Commercial Law: Analysis of Wollongong Council's Duty of Care

This case study analyzes a commercial law scenario involving Wollongong Council and its duty of care to Peter, who suffered financial loss after purchasing property based on information provided by the council. The analysis examines whether the council owed a duty of care, if that duty was breach...Read More

Commercial Law

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1.
Issue
Did Wollongong Council have a duty of care against Peter?
Rule
In order to protect people, property and monetary interest, the tort of negligence held the
party responsible for breaching its duty of case by not taking reasonable care. It is necessary
that the breaching party must have a duty of care. Negligence is established in case of breach
of such duty which causes physical or financial loss to another party. A person gets sick after
drinking from a bottle in which remains of a snail were present in Donoghue v Stevenson
(1932) AC 562. The court provided in its judgement that businesses have a duty to care to
ensure the safety of customers hence the defendant is liable for negligence. This case
established the ‘neighbour test’ which provides that a duty exists if a relationship of
proximity and reasonable risk of harm exist (Stephenson, 2012).
Application
Before making purchasing decisions, people read the certificate of Wollongong Council to
know about future projects, therefore, Wollongong Council has a duty of care for ensuring
that it provides complete information to parties. A relationship of proximity exit between
people and Wollongong Council and its negligence could cause harm to such parties.
Conclusion
Thus, Wollongong Council owes a duty of care to Peter.

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2.
Issue
Was the duty breached by Wollongong Council due to non-fulfilment of the standard of care?
Rule
The parties that owe a duty of care have to ensure that standards of care are taken by them to
avoid any injury to third parties. The court uses an objective test for determining a breach of
duty as given in Vaughan v Menlove (1837) 3 Bing. N.C. 467. The court provided that
complete reliance on best judgement is not enough and the breach should be judged by the
standard of a reasonable person (Keating, 2016).
Application
It is reasonable to think that people could face serious financial injuries if Wollongong
Council did not provide full information or misstate any fact in its certificate. From the
perspective of a reasonable person, the council should have included the information about
the major future project in the certificate.
Conclusion
Thus, the duty was breached by Wollongong Council due to not taking reasonable care.

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3.
Issue
Is the damages of Peter directly caused due to actions of Wollongong Council?
Rule
In case of negligence, the party is liable for only those losses which were foreseeable kind.
The Wagon Mound no 1 (1961) AC 388 case is a good example in which the House of Lords
provided that it is necessary to determine whether losses are caused due to direct
consequences and whether they were foreseeable (Broadbent, 2013). A party cannot claim for
damages if these elements are not fulfilled.
Application
The financial loss of $1 million is suffered by Peter because Wollongong Council failed to
disclose information about a major future project in its certificate. The risk of financial loss is
foreseeable for Wollongong Council.
Conclusion
Thus, the loss of Peter is not remote, and it happened as a consequence of the action of
Wollongong Council.

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4.
Issue
Does the defence of contributory negligence applied in this scenario?
Rule
If a person did not take reasonable care to protect himself from the loss, then he/she could be
held liable for contributory negligence based on which the court reduces the amount of
damages as per the contribution of the party. In Revill v Newbery (1996) 2 WLR 239 case, the
court reduced damages of the claimant because his actions directly contributed to the loss due
to lack of standard of care (Erbacher, 2017).
Application
Peter failed to maintain a reasonable standard of care by not reading the certificate of
Wollongong Council before purchasing his property. However, only he knows that he did not
read the certificate before making his purchasing decision, and due to lack of evidence to
prove Peter’s contribution, Wollongong Council cannot claim for contributory negligence.
Conclusion
Thus, the defence of contributory negligence did not apply in this scenario.

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5.
Issue
Does the defence of voluntary assumption of risk applied in this scenario?
Rule
If a party recognises and accepts a risk, then he/she cannot claim for damages based on the
defence of voluntary assumption of risk. In Smith v Baker & Sons (1891) AC 325 case, the
court held that if a person knows the risk yet still agrees to perform the action then later
he/she cannot claim for damages (Mullins, 2013). In order to implement this defence, three
elements are required to be fulfilled which include the agreement, voluntary acceptance and
full knowledge of the risk.
Application
Peter did not give voluntary acceptance to Wollongong Council regarding acceptance of the
risk. No agreement was established between parties and Peter did not know about the risk.
The parties fulfilled no element of the defence of voluntary assumption of risk.
Conclusion
Thus, the defence of voluntary assumption of risk did not apply in this scenario.

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6.
Issue
Can Peter demand damages from Wollongong Council for economic loss suffered by him?
Rule
In case of negligence, the aggrieved party can demand damages for “purely economic losses”
which include loss that did not result in physically injuring or damaging a person or property.
The court relies on ‘Caparo test’ to determine whether a party can demand economic losses;
the test was given in Caparo Industries Plc. v Dickman (1990) 2 AC 605 which determine a
duty based on reasonable foreseeability, proximity relationship and reasonable reason
(Robertson, 2013).
Application
Peter and Wollongong Council had proximity to their relationship, and the risk of economic
loss was foreseeable as well. Based on the relationship of parties, it is reasonable to impose
the duty of care on Wollongong Council.
Conclusion
Thus, Peter can demand damages for economic losses suffered by him due to the action of
Wollongong Council because there is a close relationship between parties and the risk was
foreseeable.

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References
Broadbent, A. (2013) Explanation and Responsibility. Critical Essays on" Causation and
Responsibility, 239, p.241.
Caparo Industries Plc. v Dickman (1990) 2 AC 605
Donoghue v Stevenson (1932) AC 562
Erbacher, S. (2017) Negligence and illegality. London: Bloomsbury Publishing.
Keating, G. (2016) Are Corporations Responsible Agents. Jotwell: J. Things We Like, p.344.
Mullins, G. (2013) Voluntary assumption of risk. Precedent (Sydney, NSW), (115), p.25.
Revill v Newbery (1996) 2 WLR 239
Robertson, A. (2013) Policy‐based reasoning in duty of care cases. Legal Studies, 33(1),
pp.119-140.
Smith v Baker & Sons (1891) AC 325
Stephenson, G. (2012) Sourcebook on Tort Law 2/e. Abingdon-on-Thames: Routledge-
Cavendish.
The Wagon Mound no 1 (1961) AC 388
Vaughan v Menlove (1837) 3 Bing. N.C. 467