LAW8500 Australian Commercial and Corporations Law Issue 2022

Running Head: BUSINESS AND CORPORATION LAW
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Australian Commercial and Corporations Law
9/27/2019
Student’s Name

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Question 1
Issue
Whether First National Bank has (the bank) can sue Dave or not? What would the basis to take
the legal action against FirstRate Accounting. Whether the bank will have any course of action
against Dave if Dave was aware of the fact that the financial statements prepared by him would
also be submitted to First National Bank.
Law
A tort refers to civil wrong that one party commits to others. Different types of torts are there
whereas negligence is of the most common type. As the name implies negligence refers to
ignorance by a person. Negligence consists of a situation where the defendant does not fulfill the
duty of care that he/she owes to the claimant and such breach caused damage to the claimant. By
this definition, it is clear that to amount negligence certain factors are required to be there. These
factors are commonly known as essentials of negligence or requirements of negligence. These
requirements are mentioned as hereunder:-
 Duty/standard of care: - A duty of care brings a responsibility to act reasonably and
responsibly to prevent all the foreseeable harms that the other person can be suffered
with. Under a claim of negligence, a standard of care must be due on the part of the
defendant. In the decision of the case titled Donoghue v Stevenson [1932] UKHL 100, it
was provided that a person owes a duty of care to his/her neighbors. Now the issue arises
in respect to the identification of neighbor (E-lawresources 2019). It was given that every
person who is close and directly affected by the act of others treated as a neighbor for that

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other person. Court uses this decision to determine the presence or absence of duty of
care.
Another test is also there to check the existence of a duty of care in the account of
defendant ad is known as the Caparo test. The subjective test has been given in the case
of Caparo v Dickman [1990] 1 All ER 568. This is a three-step test. The very first
requirement of the act states that to establish a duty of care, the relationship of claimant
and defendant is required to be proximate (Horsey & Rackley 2017, p. 62). The second
requirement of this test states that the risk must be foreseeable. It means the risk must be
of nature that could assume to be there by the defendant. Moreover, the last requirement
demands that holding liable to the defendant or to establish a duty of care to the same
must be just and reasonable under the law (Mitchell 2008, p. 283). Many of the times, the
defendant is a person who is minor or mentally sick. Such persons do not seem capable to
carry any liability under the law. If all these requirements are satisfied then a duty of care
concludes as existed in a case.
 Breach of duty of care: - It is another requirement of negligence. Breach of the standard
of care involves falling below the standard of a reasonable man and posing an
unreasonable risk of loss to claimant.
 Damage, injury, or loss: - The third and final requirement states that if there is a duty of
care and breach of the same but no negative consequences out of it then negligence does
not seem to be there. In this manner, the claimant is required to be suffered from
consequential damage. Such damages can have various forms such as physical injury,
pure economic loss, and psychiatric injury (Findlaw 2019). Here this is necessary to

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mention that the term consequential demands that the loss suffered by the claimant must
happen because of negligence of the defendant.
If all the above-mentioned three requirements meet in a case then claimant becomes eligible to
initiate action against the defendant. In many of the cases, more than one party effect from the
negligence of one party and most of such cases are related to purely economic losses out of
negligent misstatement. In such cases, courts develop their focus on the proximate relationship.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is one such case. In this case, a
company named Easipower Ltd placed a large order to an advertisement firm named Hedley
Byrne & Co Ltd. Advertisement company was not sure about the payment capacity of Easipower
and therefore made an inquiry to the bank of the same. The bank provided written advice to
Hedley Byrne where the same stated financial condition of Easipower strong which was a
negligent statement in actual (Crossan 2017). In the decision of the case, the court provided that
the between there was a proximate relationship between the bank and Hedley Byrne as the bank
was aware with the fact that the other party, Hedley Byrne is going to rely on the provided
information and could expose risk in case of using false information (Furmston 2017, p. 357). It
means for a proximate relationship, the defendant must be aware of the situation of the claimant
and with the fact that such claimant would rely on the defendant.
Vicarious liability: - Vicarious liability is an important principle of Tort Law that held the
employer liable for the negligent action of employees that has been conducted in the regular
course of employment.