Business Law Assignment on Negligence and Misstatement Analysis

This assignment analyzes two business law scenarios. The first case involves a claim of negligence against a sushi bar for a customer's illness caused by a cockroach in the sushi. The analysis applies the Caparo test, examines breach of duty, causation, and remoteness of damages, concluding that while negligence exists, certain damages are too remote for a successful claim. The second case assesses a claim of negligent misstatement against an individual who provided advice on purchasing a restaurant, resulting in financial losses. The analysis considers the principles of Spartan Steel & Alloys Ltd v Martin and Hedley Byrne & Co v Heller, concluding that a claim for negligence can be made, although the advisor's role as a non-professional may affect the outcome.

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

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BUSINESS LAWS
Issue
Whether Norm can bring a claim for damages under the law of negligence with respect to the
injury caused to him against Yokohama Sushi bar.
Rule
The contemporary law of negligence had been established via Donoghue v Stevenson [1932]
AC 562. A claim in relation to negligence would only succeed in the court of law if the plaintiff
provides that the defendant had towards them a “duty of care”, there was a breach of such duty,
damages resulted out of the reach and the injury was not very remote.
Duty of care
The type of injury which has been caused is to be considered to indentify the nature of test which
should be applied to find out a duty of care. Injury in relation to property and personal injury is
analyzed by the application of “caparo test”. Caparo Industries pIc v Dickman [1990] 2 AC
605 is the case where this test had been provided. In this case it had been stated by the court that
there is no duty of care owed where there is any sufficient proximity between the plaintiff and
the defendant. The test analyzes reasonable forseeability of injury and proximity between the
parties. Where the parties are within proximity and the injury can be foreseen then there is a duty
of care.
Breach of duty
The test which needs o ne applied to find out if the defendant is in contravention of the duty is
objective. The case of COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB
LTD [2004] HCA 29 discussed this test. The defendant is in contravention of the duty where

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there is failure to meet the standards set out by law in relation to the care to be taken. The
objective test signifies that there is requirement of meeting the standards of a reasonable person.
However this test can be varied in certain situation such as it was done in Condon v Basi [1985]
1 WLR 866 where a amateur player cannot be adjudged according to the standards of a
professional player.
Causation
The general test for indentify causation in a situation is the “but for” test as derived from the case
of Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. The harm must be a result of
the breach of duty. The harm would not have taken place but for breach of duty for the
defendant.
Remoteness of damages in negligence
In the case of Re Polemis & Furness Withy & Company ltd. [1921]3 KB 560 the court
clarified that the not all injuries which the plaintiff has suffered can be compensated under
negligence. The loss which results out of the direct consequences of the injury would be allowed
to be recovered. However this rule had been overruled by the remoteness test as provided by the
case of The Wagon Mound no 1 [1961] AC 388 where damages which cannot be foreseen and
are too remote cannot be recovered.
Application
In this case the Norm will be considered as a plaintiff and he has suffered the injury and
Yokohama Sushi Bar would be considered as a defendant as a claim is to be brought against
them. The plaintiff will succeed in relation to the claim of he is able to provide that defendant

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had towards him a “duty of care”, there was a breach of such duty, damages resulted out of the
reach and the injury was not very remote. Duty of care for Injury in relation to property and
personal injury is analyzed by the application of “caparo test”. Thus if there is sufficient
proximity between Norm and Yokohama there will be a duty of care owed. In this situation it can
be stated that from the position of Yokohama it is can be foreseen that anyone who consumes the
defective sushi can be injured. thus a duty of care is owed by Yokohama to Norm as per the
application of the case of Caparo Industries pIc v Dickman. The defendant is in contravention
of the duty where there is failure to meet the standards set out by law in relation to the care to be
taken. The objective test signifies that there is requirement of meeting the standards of a
reasonable person. A reasonable person would have ensured that there is no cockroach in the
sushi. Thus the duty of care had been breached as per the application of the case of COLE V
SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD. To establish causation the
harm must be a result of the breach of duty. The harm would not have taken place but for breach
of duty for the defendant. Here Norm would not have been ill if there was no cockroach in the
sushi and causation is identified as per the application of the case of Barnett v Chelsea &
Kensington Hospital. Damages can only be obtained as per the Wagon Mound no 1 if they can
be reasonably foreseen and are not “too remote”. In this situation t can be stated that it would
not be foreseeable to Yokohama or any reasonable person n their position that a person can meet
an accident by consuming a cockroach. It would also not be foreseeable for Yokohama to known
that Norms mother would develop a phobia. Thus these damages can be regarded as too remote
and a claim against them cannot be made.
Conclusion

