LAW100 Business Law Case Study: Council Liability and Negligence

This case study delves into several business law issues arising from a scenario involving Ellen, a local council, and a landlord. The first issue examines whether the council can be sued for negligent advice provided by its employee, potentially leading to vicarious liability. The second issue assesses whether Ellen can be sued by the landlord for non-payment of rent, constituting a breach of contract. Finally, the third issue evaluates the council worker's liability for making a negligent misstatement towards Ellen, focusing on the elements of duty of care, breach, and resulting damage. The analysis applies relevant legal principles and case precedents to determine the potential legal outcomes for each party involved. Desklib offers a wide range of solved assignments and past papers for students.

Contents
Issue 1..............................................................................................................................................2
Relevant Law...............................................................................................................................2
Application of law........................................................................................................................2
Conclusion...................................................................................................................................2
Issue 2..............................................................................................................................................2
Relevant Law...............................................................................................................................2
Application of law........................................................................................................................2
Conclusion...................................................................................................................................3
Issue 3..............................................................................................................................................3
Relevant Law...............................................................................................................................3
Application of law........................................................................................................................3
Conclusion...................................................................................................................................4
Reference List..................................................................................................................................5

Issue 1
Can the council be sued by Ellen for the advice received by her through its employee?
Relevant Law
When any employer hires an employee, then, any act carry on by an employee within
employment and as per the guidance of the employer will make an employer liable under
vicarious liability. (Sykes 1988)
As per Hollis v Vabu [2001], the vicarious liability is applicable only when the parties are
sharing the relationship of an employer- employee. Any consequences that flow from any act
that is carried out by the employee within his employment and as per the guidance of the
employer, will make the employer liable. As per Deatons Pty Ltd v Flew [1949], if the acts are
of personal nature, then, it will not make the employer answerable for the consequences that
follow from such acts of the employee.
Application of law
Ellen on the basis of the advice of the employee of the council enters into a lease agreement with
the landlord. The advice was furnished by the employee when he was under the employment of
the council and the employee just had a glance at the computer (wherein the information is
gathered by the council) before the advice is provided. So, the acts of the employee are within
his employment course and are not personal in nature.
Because of the advice, Ellen suffered damages as the advice was given negligently as the
employee submitted that there would be no construction activity that will be carried near the
lease premises, but, in reality there was a construction work that will take place near the
premises. So, because of the acts of the employee, the council is held liable under the law of
vicarious liability.
Conclusion
The council is held answerable to the acts of the employee as the loss caused to Ellen is suffered
by her by relying on the negligent advice of the employee.
Issue 2
Whether the landlord can sue Ellen for non-payment of the rent?

Relevant Law
Every contract is an enforceable agreement. The parties must comply with the contract terms and
if there is breach then the aggrieved party can sue the defaulting party. If the term is violated
which is the contract essence and without which a contract cannot be performed, then, such
terms are called conditions and the aggrieved party can cancel the contract and sue for losses
(Poussard v Spiers and Pond (1876). But, when the terms are not essential then the contract
cannot be cancelled and only losses can be attained (Bettini v Gye (1876). (Latimer 2012)
Application of law
The employee when provide advice to Ellen, then, Ellen entered into a lease with the landlord.
But, later the advice was found to be negligent and the construction activity was carried on near
the site resulting in loss to the business of Ellen. Because of business loss Ellen was not able to
pay the rent to the landlord. Now, the non-payment of rent to landlord is breach of the core term
of the lease agreement. Thus, Ellen is in violation of a condition and thus the landlord can sue
cancel the contract and sue for damages.
Conclusion
Ellen can be sued for breach of contract for non-payment oif rent as it is a breach of a condition
and sue for damage.
Issue 3
Whether the Council worker is liable for making negligent misstatement towards Ellen?
Relevant Law
The Tort of negligence is a common law which emphasis on penalizing the defendant for his
wrongful acts which has caused damage to the plaintiff (Donoghue v. Stevenson [1932]. In
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] the law of negligence is applicable to the
wrongful advice. The main essential includes:
i. Duty of care – The defendant when giving advice must make sure that the
statements should not harm the plaintiff who is relying on such advice.

a. Proximity – As per Mutual Life and Citizens Assurance Co Ltd v Evatt (1968), the
defendant and the plaintiff must be close enough so that any advice should affect
the plaintiff.
b. Reasonable forseeability – The defendant is answerable to only that plaintiff who
he can reasonably foresee while furnishing advice.
c. Special relationship – As per Esanda Finance Corporation Ltd v Peat Marwick
Hungerfords (1997) the special relationship exists when the defendant have the
knowledge that the advice furnished by him will be acted and relied upon by the
plaintiff.
ii. Breach – As per Roads and Traffic Authority of NSW v Refrigerated Roadways Pty
Limited [2009] there is breach when the advice provided by the defendant is not as
per the level of care that is needed in any given situation.
iii. Damage – As per Lindeman Ltd V Colvin [1946] it is submitted that when the
defendant provide advice to the plaintiff, then, it is necessary that loss is inflicted
upon the plaintiff because of such advice.
a. Remoteness – As per San Sebastian Pty Ltd V Minister Adminstering The
Enviromental Planning And Assessment Act (1986) the loss that is caused because
of the wrongful advice is caused directly because of the advice.
b. Reasonability –The loss that is caused should be reasonably foreseen by the
defendant.
Application of law
Ellen wishes to open a mediation centre and thus finalized a premise. But, before entering into
the lease, she reaches to the local council to enquire whether any construction activity is carried
out within the area. The employee at the council submitted that there is no construction activity
that is carried out. The employee is aware that Ellen is relying on his advice and thus there is
special relationship amid the two including the element of proximity and reasonable
forseeability.
But, the duty is not met because the advice that Ellen must carry forward the lease is not
provided by taking adequate care, as the employee just had a glance at the computer before
giving the advice.

Now, when the wrong advice is given by the employee, then, based on the advice Ellen entered
into the lease which caused harm to Ellen as there was construction activity that was carried on
because of which Ellen losses business. Also, Ellen suffered nervous breakdown. The loss that is
caused to Ellen was because of the direct result of the wrongful advice (remoteness) and the
employee can foresee the same.
Conclusion
So, the duty of care that is imposed on the employee before giving any advice is not comply with
resulting in loss to Ellen. So, the council employee is negligent an Ellen can sue the employee.

Reference List
Books/Articles/Journals
Latimer, P 2011, Australian Business Law 2012. CCH Australia Limited.
Sykes, Al, 1988, The Boundaries of Vicarious Liability: An Economic Analysis of the Scope of
Employment Rule and Related Legal Doctrines, Harvard Law Review
Case laws
(Bettini v Gye (1876)
Deatons Pty Ltd v Flew [1949];
Donoghue v. Stevenson [1932].
(Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997).
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964].
Hollis v Vabu [2001];
Mutual Life and Citizens Assurance Co Ltd v Evatt (1968).
Poussard v Spiers and Pond (1876);
Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009].
San Sebastian Pty Ltd V Minister Adminstering The Enviromental Planning And Assessment Act
(1986).