Liability of Businesses for Tortious Actions: An Analysis

The assignment content discusses the impact of torts on businesses, highlighting the financial liabilities they can face due to various types of torts, including negligence and misrepresentation. The main two torts discussed are misrepresentation, where a business makes a false statement that causes harm to another party, and negligence, where a business fails to take reasonable care to prevent harm to others. Other torts mentioned include fraud, injurious falsehood, tortious interference with contract or trade, and defamation, which can also result in significant financial penalties for businesses. The importance of businesses being aware of these torts and taking steps to avoid engaging in activities that could lead to a tort is emphasized.

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Under the common law jurisdictions, tort is usually referred to as a civil wrong undertaken which
results in a party being harmed or bearing loss, which results in legal liabilities being raised for
the person indulged in such tortious activities. Tortfeasor is the term which is used for referring
the person who commits such a tortious act (Trindade, Cane and Lunney, 2007). In Australia,
there are different torts which apply to the businesses and this includes the tort of negligence,
misrepresentation, and the others. Upon establishing a successful case of tort, the injured or the
harmed party is able to apply for damages as a manner of relief from the wrong done by the other
party. The businesses have to be aware of these torts and have to take steps for avoiding any
situation where liabilities can be raised owing to indulgence in such torts (Lunney and Oliphant,
2008). Thus, this discussion is concentrated on the different torts which apply on businesses in
the nation, with a particular reference to negligence and misrepresentation.
In order to take steps to avoid being indulged in negligence, it is important for the businesses to
understand the very meaning of negligence. Negligence is a situation where a party X does
something which has the possibility of injuring or harming party Y due to the proximity between
the parties. And in such cases, party X owes a duty of care to party Y, which when breached,
results in injury to the party Y, and resultantly attracts penalties owing to the negligence of party
X (Kennedy, 2009). It is crucial for the other party to prove that the elements of negligence were
present in order to make a successful claim of negligence. These elements include obligation of
care, its violation, a resultant loss/ injury/ harm, the risk being reasonably foreseeable, the
remoteness of loss, the proximity between parties and direct causation. In order to prove a case
of negligence, the established case laws which were present in practical circumstances prove to
be of help (Kolah, 2013).

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To show the proximity between parties and the duty of care the case of Donoghue v Stevenson
[1932] AC 562 proves to be of help. In this case, Stevenson was the manufacturer who had
produced thee ginger beer bottle which was consumed by Donoghue while she was sitting in the
cafe. Donoghue fell sick due to the dead snail which was found in the beer bottle and claimed for
damages arising out of negligence. The court held the manufacturer liable as the dead snail was
deemed as a breach of duty of care and the proximity in their relationship had the capacity of
affecting each other. Hence, Stevenson was ordered to compensate Donoghue for her losses
(Latimer, 2012).
Another requirement for showing the presence of negligence is to show that the duty had been
contravened and that the losses had been substantial (Statsky, 2011). Paris v Stepney Borough
Council [1951] AC 367 is a case which helps in this aspect. In this case, the breach of duty of
care was found as the council was aware that the plaintiff was already blind in one eye. And by
not providing him the safety goggles for the other eye, the council was held liable for negligence.
The reason for holding the defendant liable also was due to the fact that the plaintiff was blinded
which was taken to be a major loss (Martin and Lancer, 2013). Had the injury been remote as
was held in Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] UKPC 2,
the damages would not have been awarded (H2O, 2016). The loss has to be foreseeable in a
reasonable manner for the damages to be awarded for a case of negligence. And for the purpose
of foreseeability, the view of a reasonable person has to be taken due to the ruling given in the
case of Wyong Shire Council v Shirt (1980) 146 CLR 40 (Jade, 2017). The last step is to show
that the injury was a direct result of the negligence of defendant (Turner, 2013).
Misrepresentation, even though lies in the contract law jurisdiction, is also deemed as tort in the
nation. This is because under misrepresentation, a person is forced/ induced into entering of the