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There is negligence on the part of Yokohama but the claim would only be limited to the illness as
other damages are too remote
Answer 2
Issue
Whether a negligent misstatement has been made by Jack n relation to Max and Cameron
Rule
According to Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502, in normal
circumstances a person is not imposed with a duty of care in relation to avoiding a loss to another
person which is in relation to a “purely economic loss”. This is a kind of loss where there is no
relationship between the financial loss caused with any injury or damages of a personal nature or
a property.
This rule is subjected to a few exception one of which have been provided in the case of Hedley
Byrne & Co v Heller [1963] 3 WLR 101. This case signified that the damages can be claimed
against pure economic losses which such loss is a result of a negligent mis-statement rather than
a negligent action. The case introduced the idea of “assumption of responsibility”. In the case the
plaintiff wanted to verify the financial condition of a client from the defendant bank. The bank
stated that the financial condition was good in relation to general business engagements.
However the client was subjected to liquidation and the plaintiff had incurred a loss of £17,000
on contracts. The court stated in his case that there was "sufficiently proximate" between the
parties to impose a duty of care under tort law on the defendant. The provisions had been
affirmed in the case of SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385.

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On the other hand in Mutual life and citizen's Assurance Co Ltd V Evatt [1971] AC 793 the
court stated that there was no duty of care on a part of a person who has provided an advice out
of its professional capacity.
Application
In the given situation it has been stated that Max has taken advice from Jack for the purchase of a
restaurant which is near Jack’s restaurant. However the advice has not been effective thus there
has losses have been suffered by Max and Cameron. In the given situation the plaintiff is Max
and Cameron and the defendant is Jack. Although the loss here is pure economic loss the general
rule of Spartan Steel & Alloys Ltd v Martin will not be applied as there is a negligent
misstatement. The provisions of Hedley Byrne & Co Ltd v Heller & Partners Ltd as discussed
above have set a precedent that in case of a negligent misstatement a claim for negligence can be
made. In this case it can be stated that the plaintiff had relied on the advice provided by the
defendant to purchase the restaurant just like in the case of SHADDOCK V PARRAMATTA
CITY COUNCIL where the plaintiff had purchased a property relying on the advice of the
defendant and the court held the defendant liable for the loss faced by the plaintiff. Thus here
also Jack can be held liable for the loss which have been incurred by Max and Cameron as they
relied the advice provided by Jack to purchase the restaurant. However in the given situation if
the provisions of the case of Mutual life and citizen's Assurance Co Ltd V Evatt are applied
where it was stated that that there was no duty of care on a part of a person who has provided an
advice out of its professional capacity it can be derived that there is no duty owed by Jack as he
is not a professional financial advisor
Conclusion

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Thus in this case Max and Cameron cannot make a successful claim against Jack

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References
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Caparo Industries pIc v Dickman [1990] 2 AC 605
COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD [2004] HCA 29
Condon v Basi [1985] 1 WLR 866
Donoghue v Stevenson [1932] AC 562
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Mutual life and citizen's Assurance Co Ltd V Evatt [1971] AC 793
Re Polemis & Furness Withy & Company ltd. [1921]3 KB 560
SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385
Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502
The Wagon Mound no 1 [1961] AC 388