Corporation & Enterprise Law: Duty of Care and Negligence in NSW

This case study examines negligence and duty of care under New South Wales (NSW) law, focusing on two distinct scenarios. Part A analyzes a potential negligence claim against Harry and Will for breach of duty of care, outlining the elements required to establish negligence under the Civil Liability Act 2002, including the existence of a duty of care, breach of that duty, and resulting damages. It advises the injured parties, Meghan and Catherine, on their legal options and the potential for contributory negligence. Part B delves into the tort of negligent misstatement, assessing whether a financial advisor, Merlin, breached his duty of care to his clients, Pablo and his parents, by providing negligent financial advice that led to significant losses. The analysis considers whether a duty of care existed, whether the standard of care was breached, and whether the damages suffered were a direct result of Merlin's actions, concluding that Pablo and his parents have grounds for a claim of negligent misstatement. The study references relevant Australian legal principles and case law to support its analysis.

Page1
CORPORATION AND ENTERPRISE LAW
PART – A
A. Introduction
In NSW, a case of negligence can be registered under breach of duty of care when the
claimant can prove in a court of law that the negligent party either knew or was in a
position of knowing the risk of harm, and the precautions which a reasonable person
will take against the risk if faced with similar circumstances.
In this case study, Harry and Will can be charged under the prevailing Tort Laws in
Australia, although claims related to negligence in NSW are governed under the Civil
Liability Act, 2002 legislation as per Barker et al, (2012). A tort is considered under a
civil wrong and is separate from a breach of contract. Torts can be used for suing a
private individuals by another private individuals for countering the effects of a conduct
or wrong.
B. Definition of Negligence in New South Wales?
Under the NSW Civil Liability Act, 2002, negligence is defined as arising when an
individual does not exercise what should be reasonable care and skill. Hence, in case of
Harry and Will, a claim of negligence under NSW legislation will arise only when it is
proved beyond reasonable doubt that they had breached their common law duty of care
which they owed to the claimant(s) and which resulted or could have resulted in some
damage or injury, assert Bottomley et al, (2017).
C. Elements of Negligence
For making a claim in NSW of negligence, says Lunney, (2017), the claimants need to
prove one or all of the following three elements against Harry and Will, that:
1. A duty of care did exist between Harry and Will and the claimants;
2. Harry and Will breached their duty of care which they owed to the claimants; and
3. Damage or injury which was suffered by the claimants was caused by breach of
duty by Harry and Will.

Page2
D. Duty of Care
In NSW, duty of care under cases of negligence can only be established by proving the
type of relationship which existed between the claimant and the negligent party. Since
common law in NSW is under constant evolution, it keeps on increasing the duty of care
categories, assert Stewart & Stuhmcke, (2012). Hence, the courts follow the general
principle of duty of care which was cited in the case of Donoghue vs Stevenson, as this
case introduced the claim which people owed as duty of care to their neighbors. In
general, says Dyson (ed), (2015), NSW Courts recognize that a duty of care does exist
in case of following relationships:
 Patient to Doctor
 Tenant to Land Owner
 Visitor to Premises and Occupier of Premises
 Consumer to Producer of Goods
 Student to Teacher
 Pedestrian to Vehicle on Road
 Employee to Employer.
E. Breach of Duty of Care
A breach of duty of care will only happen when Harry and Will did not meet the
standard of care. Hence, as per Arvind & Steele (ed), (2012), in filing a case of
negligence against them in NSW, a breach of duty of care will be proved only when the
claimants can exhibit that:
 There existed a substantial risk of harm.
and
 Harry and Will knew, or could have reasonably known the risk of harm.
and
 Harry and Will would have taken reasonable precautions against the impending
risk if faced with same circumstances.
The NSW Courts, says Harlow, (2005), while deciding on the issue of reasonable
precautions would take into consideration one or all of the following factors:
 The severity of a likely occurring harm or damage.
 The difficulty levels of measures to be taken for avoiding the harm.

Page3
 The probability of harm taking place in case the negligent person did not take
care.
 Social benefits for negligent persons from the activity that caused the risk of
harm.
F. Advice to Parties
My advice to Meghan and Catherine being the two individuals who were subjected to
physical harm is that they should also have resorted to reasonable steps for prevent the
harm occurring to them. By this I mean they should have taken the required minimum
precautions for avoiding the degree of harm they suffered, as per Levy et al (ed), (2017).
They must also understand that court will take into consideration the effects of a breach
of duty of care on a case-to-case basis.
I must also put a word of caution to both the claimants that if it is proved that they
contributed to the harm suffered by them, they can be subjected to contributory
negligence which will reduce the amount of compensation. The amount equivalent to
contributory negligence will depend on how much negligence the person has
contributed for creating their own harm.
PART – B
A. Introduction
Duty of care, under the tort law, is a legal obligation and is imposed on an individual so
that he adheres to the standards of reasonable care while he performs acts which could
in one way or other harm others. While establishing the process when consider the
action of negligence, it is considered as the first requirement. Going further into the law,
assert Campbell & Lord (ed), (2018), one can come across tort of negligent
misstatement, which is defined as an “inaccurate statement, which is made honestly but
carelessly by an advisor having special skill or knowledge, usually in the form of an
advice to a party which does not possess those skills or knowledge."

