Commercial Law Assignment: Analyzing Negligence Claim Against Council

This commercial law assignment analyzes a case where Peter is making a negligence claim against Wollongong Council for economic loss. The case revolves around the council's failure to disclose a road-widening proposal in a certificate provided to Peter before he purchased a block of land, which subsequently reduced the land's value. The assignment delves into the legal principles of negligence, including duty of care, breach of duty, causation, and remoteness, referencing key cases like Donoghue v Stevenson, Hedley Byrne & Co Ltd v Heller & Partners Ltd, and Perre v Apand. It examines whether the council owed Peter a duty of care, considering factors like vulnerability, assumption of reliance, and fiduciary relationship, and whether the council breached this duty. The assignment also explores the defense of contributory negligence and concludes that Peter may recover economic loss. References to relevant legal cases are provided.

Running head: COMMERCIAL LAW
Commercial Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Issue.................................................................................................................................................2
Rule..................................................................................................................................................2
Application......................................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

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Issue
Whether Peter can make a claim against Wollongong Council for negligence for economic loss
Rule
In Donoghue v Stevenson [1932], the court ruled that if an act or omission of a person
affects the wellbeing of another person, the aggrieved person is considered as the neighbor and
the person whose conduct or omission affects is said to owe a duty of care to the aggrieved
person. The negligence tort is the failure of a person to exercise care obligation towards the
neighbor as per the neighbor principle established in the Donoghue’s case.
The reasonable standard of care that must be exercised is said to be breached when the
defendant could reasonably foresee the injury that the actions of the defendant is likely to cause.
The following essential elements of negligence must be satisfied to bring negligence claims.
Duty of care- the defendant must owe a care obligation towards the plaintiff and must ensure that
the reasonable standard of care is maintained by undertaking every possible measure to prevent
the harm or injury that is likely to be caused to the plaintiff due to his actions (Epstein and
Sharkey 2016).
Breach of duty of care- The defendant must have contravened the care obligation and have
caused injury to the plaintiff.
Causation- the injury caused to the plaintiff was a direct cause of the actions of the defendant. In
Cork v Kirby Maclean Ltd [1952], the court set out the ‘but for’ test, which determined that, but

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for the negligent act, the plaintiff suffered loss. If it had not taken place, the plaintiff would not
have suffered losses.
Remoteness- the loss suffered must not be too remote and was reasonably foreseeable as ruled in
Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967].
Economic loss in negligence
In Australian law, the negligence claims for economic loss where the plaintiff has
suffered monetary loss but has not been physically injured, was usually not granted by the courts
(Gilbert and Gilbert 2017). A pure economic loss takes place when the plaintiff suffers a
financial loss resulting a personal injury or damage to property. Such financial losses include
loss of earnings, loss of profitability.
Economic loss caused by negligent words
In Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964], the law was overturned and the
court permitted recovery of pure economic loss that was an outcome of negligent words.
In Hedley Byrne’s case, the courts ruled that recovery for a pure economic loss may be
granted, if the plaintiff establishes a duty of care exists between plaintiff and defendant.
In determining whether a duty of care exists, the courts must consider the following factors:
a) Vulnerability- if the plaintiff is unable to undertake reasonable steps to avert the
negligence caused by the defendant, the defendant shall owe a duty of care. The court
shall consider the practical possibilities available to the plaintiff to prevent the
negligence;

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b) assumption of reliance- If the defendant was aware that the plaintiff relied on the
responsibility of the defendant, he shall owe a duty of care;
c) fiduciary relationship- a fiduciary relationship of trust and confidence must exist between
the parties;
d) voluntary assumption of risk- a voluntary assumption of risk (either implied or express)
must exist on part of the defendant;
Economic loss for negligent acts
In Catlex Oil v The Dredge Willemstadt [1976], the court held that recovery is possible if
the defendant was aware that his act of negligence is likely to cause economic loss to the
concerned plaintiff.
In Perre v Apand [199], the court held that proximity between the action of the defendant
and the loss suffered by the plaintiff can be determined, if defendant’s acts or omissions was
reasonably foreseeable and the plaintiff relied on the assumption of responsibilities.
Defenses
The defendant may use defense of contributory negligence by establishing that the
plaintiff also contributed to the negligent act and suffered loss or damages. The defense does not
exempt the defendant from his liabilities completely but reduces the amount of compensation to
be paid to plaintiff.
Application
On the facts here, in order to establish that the council owed a duty of care towards Peter
the elements mention in Headley’s case. Firstly, Peter obtained council certificate from

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Wollongong Council prior to the purchasing of the block of land where the council did not
mention about the road-widening proposal, which will reduce the size of the block. Although,
Peter did not go through the certificate prior to the purchase but even if the certificate had
mentioned about the road proposal, Peter would not have had any option but to purchase the
land. This establishes the vulnerability of Peter, as he was unable to undertake reasonable steps
to avert the negligence caused by the Council.
Further, the Council was in a position to mention about the road-widening proposal in the
certificate that it provided to Peter while he purchased the particular block of land, which gives
rise to fiduciary relationship of trust and confidence, as he trusted the council while obtaining the
certificate.
Furthermore, Peter relied on the certificate provided by the Council even though he did
not go through the certificate because even if he had read the papers, he would have purchased
the land, as the Council did not mention about the road-widening proposal. This establishes the
assumption of reliance factor.
Moreover, as per Catlex Oil’ case, the council was aware that Peter is purchasing the
particular block of land that was the part of the road-widening proposal and non-disclosure in the
certification would result in economic loss of Peter. Thus, the defendant assumed a responsibility
voluntarily to ensure prevention of economic loss. Peter would not have suffered economic loss,
but for omission on part of Council, he suffered loss.
Further, the reduction in the size of the land would reduce the value of the land; hence,
the economic loss due to the negligent omission on part of the Council was reasonably
foreseeable as per Perre’s case.

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Therefore, it can be stated that the Council owed a duty of care towards Peter, which it
has breached by not mentioning about the road-widening proposal in the certificate. The loss
suffered was reasonably foreseeable and within the knowledge of the Council and resulted
directly from the omission on part of the Council.
However, the Council may use contributory negligence in defense and state that the
plaintiff did not read the certificate while purchasing the land, which would have otherwise
averted the economic loss that he suffered. The defense does not exempt the Council from its
liabilities but will reduce the compensatory amount.
Conclusion
Peter may recover the economic loss committed by the Wollongong Council.

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References
Catlex Oil v The Dredge Willemstadt (1976) 136 CLR 529
Cork v Kirby Maclean Ltd [1952] 2 All ER 402
Donoghue v Stevenson [1932] UKHL 100, SC (HL) 31, AC 562
Epstein, R.A. and Sharkey, C.M., 2016. Cases and materials on torts. Wolters Kluwer Law &
Business.
Gilbert, R.J. and Gilbert, P.T., 2017. Maryland Tort Law Handbook. LexisNexis.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] 1 AC 617
Perre v Apand [199]) 198 CLR 180