01/02/2015

Chapter1:TheAustralianLegalSystem
BusinessLaw
Thestudyofbusinessinvolveslearningabouthowtodealwiththeriskand
uncertainty.Competitiveriskisbasicallytherisktakenonbyabusinesswhentheyproducea
productastheirproductcouldbecomeinferiororobsoleteifabetterproductisproducedby
anotherbusiness.Thisistheriskthatliesattheheartofthemarketandcannotberemoved
withoutchangingthesystem.
Economicshasshownthatencouragingcompetitiveriskisawaytoimprove
economicwellbeingofpeople.Itencouragesproducerstoconstantlyimproveproducts,
pricesandservices.
Theroleoflawistoensurethattheriskstakenonbyabusinessarecompetitiverisks
notsystematicrisksthatarecapableofthreateningtheentirebusinessindustry.Thelaw
providesasystematicframeworkwithinwhichthecompetitiveriskisplayedout.
Twofundamentalexamplesofsystemicriskarebusinessproducingproductsthat
causeharm,andbusinessesfailingtohonourtheirpromises.Productliabilitylaws(which
dealwithharmfulpeople)andcontractlaws(whichdealswithpromises).
RuleofLaw
Theruleoflawmeanstheoppositeofthearbitrarygovernment.Thelawappliesto
everyone,equallyanditispredictable.Thelawshouldnotdiscriminateinfavourofone
groupofcitizens.Thelawensuresasystemofstableruleswhichenablesbusinessestoplan
forthefuture.
Law
Lawisanyrulethatacourtoflawwillenforce.Thecourtsapplyorrejectasuggested
lawonthebasisofitssource.Therearetwosourceswhicharecapableofprovidinglegally
enforceablerules:parliament(statuelaw)andthecourts(judgemadelaw).
Federalism
InAustralia,powerofmakingbindinglawsisdividedbetweentheCommonwealth
Parliamentandthevariousstateparliaments.TherelationshipsbetweentheCommonwealth
andthevariousstatesofAustraliaisgovernedbytheprovisionsoftheConstitutionAct.
Thisrelationshipiscalledfederalism,meaningthatthestatesretainallthosepowers
thathavenotbeenspecificallyhandedovertotheCommonwealthParliament.The
CommonwealthParliamentmayonlymakelawsregardingthefollows:
1.ThosematterssetoutintheConstitution,primarilys51;or
2.MatterswhicharenecessarilyincidentaltothematterssetoutintheConstitutionAct;or
3.ThosematterswhichhavebeenreferredtotheCommonwealthbythestates.
IftheCommonwealthParliamentattemptstopassalawthatisbeyonditspower,such
alawisunconstitutionalandofnoeffect.

TherearecertainareaswheretheCommonwealthandstateparliamenthave
concurrentpowers.Eachmakelawswithrespecttomatterscoveredbytheseconcurrent
powers.However,ifthereisaconflictbetweenthefederallawandstatelaw,thefederallaw
shallprevail:CommonwealthConstitutions109.
AlawpassedbytheparliamentwhetherstateorfederaliscalledtheActof
Parliament.Actsarealsocalledstatuesandthebodyoflawthatcomesfromparliamentis
calledstatutorylaworlegislation.
JurisdictionalDifficultiesUnderFederalism
Anexampleoflegislativecomplicationsthatcanariseoutoffederalsystemsiscompanylaw.
EnhancementoftheCommonwealthspowerscanonlytakeplacethroughareferendumbut
referendumsareusuallycostlyandunlikelytobesuccessful.
TheCompetitionandConsumerAct
CommonwealthParliamentpassedtheTradePracticesAct1974(nowcalledtheCompetition
andConsumerAct).Itaffectedthefollowingareas:
1. Advertisingandpromotionalactivities
2. Saleofgoodstoconsumers
3. Providingservicestoconsumers
4. Liabilityfordefectiveproducts
5. Pricefixingandotheranticompetitiveagreementsbetweencompetitors;and
6. Distributionofgoods
However,theCommonwealthdoesnothavethepowertorespectalladvertisingetc.sothere
hadtobebroadlawsmadethatneededtobecoveredbytheStateParliamentstomakesure
theSoleTraderswerecovered.
BusinessNameRegistration
CommonwealthParliamentnowmaintainsanallAustraliabusinessnameregisterwherethe
businessownersregistertheirbusinessandtheirnames.Thispowerwasdesignatedtothe
CommonwealthParliamentbytheStateParliamentstomakethetaskeasierandlesstedious.

