01/02/2015 Chapter 1: The Australian Legal System Business Law The study of business involves learning about how to deal with the risk and uncertainty. Competitive risk is basically the risk taken on by a business when they produce a product as their product could become inferior or obsolete if a better product is produced by another business. This is the risk that lies at the heart of the market and cannot be removed without changing the system. Economics has shown that encouraging competitive risk is a way to improve economic wellbeing of people. It encourages producers to constantly improve products, prices and services. The role of law is to ensure that the risks taken on by a business are competitive risks not systematic risks that are capable of threatening the entire business industry. The law provides a systematic framework within which the competitive risk is played out. Two fundamental examples of systemic risk are business producing products that cause harm, and businesses failing to honour their promises. Product liability laws (which deal with harmful people) and contract laws (which deals with promises). Rule of Law The rule of law means the opposite of the arbitrary government. The law applies to everyone, equally and it is predictable. The law should not discriminate in favour of one group of citizens. The law ensures a system of stable rules which enables businesses to plan for the future. Law Law is any rule that a court of law will enforce. The courts apply or reject a suggested law on the basis of its source. There are two sources which are capable of providing legally enforceable rules: parliament (statue law) and the courts (judgemade law). Federalism In Australia, power of making binding laws is divided between the Commonwealth Parliament and the various state parliaments. The relationships between the Commonwealth and the various states of Australia is governed by the provisions of the Constitution Act. This relationship is called federalism, meaning that the states retain all those powers that have not been specifically handed over to the Commonwealth Parliament. The Commonwealth Parliament may only make laws regarding the follows: 1. Those matters set out in the Constitution, primarily s 51; or 2. Matters which are necessarily incidental to the matters set out in the Constitution Act; or 3. Those matters which have been referred to the Commonwealth by the states. If the Commonwealth Parliament attempts to pass a law that is beyond its power, such a law is unconstitutional and of no effect. Acts are also called statues and the body of law that comes from parliament is called statutory law or legislation. assault. so there had to be broad laws made that needed to be covered by the State Parliaments to make sure the Sole Traders were covered. Donoghue v Stevenson . defamation and nuisance. Chapter 2: Liability for Defective Products Liability for Negligence Negligence is a tort – a civil wrong recognised by courts which entitles the injured person to compensation (called damages) – further examples include. Distribution of goods However. more and more products being produced were prepackaged and hence left little or no room for the retailer to intervene and then arose the needs to perhaps apply liability to the manufacturer for his negligence. This power was designated to the Commonwealth Parliament by the State Parliaments to make the task easier and less tedious. trespass. the Commonwealth does not have the power to respect all advertising etc. The law needed to be fair and not too severe to drive off manufacturers from producing goods. Advertising and promotional activities 2. If the seller wasn’t the manufacturer then the manufacturer could not be sold. Gradually. Price fixing and other anticompetitive agreements between competitors. Liability for defective products 5. In this case. A law passed by the parliament whether state or federal is called the Act of Parliament. the manufacturer was regarded as being fraudulent. However. Business Name Registration Commonwealth Parliament now maintains an all Australia business name register where the business owners register their business and their names. Jurisdictional Difficulties Under Federalism An example of legislative complications that can arise out of federal systems is company law. and 6. It affected the following areas: 1. Sale of goods to consumers 3. The Competition and Consumer Act Commonwealth Parliament passed the Trade Practices Act 1974 (now called the Competition and Consumer Act). The only exception to this was if the manufacturer was dangerous and the manufacturer was aware of this fact. Each make laws with respect to matters covered by these concurrent powers.There are certain areas where the Commonwealth and state parliament have concurrent powers. Providing services to consumers 4. Enhancement of the Commonwealth’s powers can only take place through a referendum but referendum’s are usually costly and unlikely to be successful. In the early days. the federal law shall prevail: Commonwealth Constitution s 109. if there is a conflict between the federal law and state law. any damage suffered by the consumer or buyer of a product could only be taken up to the seller. As she didn’t buy the drink her self. Donoghue drank some and found remains of decomposing snail. A manufacturer who sold a product such as a sealed bottle of soft drink in which there was no need for intermediate examination owed a duty of care to its consumers to take reasonable care in its production because it was reasonably foreseeable that if such care was not taken. The house of lords made it