3. Negligence

Question 1

What is tort

Answer 1

Breach of a legal duty. There is no liability unless the law recognises that the duty exists.

Question 2

What are the differences between contracts and tort

Answer 2

A contract doesn’t need to exist for a claim in tort to be successful.
Damages
Contract - Damages are intended to put the claimant back in the position he/she would have been in if the contract had been properly performed.
Tort - Damages are intended to put the claimant back in the position he/she would have been in had the tortious act never taken place.
Limitation periods
Contract - 6 years.
Tort - 6 years (cut down to 3 for personal injuries).

Question 3

What conditions must be met to bring an action under tort

Answer 3

Act or Omission - Defendant does or does not do something they are legally supposed to do/not do.
Causation - Act or omission has to have directly caused loss or harm to the claimant.
Legal liability - The defendant owes the claimant a remedy.

Question 4

What is negligence

Answer 4

Breach of a legal duty to take care.

Question 5

What 3 elements must be proved to bring an action against the defendant for negligence

Answer 5

Duty of care - the claimant must prove the defendant had a duty to take care to not cause harm
Breach of duty - claimant must prove the defendant did not take reasonable care
Causation - the breach directly caused loss or damage

Question 6

What is the neighbour principle

Answer 6

Everyone owes a duty of care to their neighbour. A neighbour is considered to be anyone closely linked to you that would reasonably foresee them as being directly affected by your actions.

Question 7

What types of losses can a duty of care be given for

Answer 7

Physical harm - duty of care to not cause physical harm to one’s neighbour.
Financial losses due to physical harm - duty of care to not cause financial losses linked to physical harm.
Purely financial losses - where the claimant has only lost money, a duty of care can only be applied if there is a special relationship between the parties

Question 8

What are the limits of the duty of care

Answer 8

Policy - Is it against public policy to apply the duty of care.
Foreseeability - was the damage suffered by the claimant reasonably foreseeable at the time of the defendants actions.
Fairness - courts will decide whether it is just and fair to give a duty of care in a particular situation.
Proximity - duty of care will only be recognised if there is sufficient proximity or closeness between the parties.

Question 9

The claimant must prove what two things to successfully claim negligence

Answer 9

Duty of care existed

Duty was breached by the defendant

Question 10

What is the principle of res ipsa loquitur and how does this apply to breach of duty of care

Answer 10

Means the facts speak for themselves. It applies to breach of duty of care as the fact that there is damage, proves there must have been negligence.
Where this is applied, it then becomes up to the defendant to prove they were not negligent.

Question 11

What is the standard of care owed

Answer 11

The claimant must show that the defendant failed to take a degree of care which a reasonable person would have taken.
Note a reasonable person is not expected to be skilled in a professional or trade but if he/she acts is supposed to act in a professional activity then he/she must show care of a skilled person of that profession/trade.

Question 12

What are the principles for assessing standard of care owed

Answer 12

Particular skill 
Emergency
Advantage and risk 
Vulnerability
Body of opinion
Lack of hindsight 
Lack of skill

Question 13

What does the principle of particular skill mean when assessing standard of care owed

Answer 13

If he/she has a particular skill then they will be judged as a reasonable man with that skill

Question 14

What does the principle of Emergency mean when assessing standard of care owed

Answer 14

What would the reasonable man have done in the same emergency scenario

Question 15

What does the principle of Advantage and Risk mean when assessing standard of care owed

Answer 15

Weighing up the risk and advantages of the scenario. If the risk outweighed the advantage gained then this would be a breach.

Question 16

What does the principle of Vulnerability mean when assessing standard of care owed

Answer 16

Claimants are owed a higher standard of care where the defendant was aware of their particular vulnerability.

Question 17

What does the principle of Body of Opinion mean when assessing standard of care owed

Answer 17

If the defendants action is considered to be reasonable by a body of professional opinion then this will not be a breach.

Question 18

What does the principle of Lack of Hindsight mean when assessing standard of care owed

Answer 18

This focus’ on the defendants knowledge at the time, not knowledge or facts found at a later date.