Page4
B. Duty of Care
Under the prevalent laws in NSW, assert Bottomley et al, (2017), the onus of proving
that duty of care shall exist between the parties, falls on the plaintiff (Pablo and or his
parents) who have to establish one or all of the following three state tests –
1. Could Pablo and or his parents were reasonably in a position to foresee that the
decisions and or suggestions made by the defendant (Merlin) would become the
cause of harm/loss to them?
My Opinion
As a legal expert, I am in a position to foresee that the decisions/suggestions of
Merlin, while in a position of being a financial adviser by profession, are likely to
have an impact in a positive or negative manner on Pablo and or his parents.
2. Can there be any factual, physical or circumstantial connection between Pablo and
or his parents and Merlin?
My Opinion
I am of the opinion that a factual relationship between Pablo and or his parents
can be deduced as Pablo and or his parents had entered into a contract with Merlin
to be their financial adviser, as detailed by Stewart & Stuhmcke, (2012).
3. How vulnerable were the plaintiff (Pablo and or his parents)?
My Opinion
I can safely vouch that the risk exposure and or vulnerability of Pablo and or his
parents was quite high as they were totally relying on Merlin’s advice while
making investments based on the professional financial decisions of Merlin.
C. Standard of Care
Now that it has been ascertained that a duty of care was indeed established between
Pablo and or his parents and Merlin, my next step is to establish whether standard of
care was breached by Merlin, as per Barker et al, (2012). This shall be stablished by
observing Merlin’s conduct towards Pablo and or his parents and by following the
definition of Standard of Care as given in the Civil Liability Act, 2002 and I quote –
“An appropriate standard of care can be defined as the standard of care that an
ordinary, reasonable and prudent person would follow.” Unquote.
For establishing Merlin’s conduct, say Arvind & Steele (ed), (2012), the following basic
principles shall be taken into consideration –

Page5
 Risks inherent in Merlin’s conduct.
 Likely outcome and its severity if any of the risks materialize.
 Is Merlin’s conduct in line with existing standard of care?
 Did Merlin keep up with the changes in professional standards?
I do not find an affirmative answer to any of the above four principles. One of the
biggest flaw in Merlin’s conduct was that there were no investigative observations
posted while making the financial suggestions. In my opinion, a prudent financial
adviser, under the prevalent circumstances of his client, would have conducted a
thorough investigation before recommending any investments, as explained by Lunney,
(2017).
D. Damages Caused
The basic functional area of Torts is to find ways of compensating the victim. Hence, in
this case study, as per Dyson (ed), (2015), the first factor which the Court shall ascertain
is the loss suffered by Pablo and or his parents because of the actions of Merlin. While it
is an established fact that the funds became insolvent soon after being invested and
Pablo suffered huge losses, these losses can be considered by the Court as grounds for a
claim under the negligent misstatement when the standard of care was breached by
Merlin.
E. Conclusion
The plaintiff has ample proof to prove that Merlin not only kept his employer BENQ in
the dark, he breached the elements of negligence, which include –
ELEMENT OF FAULT
There is ample proof that Merlin committed the whole act intentionally and negligently.
ELEMENT OF ACTUAL DAMAGE
Plaintiff have been able to prove that financial losses were suffered as a result of the
actions of the defendant.
ELEMENT OF OBTAINING REMEDY
The law of Torts has concern of compensating the Plaintiff rather than punishing the
Defendant, hence the Court is to duty bound to put the Plaintiff back into the position
which they enjoyed before the wrongdoings committed by the Defendant, as per Levy et
al (ed), (2017).

Page6
In conclusion, I am totally convinced that Pablo and or his parents have suitable
grounds of making a claim under the Tort of negligent misstatement by Merlin.
LIST OF REFERENCES
Arvind, T.T. and Steele, J. (ed). 2012, Tort Law and the Legislature: Common Law,
Statute and the Dynamics of Legal Change. Bloomsbury Publishing, Oxford.
Barker, K., Cane, P., Trindade, F. and Lunney, M. 2012, The Law of Torts in Australia,
5th ed. Oxford University Press, Melbourne.
Bottomley, S., Hall, K., Spender, P. and Nosworthy, B. 2017, Contemporary Australian
Corporate Law. Cambridge University Press, Melbourne, VIC.
Campbell, L. and Lord, N. (ed). 2018, Corruption in Commercial Enterprise: Law,
Theory and Practice. Routledge, Oxon.
Dyson, M (ed). 2015, Comparing Tort and Crime: Learning from across and within
Legal Systems. Cambridge University Press, Melbourne, VIC.
Harlow, C. 2005, Understanding Tort Law. Sweet & Maxwell, London.
Levy, R., O’Brien, M., Rice, S., Ridge, P. and Thornton, M. (ed). 2017, New Directions
for Law in Australia: Essays in Contemporary Law Reform. ANU Press, Acton, ACT.
Lunney, M. 2017, A History of Australian Tort Law 1901-1945. Cambridge University
Press, Melbourne, VIC.
Stewart, P and Stuhmcke, A. 2012, Australian Principles of Tort Law, 3rd ed. Federation
Press, Annandale, NSW.