Chapter2:LiabilityforDefectiveProducts

LiabilityforNegligence
Negligenceisatortacivilwrongrecognisedbycourtswhichentitlestheinjuredpersonto
compensation(calleddamages)furtherexamplesinclude,trespass,assault,defamationand
nuisance.Intheearlydays,anydamagesufferedbytheconsumerorbuyerofaproductcould
onlybetakenuptotheseller.Ifthesellerwasntthemanufacturerthenthemanufacturer
couldnotbesold.Theonlyexceptiontothiswasifthemanufacturerwasdangerousandthe
manufacturerwasawareofthisfact.Inthiscase,themanufacturerwasregardedasbeing
fraudulent.Gradually,moreandmoreproductsbeingproducedwereprepackagedandhence
leftlittleornoroomfortheretailertointerveneandthenarosetheneedstoperhapsapply
liabilitytothemanufacturerforhisnegligence.Thelawneededtobefairandnottoosevere
todriveoffmanufacturersfromproducinggoods.

DonoghuevStevenson

Facts:Stevensonmanufacturedsoftdrinkswhichweresoldindarkopaque
bottles.DonoghuesfriendboughtherabottleofStevensonssoftdrinkfroma
retailer.Donoghuedranksomeandfoundremainsofdecomposingsnail.She
sufferedshockandgastroenteritis.Asshedidntbuythedrinkherself,shecould
notsuetheretailerforbreachofcontract.ShesuedStevensonforthetortof
negligence.Stevensonarguedthattherewasnodutyofcareowedbyhimto
Donoghueastherewasnocontractbetweenthem.
Issue:DoesamanufacturerlikeStevensonoweadutyofcareunderthelawto
thoseinjuredbyhisproductsandunderwhichcircumstance?
Decision:HouseofLordsliabilityfornegligencedidnotdependonacontract.
Amanufacturerwhosoldaproductsuchasasealedbottleofsoftdrinkinwhich
therewasnoneedforintermediateexaminationowedadutyofcaretoits
consumerstotakereasonablecareinitsproductionbecauseitwasreasonably
foreseeablethatifsuchcarewasnottaken,theconsumercouldbeinjured.
Theapplicationofliabilityisnotonlylimitedtomanufacturersbutalsoother
professions.
InsuranceIndustryReforms
Insurancecompaniesarguedthatthelawhadbecomeoverprotectiveandthatthe
ratesofinsurancepayoutswererisingalarmingly.TheAustralianstatesandterritories
enactedlegislationthatallowedtherestrictionoftheamountofdamagedbyimposingcaps
foranexample.
ElementsofaNegligenceAction
Therearethreeseparateelementsthatmustbeprovedinanegligenceclaim.Although
theelementsareseparateforthepurposeoftheclaim,theyareallconceptuallyrelated.There
arealsoanumberofdefencesthatcanbearguedbyadefendant.
(1)TheDuty:Didthedefendantowetheplaintiffadutytotakereasonablecareand
avoidtheinjurythatoccurred.
Thehouseoflordsmadeitveryclearthatnomatterhownegligentthepersonis
(manufacturerorotherwise)theydonotoweadutyofcaretoeveryone.
Reasonablecaremustbetakentoensurethatactsoromissionswhichare
reasonablyforeseeablylikelytoinjureyourneighbourareavoided.Theneighbour
isthensomeonewhoissocloselyanddirectlyaffectedbutwhenthemanufacturer
orotherwisewasthinkingoftakingactiontheycouldhaveseenthemgetting
damaged.Thetestfordutyofcareisnotjustofreasonableforeseeabilitybutalso
oftheplaintiffsabilitytoexercisepersonalresponsibility.Thequestionwhethera
dutyofcareexistsisadecisionoflawandhencedecidedbythejudgenotthe
jury.

GrantvAustralianKnittingMillsLtd
Facts:Dr.Grantsuffersseveredermatitisafterwearingsomeunderwear
manufacturerbyAKM.Thiswascausedbecauseofthepresenceofexcess
sulphiteswhichareharmfultotheskin.Theyweresupposedtobewashedout
beforethatprocesswascompleted.Dr.Grantdidnotwashtheunderwearand
suedAKMfornegligence.Healsosuedtheretailerforbreachofcontract.
Issue:DoesAKMoweadutyofcaretoDr.Grant?