very clear that no matter how negligent the person is (manufacturer or otherwise) they do not owe a duty of care to everyone. The neighbour is then someone who is so closely and directly affected but when the manufacturer or otherwise was thinking of taking action they could have seen them getting damaged. She suffered shock and gastroenteritis. The test for duty of care is not just of reasonable foreseeability but also of the plaintiff’s ability to exercise personal responsibility. Donoghue’s friend bought her a bottle of Stevenson’s soft drink from a retailer. The question whether a duty of care exists is a decision of law and hence decided by the judge not the jury. She sued Stevenson for the tort of negligence. Grant suffers severe dermatitis after wearing some underwear manufacturer by AKM. Grant did not wash the underwear and sued AKM for negligence. He also sued the retailer for breach of contract. Dr. Grant v Australian Knitting Mills Ltd Facts: Dr. Grant? . the consumer could be injured. she could not sue the retailer for breach of contract. The application of liability is not only limited to manufacturers but also other professions. Issue: Does a manufacturer like Stevenson owe a duty of care under the law to those injured by his products and under which circumstance? Decision: House of Lords – liability for negligence did not depend on a contract. They were supposed to be washed out before that process was completed. they are all conceptually related. There are also a number of defences that can be argued by a defendant.Facts: Stevenson manufactured soft drinks which were sold in dark opaque bottles. Insurance Industry Reforms Insurance companies argued that the law had become over protective and that the rates of insurance payouts were rising alarmingly. Issue: Does AKM owe a duty of care to Dr. Elements of a Negligence Action There are three separate elements that must be proved in a negligence claim. Reasonable care must be taken to ensure that acts or omissions which are reasonably foreseeably likely to injure your neighbour are avoided. (1) The Duty: Did the defendant owe the plaintiff a duty to take reasonable care and avoid the injury that occurred. This was caused because of the presence of excess sulphites which are harmful to the skin. Stevenson argued that there was no duty of care owed by him to Donoghue as there was no contract between them. Although the elements are separate for the purpose of the claim. The Australian states and territories enacted legislation that allowed the restriction of the amount of damaged by imposing caps for an example. Issue: Does a retailer owe duty of care for the products it sells and under what circumstance? Decision: NWS Court of Appeal held that a vendor does not automatically owe a duty of care to purchasers and end users. Duty of care owed by property owners: Australian Safeway Stores Pty Ltd v Zalzuna Facts: Zalzuna owed a supermarket owned by Safeway. Zalzuna slipped and was severely injured. She sued Safeway but Safeway argued that no duty of care was owed in the circumstance. There is a duty of care owed by the distributors of the products to customers. Issue: Does a retailer owe a duty to its customers to take reasonable care to not injure them when on the retailer’s premise? . Mr Eaton’s job required him to cut the millboard and work with the pieces. Duty of care owed by service providers such as repairers and installers is treated in the same way as manufacturers. His widow sued McPhersons as they were liable for the damages suffered by Mr Eaton on the basis that a vendor of retail goods owed a general duty of care to the public. McPhersons purchased the millboards from manufacturers. the issue was if the vendor knew of the dangers of asbestos inhalation and that the cutting of millboards might release fatal quantities of asbestos. Mr Eaton was employed by the company that used these millboards in the construction of heater boxes used in air conditioning. the floor was wet and slippery. He died as a result of exposure to asbestos.Decision: There was a duty of care that was owed by AKM because they had not taken the reasonable care in avoiding the sulphites. It is not important that the precise injury be reasonably foreseeable but just the fact that injury (or event) was foreseeable is enough. Owing to the number of customers that had entered the premises. end users and bystanders who are injured by the products they sell: McPhersons Ltd v Eaton McPhersons was a large hardware retail outlet which sold millboards containing asbestos. In this case. (2) The Breach: Did the defendant fail to exercise the required standard of care? (3) The Damage: Were the plaintiff’s losses caused by the defendant’s negligence and were the losses reasonably foreseeable? Manufacturers also owe a duty in appropriate circumstances to the innocent bystanders. The circumstance on which the establishment of duty is based on the nature of the good and the level of risk. According to the tribunal McPhersons ought to have known of the danger of asbestos and failed to warn its customers. The day was rainy and the supermarket was covered with vinyl tiles. In Stennett v Hancock and Peters. The injury or event must be fanciful or far fetched. a repairer was liable to a pedestrian who was injured when a wheel came off a vehicle repaired by the defendant. More police arrived and four officers were taken to the hospital. Nearby there were allhours automatic teller machines. All road users have a duty of care to take reasonable care not to cause foreseeable injury. The video shop faced the car park. The club called the