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contract after making a false statement. In order to show that a case of misrepresentation is
present, there is a need to show that the false statement made was of fact and not of opinion
(Cartwright, 2012). The statement of opinion regarding the farm holding the sheep in Bisset v
Wilkins [1927] AC 177 resulted in the court finding that misrepresentation is not present. The
next condition is to show that the plaintiff made reliance on the false statement of fact made by
the defendant (E-Law Resources, 2017a). In Horsfall v Thomas [1862] 1 H&C 90, the court held
that the claimant had not relied on the statement made by the respondent. And due to these
reasons, even when the statement of fact has been lied about, a case of misrepresentation would
not stand (E-Law Resources, 2017b). The position of a person knowing the truth or falseness of a
statement is also taken into consideration for establishing the presence of negligence as was held
in Smith v Land and House Property Corp (1884) 28 Ch D 7 (E-Law Resources, 2017c).
Due to the businesses regularly indulging with customers and clients, the chances of a case of a
tort of negligence or misrepresentation being made are quite high. For instance, Australian
Safeway Stores v Zaluzna (1987) 162 CLR 479 was a case where the defendant was held liable
for negligence for failing to provide safe shopping experience to its customers (Sappideen et al,
2009). So, when dealing with the customers and clients, it is important for care to be taken. For
instance, in Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051, the business
stated that they had certain available bids, but in actuality, they had none. This was deemed as a
misrepresentation on part of the business (E-Law Resources, 2017d).
The injured clients get an option of making a claim of damages when a tort had been committed.
For negligence, the parties can make a claim if the elements of negligence are established and
can apply for the physical injury sustained by them, the mental distress and even for the
economic losses suffered by them (Gibson and Fraser, 2014). Vaughan v Menlove (1837) 132 ER

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490 was a case where the damages were not awarded as the defendant had failed to take the
reasonable care towards himself and had not worked on the warnings of fire (Commonlii, 2017).
Similarly, for misrepresentation, the damages which are available are rescinding the contract or
the more appropriate one in cases of tort, as damages for the loss (Latimer, 2012).
The businesses have available defences in cases of a tort being made against them. In
misrepresentation, they can show that they had reasonable basis to rely on the truth of the
situation. In cases of negligence, the defence of contributory negligence proves to be of help. In
this defence, it has to be shown that the plaintiff had, by their actions, taken such steps where
they added in the injury which they had received and in such cases, the penalty which is imposed
on the defendant had to be reasonably brought down by the contribution of the negligence made
by the plaintiff (Dongen, 2014). For instance, even though the floor of the supermarket was wet,
but by running on the wet floor to grab the last item on shelf, the plaintiff in Raad v KTP
Holdings Pty Ltd as Trustee for VM & KTP Nguyen Family Trust [2016] NSW 2016 888 was
held guilty of contributory negligence, and as a result of this, their remedial damages were
reduced by ten percent (Devitt, 2016).
Apart from the common law, the statutory law result also attracts penalties for negligence. Each
jurisdiction in the nation has its own Civil Liability Act through which the provisions for
negligence are given. The Civil Liability Act 2002 is applicable in the jurisdiction of New South
Wales. Under section 5B of this act, it is provided that a person would not be deemed to have
breached his duty of care till the time it could be proved that the risk of harm was significant, till
the time it was properly foreseeable and till the time it can be shown that a reasonable individual
would have taken the desired safeguards in order to evade this liability. Not only can the
provisions of negligence, but also of contributory negligence be established, through the

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statutory act. Under section 5S of this act, it is provided that in case where a contributory
negligence is shown to be present, the awarded compensation to the plaintiff can be reduced
100% if the circumstances of the particular case demand the same. So, not only the public
authorities, the statutory authorities can also make an action for torts, for protecting the interest
of the affected parties (Legislation NSW, 2015).
Negligence and misrepresentation are not the only two torts which have an impact on the
businesses but there are different torts which can poses financial liability for the businesses. In
this regard are the torts of fraud, injurious falsehood, tortious interference with contract or trade,
and defamation. Defamation refers to such a situation where the reputation of an individual is
tarnished by actions or words and takes form of libel and slander. For instance, when the
business communicates with their clients, they have to take steps that they do not insult anyone
or defame any party. All these torts result in heavy damages for the businesses, where they are
imposed penalties and this is a loss as the money used for giving the penalties could otherwise be
used by the businesses in furthering their objectives (Barnett and Harder, 2014).
To summarize the discussion carried on till now, the businesses have to bear losses due to certain
torts in which they engage. The main two torts include misrepresentation and negligence. Under
the tort of negligence, the businesses can be asked to compensate for the physical injuries, the
economic loss and the mental distress caused to the plaintiff, when they fail in taking the
requisite duty of care towards the plaintiff, by the reason of which, the plaintiff is injured.
Alternatively, in the cases of misrepresentation, such a statement is made by the business which
is false, and where the business knew of the falseness of the statement, which resulted in the
consumer making relations with them. Owing to this falseness, the businesses have to
compensate the consumers for reliance made on the false statement and the resultant loss which

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they had to bear. Not only the common law, but the statutory law also imposes these liabilities on
the businesses. Hence, it is important for the businesses to not only be aware of the different torts
which apply on them, but also take steps towards not indulging in activities which can possible
result in a tort.

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Devitt, S. (2016) A slip up - shopping centre liable for slip and fall on wet tiles. [Online]
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08/09/17]

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