Decision:TherewasadutyofcarethatwasowedbyAKMbecausetheyhadnot
takenthereasonablecareinavoidingthesulphites.
(2)TheBreach:Didthedefendantfailtoexercisetherequiredstandardofcare?
(3)TheDamage:Weretheplaintiffslossescausedbythedefendantsnegligenceand
werethelossesreasonablyforeseeable?
Manufacturersalsooweadutyinappropriatecircumstancestotheinnocent
bystanders.Itisnotimportantthatthepreciseinjurybereasonablyforeseeablebutjustthe
factthatinjury(orevent)wasforeseeableisenough.Theinjuryoreventmustbefancifulor
farfetched.
Thereisadutyofcareowedbythedistributorsoftheproductstocustomers,end
usersandbystanderswhoareinjuredbytheproductstheysell:
McPhersonsLtdvEaton
McPhersonswasalargehardwareretailoutletwhichsoldmillboardscontaining
asbestos.McPhersonspurchasedthemillboardsfrommanufacturers.MrEaton
wasemployedbythecompanythatusedthesemillboardsintheconstructionof
heaterboxesusedinairconditioning.MrEatonsjobrequiredhimtocutthe
millboardandworkwiththepieces.Hediedasaresultofexposuretoasbestos.
HiswidowsuedMcPhersonsastheywereliableforthedamagessufferedbyMr
Eatononthebasisthatavendorofretailgoodsowedageneraldutyofcareto
thepublic.AccordingtothetribunalMcPhersonsoughttohaveknownofthe
dangerofasbestosandfailedtowarnitscustomers.
Issue:Doesaretailerowedutyofcarefortheproductsitsellsandunderwhat
circumstance?
Decision:NWSCourtofAppealheldthatavendordoesnotautomaticallyowea
dutyofcaretopurchasersandendusers.Thecircumstanceonwhichthe
establishmentofdutyisbasedonthenatureofthegoodandthelevelofrisk.In
thiscase,theissuewasifthevendorknewofthedangersofasbestosinhalation
andthatthecuttingofmillboardsmightreleasefatalquantitiesofasbestos.
Dutyofcareowedbyserviceproviderssuchasrepairersandinstallersistreatedin
thesamewayasmanufacturers.InStennettvHancockandPeters,arepairerwasliabletoa
pedestrianwhowasinjuredwhenawheelcameoffavehiclerepairedbythedefendant.
Dutyofcareowedbypropertyowners:
AustralianSafewayStoresPtyLtdvZalzuna
Facts:ZalzunaowedasupermarketownedbySafeway.Thedaywasrainyand
thesupermarketwascoveredwithvinyltiles.Owingtothenumberofcustomers
thathadenteredthepremises,thefloorwaswetandslippery.Zalzunaslipped
andwasseverelyinjured.ShesuedSafewaybutSafewayarguedthatnodutyof
carewasowedinthecircumstance.
Issue:Doesaretaileroweadutytoitscustomerstotakereasonablecaretonot
injurethemwhenontheretailerspremise?

Decision:Thenormalrulesofnegligenceappliedtothecaseofpropertyowners
andthepersonsinjuredontheproperty.Safewaywasoperatingastore.Zalzuna
wasacustomer.TherelationshipbetweenSafewayandZalzunasatisfiedthe
neighbourtestfordutysetoutinDvS.Therefore,Safewayowedadutyto
ZalzunatotakereasonablecaretoavoidforeseeableriskofinjurytoZalzuna.
Wheretheharmiscausedbyafailuretocontroltheactionsofthirdparties,itwillbe
difficulttoestablishadutyofcare.
Dutyofcareowedbyroadusersisthemostcommonuseoftortofnegligence.All
roadusershaveadutyofcaretotakereasonablecarenottocauseforeseeableinjury.
DutyofcareFailingtoActIngeneralthereisnodutyofcaretoprotectanother
humanbeingfromharm.Adutymayarisewhenthereisaspecialrelationshipbetweenthe
plaintiffandthedefendant.ThedoctorofapatientwhohasHIVisunderthedutytoinform
thepatientspartneroftheirconditiondespitethefactthatthepartnerisnotapatientofthe
doctors.Also,generallythereisnodutytocontrolapersonfrominflictingharmupon
anotherperson,unlessthedefendantisincontroloftheperpetratorsuchasparents.

ModburyTriangleShoppingCentrePtyLtdvAnzil
Facts:ModburyownedashoppingcentrecalledTheCentreinAdelaide.Anzil
wasemployedasamanagerbyFocusVideowhichleasedpremisesinThe
Centre.TheCentrehasalargeoutdoorareaforcarparking.Thevideoshop
facedthecarpark.Nearbytherewereallhoursautomatictellermachines.The
lightswentoutat10pmandAnzilclosedthestoreandwalkedtohiscaratabout
10.30pmwherehewasattackedbythreeunknownmenandsufferedserious
injuries.AnzilsuedModburyfordamages
Issue:Doesapropertyowneroweadutyofcaretothoseinjuredonitsproperty
bythedeliberateactsofthirdperson?
Decision:Ingeneral,thereisnodutytocontrolpersonsfrominflictingharm
uponothers.Thisgeneralrulemaybedisplacedwherethereisahighdegreeof
certaintythatharmwillfollowfromalackofaction.Inthiscase,however,there
wasnosuchdegreeofcertainty.Therefore,Modburywasnotliable.

