertising, referral selling, misleading the public etc. The schedule 2 of the Competition and Consumer Act 2010, stipulates consumer guarantees to the consumers, which must be complied with the persons or businesses providing such goods or services. The consumers of the businesses are entitled to receive goods or services of appropriate quality and the statements made by the persons or businesses with respect to the quality, condition, value and price must match while the goods are delivered and services are rendered to the customers.
The businesses in Australia are prohibited from making any false statements that are likely to mislead or induce the customers to enter into the contract. The other forms of torts other than negligence or misrepresentation that are applicable in business situations include restraint of trade, fraudulent misrepresentation, defamation, breach of statutory duties and intentional damage to economic interests (Howells and Weatheril 2017). The businesses must not make false statements knowing it to be false without believing that such statement is true. It must ensure that the businesses do not be recklessly careless about the fact whether such statement is true or false.
The persons carrying out the business must not make any statement for which they have no reasonable grounds to believe that such statement is true. The torts of negligence and the torts of misrepresentation are the most common torts that take place in the corporate world. For instance, in a business situation, within the premises of the retailer, the retailer must ensure that it does not engage in any conduct that would engage any unfair practices (Latimer 2016). The retailer must ensure that he does not make any false statement regarding the quality, value, price, condition or nature of the goods and services rendered to the customers to prevent any act of misrepresentation.
In regards to the tort of negligence, the businesses must ensure the safety of the goods and services and that such goods or services does not cause any harm to the customers, as the businesses owe a duty of care towards its customers. If the risk that may arise from the goods or the services is foreseeable, reasonable steps should be taken to avoid such risks and prevent the customers. In case of any claim made by the clients against the actions of the businesses, the businesses must establish that it had complied with the consumer guarantees stipulated by the Australian Consumer Law (Pearson 2017). Further, the Businesses must establish that it has disclosed all relevant information related to the goods or services, thus, ensuring safety of the customers.
The statutory authority such as the Australian Consumer law, ensures that the businesses does not engage in any unfair practices which causes significant imbalance in the rights and obligations of the parties to the contract and that it does not results in the detrimental of the consumers (Brody and Temple 2016). In case of any unfair practices, the aggrieved party shall be entitled to refund or repair of the goods or compensate the aggrieved party for the loss suffered or injuries sustained by the aggrieved party. It is evident from the scenarios above; it is evident that any person who owes a duty of care must take reasonable steps to prevent any risk that may arise from the acts or omissions of the person exercising such duty of care especially when such risks are reasonably foreseeable.
Another instance like that of Joysticks company, Uber brings a legal claim against mobile ad agency Fetch Media for making misrepresentations with respect to the mobile ads and have failed to prevent the advertising of such fraudulent ads thus, the company becomes liable for committing negligence and misrepresentation. These instances are evident of the fact that the business or Economic torts that arises out of business transactions are likely responsible for interfering with the business relationship and not only results in financial loss but affects the reputation and goodwill of the business as well.
References
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428.
Brody, G. and Temple, K., 2016. Unfair but not illegal: Are Australia’s consumer protection laws allowing predatory businesses to flourish?. Alternative Law Journal, 41(3), pp.169-173.
Competition and Consumer Act 2010 schedule 2
Corones, S.G., 2014. Competition law in Australia. Thomson Reuters Australia, Limited.
Esso Petroleum v Mardon [1976] QB 801.
Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge.
Latimer, P., 2016. Protecting Consumers from Unfair Contract Terms: Australian Comparisons.
Leon, J.J., 2015. Negligence-Torts-Negligent Misrepresentation-Downfall of Privity-Hanberry v. Hearst Corp., 81 Cal. Rptr. 519 (1969). DePaul Law Review, 19(4), p.803.
Little, J.W., Lidsky, L.B., O’Connell, S.C. and Lande, R.H., 2014. Torts: Theory and Practice. LexisNexis.
North, J. and Flitcroft, R., 2016. Businesses beware When does the Australian Consumer Law apply?. Governance Directions, 68(5), p.306.
Oyston v St Patricks’s College [2011] NSWSC 269,
Pearson, G., 2017. Current Issues for Consumer Protection Law in Australia. In Consumer Law and Socioeconomic Development (pp. 199-208). Springer, Cham.
Sandeen, S., 2015. LAW9151-W. Torts: The Common Law Process. F15. Sandeen, Sharon.
Smith v Land & House Property Corp [1884] 28 Ch D 7.
Stickley, A.P., 2016. Australian Torts Law. LexisNexis Butterworths.
Wagon Mound No 1 [1969] AC 388,
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