Rights and Liabilities in Corporation Law

Running head: CORPORATION LAW
CORPORATION LAW
Name of the Student:
Name of the University:
Author Note:

1CORPORATION LAW
Question 1:
Part A:
Issue:
This issue involved in this case is what are the rights and liabilities of Magnolia in the
present case study analysis.
Laws:
The tort of negligent misstatement can be defined as an inappropriate and inaccurate
statement made honestly by a person with special skill and knowledge to the other who does not
have such skill or knowledge, without taking reasonable care while giving any advice as
observed in the case of Esanda Finance Corporation Limited V Peat Marwick Hungerfords
[1997] 142 ALR 750 by the High Court of Australia.
To prove the tort of negligent misstatement, it is required to show that the elements of
negligence have been breached too. Such elements include element of fault, presence of actual
damage and element of having remedy as seen in the case of Esanda Finance Corporation Ltd v
Peat Marwick Hungerfords (1997) 188 CLR 241 (HCA).
Firstly, there must be element of fault, that is, it is needed to show that one party has
committed a tort either negligently or intentionally by providing an inappropriate and inaccurate
statement intentionally or negligently.
Secondly, the plaintiff in the cause has the burden of proof to show that he has suffered
from certain loss, damage or injury due to the tortuous act of the tort feasor.

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Thirdly, there must be an option available to the court to place at a position where he
would have been if he would not been subjected to the tort. The reason behind this is law of torts
believes to compensate the victim instead of giving punishment to the tort feasor.
Another aspect to be considered in this regard is the negligently inflicting economic loss
to the plaintiff as seen in the Council of the Shire of Sutherland v Heyman [1985] HCA 41.
When economic loss is caused due to misstatement given by a party carefully, it results in to tort
of negligent misstatement as observed in the case of Perre v Apand (1999) 198 CLR 180.
Further, the court will take into account additional factors that will make the tort feasor
liable for the result of his tortuous acts. These factors include the presence of duty of care of the
wrongdoer to the plaintiff in the light of reasonable foreseeability, proximity test of the tort and
the harm caused and vulnerability.
Application:
In the present case, it is seen that Laura, an accountant and financial advisor, advied
Magnolia to expand her business and for which she asked her to borrow money. As per the
advice, Magnolia borrowed 69000$ from Usurer’s credit. She then signed 5 year lease and
bought thermomixers and hired a designer to design a webpage for her.
Later on, things changed. Laura admitted that she did not consider the pre existing debts
and thus underestimated the establishment cost which amounts to a misstatement as being a
financial advisor is expected to provide accurate ideas as seen in The Owners -Strata Plan No
61288 v Brookfield Australia Investments Ltd [2013] NSWCA 317 case. Magnolia suffered loss
due to this misstatement due to the negligent act of Laura resulting in to economic loss.

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Conclusion:
Thus, from the above discussion, it s clear that Magnolia has the right to recover damages
from Laura for her act of committing tort of negligence by providing misstatement causing
economic loss to her.
Part B:
Issue:
The issue involved in this case is whether the Blue Mountain City Council has any
liabilities towards Jake.
Laws:
This case study also dealt with the concept of negligent misstatement by the tort feasor
giving wrong advice or opinion to the plaintiff causing economic loss to him. Misstatement
means giving a wrong advice carelessly and without taking reasonable care by a person having
special skill or knowledge on the matter of advice to the plaintiff as seen in the case of Esanda
Finance Corporation Limited V Peat Marwick Hungerfords [1997] 142 ALR 750 by the High
Court of Australia.
In this regard, the landmark case of Shaddock V Parramatta City Council (1981) ALR
385 has to be referred where the High Court of Australia held that the local government body
was liable for the wrong information it supplied to the general public who suffered a loss by
relying on such erroneous information supplied to them innocently but negligently.
In order to prove the tort of misstatement, the plaintiff must show that the he has suffered
from losses by relying on the statement made by the defendant. Moreover, it is required to show