ClubItalia(Geelong)IncvRitchie
Facts:ClubItaliawasconductingadebutanteball.Someofthepatronswere
drinkingheavilyandlookingfortrouble.AmancalledHoltonandhisgroup
seemedtobethesourceofmostproblems.Theclubcalledthepoliceandtwo
officerswalkedin.AsthenightprogressedHoltonbecamemoreandmore
aggressiveandconsumedmorealcohol.Therewasahugebrawlandthepolice
werecalledin.OneofthepoliceofficerswasRitchie,theplaintiff.Thepolice
werenottoldthatthesituationdeterioratedintoabrawl.Whentheyarrivedthey
wereattackedandRitchiewasseriouslyinjured.Morepolicearrivedandfour
officersweretakentothehospital.Ritchiesuedtheclubfornegligence.
Issue:ShouldadutyofcarebeappliedtoClubItalia?

Decision:HoltonwasunderthecontroloftheClubtosomedegree.Hewas
allowedtomisbehave,outofcontrol,whenheshouldhavebeenkeptunder
controlbytheClubwhohasinvitedhimthereforthepurposeofthebusiness.It
alsocontinuedtosellliquortothepatrons.

JaenschvCoffey
Facts:MrCoffeywasseriouslyinjuredinaroadaccidentcausedbyJaensch.He
wastakentothehospital,MrsCoffeydidnotwitnesstheaccidentbutshesuffered
psychiatrictrauma(anxietyanddepression)asaresultinpartfromseeingher
husbandinthehospitalandinpartbecauseofwhatshewastoldaboutthe
injuriesandprognosis.ShesuedJaenschfornegligence.
Issue:DidJaenschoweadutyofcaretoMrsCoffeytoavoidcausing
psychologicalharm?
Decision:ThecourtdecidedinfavourofMrsCoffey.

TamevNewSouthWales
Facts:AfteracaraccidentforwhichshewasnottobeblamedMrsTamewas
requiredtotakeabloodalcoholtest.Shehadnoalcoholinhersystembutthe
policeofficerbymistakemadeanotethatherreadingwas0.14.Thisisavery
highalcoholreadingandwascorrectedamonthlater.ButduringthattimeMrs
Tamedevelopedapsychoticdepressivestate.Shesuedthepoliceofficerandthe
stateofNSW.
Issue:Didthepoliceofficeroweadutyofcare?
Decision:Theydidnotoweadutyofcarebecausefirstly,adutytoprotectfrom
emotionaldisturbanceandpossiblepsychiatricillnesswasincompatiblewitha
policeofficersdutytomakeareportofincidentsandinvestigations.Furtherit
wasnotreasonablyforeseeablethatapersoninthepositionofMrsTamewould
sustainarecognisablepsychiatricillnessfromaclericalerrorthathadbeen
identifiedquickly.

AnnettVAustralianStationsPtyLimited
Facts:JamesAnnettwas16whenhestartedworkingasajackarooonthe
defendantscattlefarm.Jamesmotherwastoldbythedefendantthathewouldbe
underconstantsupervision.However,sevenweeksafterarrivingatthe
defendantsproperty,Jameswassenttoworkaloneataremoteproperty.Some
timelater,theAnnettswereinformedthatJameshaddisappeared.Fivemonths
latertheywereinformedthatabodyhadbeenfoundinthedesert.Jameshaddied
fromdehydration,exhaustionandhypothermiawhenhiscargotboggeddown.
Boththeparentssufferedfrompsychiatricinjury.Theyclaimeddamagesagainst
thedefendant.
Issue:DidtheAustralianStationsoweadutyofcaretonotcausementalpain
andinjury?
Decision:Thecourtheldthatthedefendantowedadutyofcaretotheparents.In
decidingthatthedefendantowedadutyofcaretotheAnnetttoavoidinflicting
mentalinjurythecourtrejectedthenotionsthattheshockhadtobesuddenor
thattherehadtobeaclosephysicalconnectionbetweentheincidentgivingrise
tothepsychiatricinjuryandthesufferingoftheinjury.

DutyofCareThedifficultissueofpureeconomicloss