Question 19

What does the principle of Lack of Skill mean when assessing standard of care owed

Answer 19

Defendants level of skill is irrelevant. Inexperience is not an excuse for reduced lack of care.

Question 20

In what two ways can a causal link between the defendants conduct and the damage which occured be determined

Answer 20

If the damage was caused directly due to the defendants act.

If the claimant would have suffered loss regardless of the defendants conduct.

Question 21

When can there be damages awarded for a purely financial loss

Answer 21

Only when there is a special relationship. If there is no special relationship then no damages can be awarded.

Question 22

When does a special relationship exist

Answer 22

When the defendant is in the business of giving professional advice.
Advice given in business context.
Defendant knew claimant would rely on the advice.

Question 23

Do auditors owe a general duty to individual shareholders

Answer 23

No, they provide an annual audit report to the company as a whole not to each individual shareholder. However if a shareholder asks for specific advice there would be a duty of care to them for that advice.

Question 24

What are the factors to consider in establishing whether a duty of care exists

Answer 24

Purpose - statement was made by a business of giving professional advice in a business context and was used as was intended.
Relationship - what is the relationship between the professional, recipient and third party. Will examine a relationship in light of the damage that occurred.
Responsibility - is there evidence that the professional had a perceived responsibility to the client.
Class - the class in which the claimant belongs (i.e. shareholders). Where a statement for general circulation has been made, this creates a different duty of care to where you create accounts for a known third party who is contemplating bidding to take over. There is a duty of care where it is reasonably foreseeable that a claimant that could be identified and not part of a large class would rely on the accounts.
Reliance - to what extent did a client rely on the statement and was that foreseeable. If the professional makes a negligent misstatement in knowledge or reasonable expectation that an identifiable person would rely on it, they are likely to be a duty of care to that person.
Fair and equitable - will it be against public policy to impose a duty of care on the professional.

Question 25

What are the Companies Act provisions that can make Audiors liable in addition to any liability in tort

Answer 25

S.507 - It’s an offence for an auditor to recklessly allow an auditors report to contain misleading and false info which is punishable by a fine.
S.532 - Any provision exempting auditors from, or indemnifying them, liability for negligence re audited accounts is void.
S.534 - A company may enter a liability limitation agreement with an auditor which limits their liability for negligence in the course of auditing accounts.

Question 26

As negligence is a tort, it is a civil wrong. The main remedy is damages. How will these damages be calculated?

Answer 26

To put the claimant back in the position they would be in if the negligent act never happened.

Question 27

As negligence is a tort, it is a civil wrong. The main remedy is damages. What type of damages will be awarded.

Answer 27

Compensation will be awarded if the type of loss suffered is a reasonably foreseeable consequence of the defendants negligence.

Question 28

As negligence is a tort, it is a civil wrong. The main remedy is damages. Does the extent of the loss impact how much damages will be awarded.

Answer 28

If the loss was deemed foreseeable, damages will be awarded for all losses not just what was deemed to be foreseeable.

Question 29

In what ways can the defendants claim against negligence

Answer 29

Contributory negligence - if the defendant is only partly responsible, the damages can be reduced to the degree
in which they are judged as responsible.
Volenti non fit injuria - claimant has freely consented to the risk of loss or damage due to the defendants actions (must have taken action to show this).
Exclusion clauses - if there’s a contract between parties and there is an exclusion clause within this.

Question 30

What is vicarious liability

Answer 30

When one person is reliable for another’s actions.

Question 31

What are the conditions for vicarious liability

Answer 31

The wrongdoer must be an employee. Generally doesn’t apply to subcontractors but if they’re acting as an employee, vicarious liability may still apply.
Wrongdoer must have been acting in the course of their employment.

Question 32

Does vicarious liability apply in a principal and agent relationship

Answer 32

Yes, the principal is liable for the agents actions subject to whether they within his authority and performing the tasks he was appointed for.