Australian Commercial and Corporation Law: Negligence and Agency Law

Australian Commercial and Corporation Law
Student’s Name
10/13/2019

LAW8500 1
Question 1
Research Methodology
To find the solutions of given issues hereby, firstly primary resources will be find and
study. Under the primary resources, case laws will be find and discussed. For the
further study of these cases, some secondary resources will also be find and study. In
this manner, a proper research using primary and secondary resources will be done.
Issue
The following issues are there to address in the provided scenario
a) Does First National Bank have the authority to sue Dave?
b) May the said bank sue FirstRate accounting? If yes then on what basis?
c) Does First National Bank have the authority to sue Dave If Dave knew that the
financial statements of the Excel Group made by him can be used in this bank?
Rules
Negligence is a scenario where the person who must keep care, breach such duty and
due to this, the other person to whom the duty has been owed suffer from a loss. It
means it is a situation where a person remains negligent in his/her dealings. If to
carefully look after the abovementioned definition of negligence, one may see the
necessity of certain factors. These factors are as essential as in the absence of one or
more; the claim of negligence cannot be initiated. There are three essentials of
negligence. The first element is the existence of a duty of care. A duty of care is a duty
to behave responsibly considers the best interest of the other person. Every defendant

LAW8500 2
is required to have such duty towards the plaintiff/claimant of the case1. If the defendant
does not owe such duty to a claimant then he/she may never be held liable for
negligence. Doctor-patient, teacher-student are some of the relationships where a duty
of care determined to exist. People also owe such duty when relations apart from the
said ones exist between claimant and defendant. A defined list of such relationships
was not possible to make hence to identified the presence of such duty on the part of
the defendant; some tests have been used and developed over time. These tests have
been used in some of the cases and then further courts start using them as a common
law test or legal precedents.
The very first test has been provided in the case of Donoghue v Stevenson2 . In the
decision of this case, Lord Atkin formulated a general principle to determine the
presence of duty of care. It was established that a person should take reasonable care
to his/her neighbor with respect to foreseeable risks. Here the person who seems to be
directly affected by one's task is known as neighbor3.
A negligent misstatement is one the most important topic of law of negligence. Tort Law
states that a person who has a duty of care must not make a negligent misstatement
where it is foreseeable that the other party can believe in such a statement. According
to this law, a person who gratuitously makes a misstatement can be held liable where
one of the parties rely on such statement and causes pure economic loss. Hence,
negligent misstatement does not provide a remedy for physical injury or mental injury.
1 David G. Owen, The Five Elements Of Negligence (Law.hofstra.edu) <
https://law.hofstra.edu/pdf/academics/journals/lawreview/lrv_issues_v35n04_bb1_owen_35_4_final.pdf>.
2 Donoghue v Stevenson [1932] UKHL 100
3 Richard Castle, Lord Atkin And The Neighbour Test: Origins Of The Principles Of Negligence In
Donoghue V Stevenson (Cambridge.org) < https://www.cambridge.org/core/services/aop-cambridge-
core/content/view/S0956618X00005214>.

LAW8500 3
Esanda Finance Corporation V Peat Marwick Hungerfords4 is one of such cases that
may help here to understand the consequences of negligent misstatement. In this case,
the claimant relies on the financials prepared by the defendant auditors and suffered
from a loss due to negligent misstatement5. The claimant sued the defendant but the
high court rejected this claim. In the reasoning of the decision, it has stated that the
defendant did not owe any duty of care to the claimant because the same could not
assume that the claimant may use the information provided by them6. Hence, to state
that a defendant owes a duty of care for negligent misstatement when the same know
that the claimant relies on the information of such defendant and may suffer from the
loss if the information finds to be incorrect7.
Second element of negligence is a breach of duty. These elements state that the
defendant must breach the duty of care. Such breach refers to a situation where the
defendant does acts below the standard of a reasonable person8. A defendant can
breach the duty by doing a thing in a certain manner or by not doing the same in a
particular manner. The third and last element states that due to the breach of such duty,
the claimant must suffer from a loss. If the plaintiff does not suffer from any loss then
he/she cannot sue the defendant. The law of negligence identifies three types of loss
4 Esanda Finance Corporation V Peat Marwick Hungerfords (1997) 188 CLR 241
5 I-law.com, Esanda Finance Corporation Ltd V Peat Marwick Hungerfords (Reg) (I-law.com) <
https://www.i-law.com/ilaw/doc/view.htm?id=152022>.
6 Yellowpages.com.au, Pure economic loss caused by Negligent Misstatement (Yellowpages.com.au) <
yellowpages.com.au/content/if/extract/contentstore/2014/10/10/14/42/1080864128/1/
pureeconomiclossnegligentmisstatementexclusionclauses.pdf>.
7 Doylesarbitrationlawyers.com, Esanda Finance Corporation V Peat Marwick Hungerfords
(Doylesarbitrationlawyers.com) < http://doylesarbitrationlawyers.com/esanda-finance-corporation-v-peat-
marwick-hungerfords/>.
8 Griffithslawpc.com, 4 Elements of a Negligence Claim (and more) (Griffithslawpc.com) <
https://www.griffithslawpc.com/resources/elements-negligence-claim/>.