Business Law: Case Study on Sam's Re-fuelling Business Liability

This case study examines the potential liabilities of Sam, who runs a re-fuelling service for aircraft, under tort law. It analyzes whether Sam is liable for damages incurred due to contaminated fuel, focusing on the principles of duty of care, breach of duty, and causation. The analysis applies the n...Read More

BUSINESS LAW
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Issue
The central issue is to determine whether Sam is liable for the respective damages incurred to the
potential plaintiffs based on the given case facts. The given facts need to be analysed in the
context of tort law.
Rule
There are three main conditions that need to be present in regards to the applicability of tort of
negligence. The first condition is presence of duty of care directed towards the plaintiff on behalf
of the defendant. This can be determined with the help of neighbour test. The second condition is
to ascertain whether there is breach of duty or not on the part of defendant by not taking essential
precautions in regards to avoid any foreseeable damages. The last condition is to determine the
presence of damages faced by the concerned plaintiff that have resulted due to the breach of duty
to care on behalf of the defendant (Davenport & Parker, 2014, p.75-76). A detailed description
regarding these three conditions is given below.
Neighbour test is considered an imperative test to determine whether a duty of care on part of the
defendant exists towards the plaintiff for the give situation or not (Harvey, 2009). According to
this test, neighbour is defined as any entity that the respective action doer considers may be
significantly affected or can be reasonable harmed by his/her selection of either action or
inaction for a particular scenario. In accordance of the verdict given in Donoghue v. Stevenson
[1932] AC 562 at 580, the duty of care would exist for the action doer only when the action or
inaction of the action doer can have the possibility to result some significant foreseeable
damages to the plaintiff. The court will examine various scenarios in order to decide whether the
incurred damages are foreseeable or not (Gibson & Fraser, 2014, p.53-54).
It is apparent from the above that action doer must undertake the essential measures in regards to
prevent any foreseeable damages for plaintiff. In this regards, it is imperative that defendant who
owes duty to care to the neighbour should also define the possible risk related to breach of duty
of care. This is because the breach of duty of care can result in significant damages and in this
regards, there is a possibility of loss of neighbour’s life and loss of asset and so forth. Breach of
duty of care arises when the action doer has not taken appropriate measures towards the
concerned plaintiffs in regards to minimize or prevent foreseeable risks as highlighted in Bolton
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v Stone [1951] A.C. 850, [1951] 1 All E.R. 1078 (Crosling & Murphy, 2009, p.67). Further, it is
essential to note that breach of duty of care would not be extended to the unforeseeable harms
which fall outside the domain of the foreseeable damages as apparent from the verdict of
Chapman v Hearse (1961) 106 CLR 112. It means there is possible risk that the neighbour would
suffer damages irrespective of the best duty of care due to the presence of unforeseeable
damages which lies outside the purview of tort law. Also, The level of care required to be
extended by the defendant would depend on the underlying scenario and the amount of damage
likely to be caused to the plaintiff (Lindgren, 2014, p.73-74).
There are number of forms in which damages can be incurred because of the breach of duty of
care by the defendant as evident from Jaensch v Coffey (1984) 155 CLR 549 case. One simple
way to determine whether the damages are incurred because of the breach of duty of care is to
find whether the respective damages would even be incurred if the defendant would have not
breached the duty of care ( Latimer, 2016, p.89). If the suffering of the damage is independent of
whether the duty of care is breached or not, then the defendant would not be held liable for the
losses suffered by the plaintiff. Further, it is essential to note that the domain of tort (breach of
duty of care) would not only restrict to the physical or financial damages but also comprises
emotional, mental damages (Davenport & Parker, 2014, p.81).
Application
It is apparent from the case facts that Sam is running a business of re-fuelling the aircraft at the
respective regional airport of New South Wales. In this business, it is Sam’s duty to care towards
the clients to check and provide best quality fuel to the aircraft so that the performance of the
engine can be maintained. This is because providing of inferior quality fuel can lead to engine
failure and loss of aircraft and hence adverse impact the interest of the airplane owners. Here,
Sam has not taken requisite measures of duty of care and due to his negligent behaviour (leaving
the lid open of the fuel tank because he was busy on call),the fuel gets contaminated. Also, Sam
has neither taken any measures to check the sample fuel nor made any representation to the
aircraft owners before fuelling to the aircraft. Hence, aircraft owners, pilots do not have any clue
related to the fuel contamination which can be potentially fatal. Consider the underlying damage
that negligence can cause, highest level of duty of care is expected on behalf of Sam. This is
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because presence of any contamination in the fuel can cause airplane clash and loss of life and
property. Thus, it can be concluded that breach of duty of care is present.
The aircraft owned by White Ltd has crashed and also significant damages have been suffered by
a Mercedes Benz. It is apparent that damages incurred to aircraft and Mercedes ($1 million of
aircraft and $75,000 of Mercedes) are foreseeable damages that can be prevented if Sam had
discharged the duty of care. Hence, it can be said that Sam is liable for the damages incurred to
both aircraft and Mercedes.
It is apparent that Same has informed the pilot of Blue Ltd aircraft that fuel is contaminated and
can result damages and hence, the flight get cancelled and no loss of property and life has been
incurred and therefore, no liability is applicable on Sam. Further, a passenger of Blue Ltd aircraft
was not able to reach Sydney and was unable to certify cargo ship owned by the Safmarine Ltd.
This has caused a damage of $250,000 to Safmarine Ltd. However, Sam is not liable for damage
of $250,000 because this loss is not a foreseeable damage.
It can be seen that Sam has clearly informed pilot of Green Ltd regarding the contaminated fuel.
However, pilot has ignored the warning and thus, aircraft has suffered a damage of $200,000. It
is apparent that Sam has informed the pilot but pilot has not listened his warning. Further, if the
pilot has listened Sam’s warning then the damages could easily be prevented. Therefore, in this
case, Sam is not liable for the damages because the damages has incurred due to the negligent
behaviour of the pilot.
Conclusion
It can be concluded that defendant Sam is liable for the damages incurred to aircraft of White Ltd
and the damages incurred by the Mercedes Benz. However, Sam is not liable for any damages
that have been incurred by Green Ltd and also by Safmarine Ltd.
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References
Crosling, G. M. & Murphy, H. M. (2009) How to Study Business Law (4th ed.). Sydney:
Butterworths.
Davenport, S. & Parker, D. (2014) Business and Law in Australia (2nd ed.) Sydney:LexisNexis
Publications.
Davenport, S. & Parker, D. (2014) Business and Law in Australia (2nd ed.). Sydney:Lexis Nexis
Publications.
Gibson, A. & Fraser, D. (2014) Business Law (8th ed.). Sydney: Pearson Publications.
Harvey, C. (2009) Foundations of Australian law (2nd ed.), Victoria: Tilde University Press.
Latimer, P. (2016) Australian Business Law CC (1st ed.). Sydney: LexisNexis Study Guide.
Lindgren, KE. (2014) Vermeesch and Lindgren's Business Law of Australia (12th ed.). Sydney:
LexisNexis Publications.
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