police and two officers walked in. there was no such degree of certainty. Modbury was not liable. As the night progressed Holton became more and more aggressive and consumed more alcohol. there is no duty to control persons from inflicting harm upon others. This general rule maybe displaced where there is a high degree of certainty that harm will follow from a lack of action. Issue: Should a duty of care be applied to Club Italia? . The relationship between Safeway and Zalzuna satisfied the neighbour test for duty set out in D v S. The doctor of a patient who has HIV is under the duty to inform the patient’s partner of their condition despite the fact that the partner is not a patient of the doctors. When they arrived they were attacked and Ritchie was seriously injured. Duty of care owed by road users is the most common use of tort of negligence. Some of the patrons were drinking heavily and looking for trouble. generally there is no duty to control a person from inflicting harm upon another person. Also. In this case. Club Italia (Geelong) Inc v Ritchie Facts: Club Italia was conducting a debutante ball. The police were not told that the situation deteriorated into a brawl. Safeway owed a duty to Zalzuna to take reasonable care to avoid foreseeable risk of injury to Zalzuna. Zalzuna was a customer. Therefore. however. Safeway was operating a store. One of the police officers was Ritchie. The Centre has a large outdoor area for car parking. A duty may arise when there is a special relationship between the plaintiff and the defendant. Anzil was employed as a manager by Focus Video which leased premises in The Centre. The lights went out at 10 pm and Anzil closed the store and walked to his car at about 10. unless the defendant is in control of the perpetrator such as parents.Decision: The normal rules of negligence applied to the case of property owners and the persons injured on the property. There was a huge brawl and the police were called in. Therefore. Duty of care – Failing to Act – In general there is no duty of care to protect another human being from harm. it will be difficult to establish a duty of care. Ritchie sued the club for negligence. Modbury Triangle Shopping Centre Pty Ltd v Anzil Facts: Modbury owned a shopping centre called ‘The Centre’ in Adelaide. A man called Holton and his group seemed to be the source of most problems. Where the harm is caused by a failure to control the actions of third parties.30 pm where he was attacked by three unknown men and suffered serious injuries. the plaintiff. Anzil sued Modbury for damages Issue: Does a property owner owe a duty of care to those injured on its property by the deliberate acts of third person? Decision: In general. They claimed damages against the defendant. Mrs Coffey did not witness the accident but she suffered psychiatric trauma (anxiety and depression) as a result in part from seeing her husband in the hospital and in part because of what she was told about the injuries and prognosis. Tame v New South Wales Facts: After a car accident for which she was not to be blamed Mrs Tame was required to take a blood alcohol test. . Issue: Did the Australian Stations owe a duty of care to not cause mental pain and injury? Decision: The court held that the defendant owed a duty of care to the parents. He was allowed to misbehave. She sued Jaensch for negligence. James mother was told by the defendant that he would be under constant supervision. It also continued to sell liquor to the patrons. Five months later they were informed that a body had been found in the desert. She had no alcohol in her system but the police officer by mistake made a note that her reading was 0. exhaustion and hypothermia when his car got bogged down. Jaensch v Coffey Facts: Mr Coffey was seriously injured in a road accident caused by Jaensch.Decision: Holton was under the control of the Club to some degree. This is a very high alcohol reading and was corrected a month later. However. Further it was not reasonably foreseeable that a person in the position of Mrs Tame would sustain a recognisable psychiatric illness from a clerical error that had been identified quickly. But during that time Mrs Tame developed a psychotic depressive state. In deciding that the defendant owed a duty of care to the Annett to avoid inflicting mental injury the court rejected the notions that the shock had to be sudden or that there had to be a close physical connection between the incident giving rise to the psychiatric injury and the suffering of the injury. Some time later. the Annett’s were informed that James had disappeared. He was taken to the hospital. when he should have been kept under control by the Club who has invited him there for the purpose of the business. Issue: Did the police officer owe a duty of care? Decision: They did not owe a duty of care because firstly. Both the parents suffered from psychiatric injury. Annett V Australian Stations Pty Limited Facts: James Annett was 16 when he started working as a jackaroo on the defendant’s cattle farm. seven weeks after arriving at the defendant’s property. Issue: Did Jaensch owe a duty of care to Mrs Coffey to avoid causing psychological harm? Decision: The court decided in favour of Mrs Coffey. out of control. James was sent to work alone at a remote property. James had died from dehydration.14. She sued the police officer and the state of NSW. a duty to protect from emotional disturbance and possible psychiatric illness was incompatible with a police officer’s duty to make a report of incidents and investigations. Duty of Care – The difficult issue of pure economic loss .