Business Law: Negligence and Liability of Betapharm Ltd

This report analyzes a business law case involving Betapharm Ltd and the potential liability for negligence related to their new drug, THX 1138. The assignment applies the principles of tort law, specifically negligence, to determine Betapharm's responsibility to various plaintiffs affected by the drug. The report examines the elements of negligence, including duty of care, breach of duty, and causation, referencing the Civil Liabilities Act 2002 and relevant case law such as Donoghue v Stevenson, Jaensch v Coffey, Smith v Leech Brain & Co, and Esanda Finance Corporation v Peat Marwick Hungerfords. The analysis considers the potential claims of Alice, Bob, Dan, and Elizabeth, assessing whether Betapharm Ltd is liable for their respective damages. The report concludes by summarizing the company's liability based on the application of legal principles to the facts of the case.

Running head: BUSINESS LAW
BUSINESS LAW
Name of Student
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Author Note

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Table of Contents
Issue.................................................................................................................................................2
Law..................................................................................................................................................2
Application......................................................................................................................................3
Reference.........................................................................................................................................5

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Issue
The main issue in this case is whether Betapharm Ltd is liable to each of the potential
plaintiffs.
Law
As per the provisions of the Civil Liabilities Act 2002 for establishing a claim of
Negligence the plaintiff needs to prove three elements. These three elements are that- the duty of
care was owed by the defendant towards the plaintiff, the standard of care of a reasonable person
had been breached by the defendant, that harm was caused to the plaintiff by way of the conduct
of the defendant.
The test for establishing duty of care was first formulated in the case Donoghue v
Stevenson [1932]. In the case it was hold by the court for a duty of care to take place there must
be some general conception of relations present.
Under section 31 of the Civil Liabilities Act 2002 (NSW) a person would be held
liable for negligence towards the person who has undergone shock which has resulted in
psychiatric illness going beyond ordinary level of grief as was held in the case Jaensch v Coffey
[1984] where the court held the defendant liable not only for the motor cycle rider’s injuries but
also towards the wife of the rider who had suffered emotional shock and psychological illness
when she heard of her husband’s injuries.
As per the ‘egg shell skull’ rule, if the plaintiff is seen to be having any physical
weakness or illness which would lead them to be suffering greater harm that could be foreseeable

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usually, then the defendant would be held liable for all the injuries that had been suffered by the
plaintiff even of those that could not reasonably be foreseeable. The rule was first seen to be
established in the case Smith v Leech Brain & Co [1962].
A person would not be held liable for any third party loss which was not foresseable from
the beginning as was held in the case Esanda Finance Corporation v Peat Marwick Hungerfords
[1997].
As per the provisions of the Civil Liabilities Act 2002 damages are defined as the sum of
the money awarded for the loss or the damage that had been suffered. The purpose of the damage
is to be putting the plaintiff in the same financial position they would have been in absence of the
harm.
As per the law of torts a plaintiff can claim for pecuniary damages for the financial loss
incurred from injuries, like, medical expenses, loss of earning capacity, rehabilitation expenses.
A plaintiff can claim non-pecuniary for any other damages other than financial damages
such as pain and suffering from the physical and mental injury, shortening of life expectancy,
loss of amenities caused for a loss of limb, loss of faculties.
Application
Applying the provisions of the Civil Liabilities Act 2002 for Betapharm Ltd to be liable
towards the potential plaintiffs each of them has prove that the three elements of negligence is
fulfilled. The three elements of negligence are- the duty of care was owed by the defendant
towards the plaintiff, the standard of care of a reasonable person had been breached by the
defendant, that harm was caused to the plaintiff by way of the conduct of the defendant.

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Applying the test for establishing duty formulated in the Donoghue v Stevenson case it
can be seen that Betapharm Ltd has a duty of care towards Alice who has suffered severe injuries
including a loss of a limb after taking the medicine manufactured by Betapharm. Alice can claim
for both pecuniary and non-pecuniary damages from Betapharm Ltd for the financial loss
incurred from her injuries, like, medical expenses, loss of earning capacity, pain and suffering
from the physical injury and loss of amenities caused for a loss of limb.
Applying section 31 of the Civil Liabilities Act 2002 and the judgment of the case
Jaensch v Coffey [1984] Betapharm would be liable for Bob’s nervous breakdown as Bob had
undergone shock after seeing Alice’s car getting crashed and her getting cut off. In this case Bob
would be eligible to claim for non-pecuniary damages because of his suffering from the mental
injury and loss of faculties by loss of two weeks of work.
Applying the ‘egg shell skull’ rule established in the case Smith v Leech Brain & Co
[1962] it can be seen that although Dan was aware of the side effects of the drugs yet Betapharm
would be liable for the loss of one day’s income he suffered because of developing severe
headache and nausea after taking the medicine. Dan would be eligible to claim non pecuniary
damages from Betapharm Ltd for loss of a day’s income.
By applying the judgment of the case Esanda Finance Corporation v Peat Marwick
Hungerfords [1997] it can be said that Betapharm would not be liable towards the loss of
Elizabeth as the loss was not foreseeable.

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Conclusion
Thus from the above discussions it can be concluded that Betapharm Ltd is liable towards
three of the potential plaintiffs, namely, Alice, Bob and Dan. However Betapharm is not liable
towards Elizabeth.

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Reference
Civil Liabilities Act 2002
Donoghue v Stevenson [1932] All ER 1
Esanda Finance Corporation v Peat Marwick Hungerfords [1997] 188 CLR 241
Jaensch v Coffey [1984] 155 CLR 549
Smith v Leech Brain & Co [1962] 2 QB 405