510-lecture 4 Tort

Law for New Zealand Business session 4 Overview of the New Zealand law of torts

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Tort: what is it? Civil wrong in the absence of contract So what do they entail and why do we recognise them? Commission of an act that offends against society’s idea of “rightness”  Social harmony and “ethics” assume certain boundaries to behaviour- reaction when breached  Does not necessarily (although it may) involve a crime or direct act 

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What categories do we have? Basically two: 

Trespass Categories are closed  Normally related to malicious action or intent  Includes assault and trespass 

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Actions on the case Categories are NOT Not closed but evolve depending on changing societal expectations and standards  Do not require malicious action or intent  Includes a range of torts that does change over time 

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So what about actions on the case?

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So what about actions on the case? negligence

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So what about actions on the case? negligence

defamation

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So what about actions on the case? negligence

defamation libel

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So what about actions on the case? negligence

defamation libel

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slander

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So what about actions on the case? negligence

defamation libel

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slander

nuisance

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So what about actions on the case? negligence

defamation libel

slander

nuisance

private nuisance 10/17/08

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So what about actions on the case? negligence

defamation libel

slander private nuisance

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nuisance public nuisance

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What is the most significant category? Without a doubt: negligence Why?  Relatively

recent recognition  Continuing development through common law  Reacting to societal, economic and scientific change 10/17/08

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So what does Negligence involve? Leading case: Donoghue v Stevenson  See

here: Donoghue v Stevenson, UK Law Online  We can extract four requirements:  Duty

of care  Breach of that duty of care  Injury or damage to the plaintiff  Connection between that breach and the injury 10/17/08

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How have these requirements been applied? Based on the connected concepts of foreseeability- that is, both the plaintiff and his/her injury must be reasonably foreseeable, and reasonableness- the defendant (tortfeasor) must have acted unreasonably

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Various cases have reinforced that concept Donoghue v Stevenson Bourhill v Young Re the Wagonmound

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And negligence has been expanded to include: Property loss Nervous shock (notion of secondary victims) Pure financial loss- the tricky one!

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Particular case study Negligent misstatement by professionals- particularly auditors

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What is the role of the auditor? Accounts of companies are required to be audited unless (in limited circumstances) the members agree otherwise- why? Auditors can provide independent judgment on the validity and completeness (the truth and fairness) of the financial reporting  Auditors have the professional expertise to assess the financial records and control systems 

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So how are they expected to act? Professionally-collect information and investigate matters that concern them- Re Thomas Gerrard and Son Ltd (1967), Dairy Containers Ltd v NZI Bank (1995) Report on relevant matters “Watchdog not a bloodhound” (Re Kingston Cotton Mill (1896) per Lopes L.J.)- standard of skill, care and caution expected of a reasonably competent, careful and cautious auditor- expectations have increased 10/17/08

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What are their relationships?

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What are their relationships? Contract- to the company

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What are their relationships? Contract- to the company

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To outsiders

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What are their relationships? Contract- to the company

To outsiders

Shareholders

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What are their relationships? Contract- to the company

To outsiders

Shareholders Creditors

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What are their relationships? Contract- to the company

To outsiders

Society

Shareholders Creditors

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The problem: how far should the non-contractual responsibility extend? To shareholders?

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The problem: how far should the non-contractual responsibility extend? To shareholders? To creditors and investors or potential investors? 10/17/08

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The problem: how far should the non-contractual responsibility extend? To society?

To shareholders? To creditors and investors or potential investors? 10/17/08

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This is a contentious issue: Traditionally:  Auditors

could only be considered liable in the tort of negligent misstatement where:  Held

out as having special skill and knowledge  Was in a special relationship with the recipient  Knowledge of reliance on report  Actual reliance on the report causing loss Hedley Byrne v Heller (1964)  Dimond Manufacturing v Hamilton (1969) 

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But moves from there to widen the test Nb- a reflection of a more general move in the development of the tort of negligence  Anns

v London Borough Council of Merton (1967) and other cases  Reasonable

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foreseeability of damage?  Degree of appropriate proximity giving rise to a duty of care?  Public policy- questions of society standards and expectations? Law for New Zealand Business 30

This was reflected in: Scott Group v McFarlane (1978)- two of three judges (CA) considered reasonable foreseeability of both damage and plaintiff was an adequate measure of proximity There were no public policy reasons for refusing to recognise that liability However, the auditors were not found liable 10/17/08 Law for New Zealand Business 31

This can be compared to the House of Lords Caparo Industries Plc v Dickman (1990)  Foreseeability

of damage  Proximity must be more than foreseeability of the plaintiff  Must be public policy reasons for imposing liability

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So what did you have?

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So what did you have?

Scott GroupProvided there was proximity, giver of advice or report could be liable unless contrary to pp

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So what did you have?

Scott GroupProvided there was proximity, giver of advice or report could be liable unless contrary to pp

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CaparoMust have close proximity and pp reasons in favour

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What has happened since? South Pacific Manufacturing v NZ Security Consultants and Investigations (1992) Jagwar v Julian (1992) Boyd Knight v Purdue (1998)

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Likely conclusion The trend is towards a more limited scope of liability for givers of advice Concern with: the potentially indeterminate scope of liability  the increased tendency for litigation  balance between the need to have assessment (audits) and costs involved in high levels of liability 

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But on the other hand: What should an auditor be doing? What is the point of an audit and public availability of reports if third parties are not expected to rely on them? American tendency has been to widen the liability rather than limit Remains a vexing issue 10/17/08

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Finally- statutory modification to negligence New Zealand accident compensation- under the Injury Prevention, Rehabilitation and Compensation Act 2001- see Accident compensation legislation Concept of a no-fault, state- driven compensation system for personal injury by accident  Arose out of recommendations of the Woodhouse Report  Been fiddled with by those with political agendas ever since 

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Up-side No suing for compensation Available to all, not just those with deep pockets Cheap relative to alternative systems Covers non-work and non-vehicle accidents Spreads the risk 10/17/08

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Down-side Limited compensation- no lump-sum Claimed lack of motivation for personal safety Claimed costs for business Claimed lack of right to sue Claimed risk-bearing for those with no responsibility 10/17/08

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summary Tort law, particularly negligence is still developing Some statutory modification and negation to some principles Some gaps evident in treatment across common law countries

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