CASES

COMLAW101 LIABILITY IN CONTRACT

Calill v Carbolic Smoke Ball Co [1893] An ad (usually considered an invitation to treat) may, under rare circumstances, amount to a conditional offer contract between the advertiser (offeror) and any person who satisfies the conditions Ad: 100 reward to any person who still gets flu after using a carbolic smoke ball in the prescribed manner for a specific period of time. Furthermore, 1000 deposit made with a bank to demonstrate sincerity Held: ad was a binding conditional offer Held: company waived right of acceptance

And then, that supposing the ad was an offer and the performance of the conditions was acceptance of the offer, the acceptance should have been notified. Lindley LJ said this offer is a continuing offer Stevenson, Jacques & Co v McLean [1880] McLean: Can I get an offer for warrants on iron ore? Stevenson: 40s per ton in cash is the lowest price; offer open till Monday 9.42 AM McLean: Please wire whether you would accept forty for delivery over 2 months, or if not, the longest limit you could give 1.25 PM Stevenson: [no answer]; sold to someone else McLean: [without knowing] I accept the original offer Stevenson refuses to deliver the iron; McLean brings an action for nondelivery Held: McLeans telegram was not a rejection, but an inquiry about whether the terms could be modified. Although McLean could revoke the offer before Monday, that was not effective until it reached the plaintiffs.

Balfour v Balfour [1919]

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Held that there is a rebuttable presumption against an intention to create a legally enforceable agreement when the agreement is domestic in nature. 1915, Wife got sick and had to stay in England Balfour had to go back to Ceylon to work, but promised her 30 a month until he came back They drifted apart, and Balfour wrote saying it was better they remain apart 1918, wife sues to keep up with the monthly 30 payments; obtains a decree nisi and an order for alimony (he must support her) CoA unanimously held there was no enforceable agreement

Re McArdle [1951] Plaintiff carried out improvements on a house owned by her mother-in-law Later it was agreed that the plaintiff would be paid for the work Held: No Contract the mother-in-laws promise to pay was not supported by consideration because the work the plaintiff had done was not done in relation to the promise (not part of the same transaction)

LIABILITY FOR NEGLIGENCE Meah v McCreamer (No. 2) [1986]: Careless driver, crash, passenger injured later became a rapist Rape victims tried to sue careless driver for indirect loss Held: Damages too remote to be recoverable, and would leave insurers open to indefinite liability for an indefinite duration.

Dorset Yacht Co. Ltd v Home Office [1970]

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Borstal boys escaped from camp and damaged plaintiffs yacht in their escape Held: Prison authorities owed a duty of care as they should have foreseen that this could potentially happen as the boys had escaped before

Palsgraf v Long Island Railway Co [1928] 2 railway guards attempted to help a boarding passenger with his parcels, negligently dropping one which exploded Nearby, a heavy set of scales fell on Ms Palsgraf, injuring her Palsgraf sued Railway alleging they were indirectly responsible for her injuries (vicarious liability employer liable for torts of employee) Held: No DoC as no forseeability

Bourhill v Young [1943] Motor cyclists negligence caused accident which killed him Pregnant Bourhill heard impact but did not see it, as she was stepping off a tramcar on the other side of the road As a result of seeing bloody aftermath, she suffered severe nervous shock and was too upset to work. Later, her baby was stillborn Held: users of motor vehicles on public roads owed a duty to drive with care to all persons who could forseeably be injured (including experiencing shock). However, plaintiff was not sufficiently close to area of potential danger, so no DoC owed.

McCarthy v Wellington City Council [1966] WCC stored detonators stolen by kids injured kids Held: WCC owed a DoC to keep explosives secure from all persons foreseeably likely to be injured as a result of breach. It was reasonably foreseeable that this could happen.

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Russell v McCabe [1962] Volunteer firefighter injures himself while trying to put out a fire that had spread from defendants land

Balfour v Attorney General [1991] Over several years, plaintiff applied for and failed to get over 100 teaching positions Noted on his personal file that he was a long practicing and blatant homosexual (allegations were untrue, but it was not checked) Sued the Education Department for negligence for not verifying what was recorded in the file Held: Plaintiff subject of unjust/malicious conduct, but no causal link between the negligence and the harm. Also, no DoC owed (policy factor: main priority = children)

Price Waterhouse v Kwan [2000] Firm of solicitors paid PW to conduct an audit of its trust account Some clients invested money with the firms nominee company and lost their ivestment Kwan for the client-victims sued PW alleging negligence Court found the regulatory regime under which solicitors audits are carried out is in large part designed to protect clients from loss as a result of improper conduct in relation to solicitors trust accounts DoC could prima facie be imposed on the auditor in relation to the clients because sufficient proximity existed Held: Strong policy reasons to impose a duty.

Frost and Sutcliffe v Tuiara [2004] CoA found that the scope of a solicitors contractual DoC influenced 4

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the scope of his tortuous duty

Barnett v Chelsea Hospital [1968] Night watchmen drank tea while on duty, and all became ill Nurse phoned duty doctor (casualty dept) who, without examining the men, told them to go home and see their own doctors One man died of what was later discovered to be arsenic poisoning Established that the severity of the poisoning meant little could have been done Held: While hospital owed DoC to patients and the doctors conduct did not meet the standard of care required, the plaintiff could not establish on the balance of probabilities that the breach caused the deceaseds death.

Taupo B.C. v Birnie [1978] (CoA) Council negligently flooded Birnies hotel o Physical damage o Lost business revenue Birnie defaulted on mortgage payments (no income) mortgagee sale large capital loss Council argued they should not be liable for financial vulnerability. Argument failed. Held: Because of the defendants conduct, the hotel no longer provided the income with which to pay the mortgage.

Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd [1961] A quantity of oil fell into Sydney Harbor from the SS Wagon Mound 5

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due to As careless employees Oil drifted right across harbor and under Bs wharf where it caught alight both wharf and ship were extensively damaged by fire (caused by escaping sparks) Privy Council: A neither knew nor could reasonably be expected to know that that particular kind of engine oil was capable of such instant flammability Held: Bs claims for damages dismissed.

LIABILITY FOR NEGLIGENT MISSTATEMENT

Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] Defendants (bankers) gave gratuitous information about the creditworthiness of a customer to a third party (plaintiffs) Advice was negligently given and incorrect, as a result of which the plaintiffs suffered loss Held: Defendants not liable because they issued a disclaimer (understanding that it was made without responsibility), but otherwise they would have been.

Attorney-General v Carter [2003] Plaintiffs relied on negligent ship survey certificates issued by the Marine division of the Ministry of Transport to purchase a boat and suffered economic loss Held: Purpose of the survey was to enhance marine safety, not to protect economic interests, so no DoC owed.

Caparo Industries PLC v Dickman [1990] Plaintiffs took over a company (Fidelity), relying on the negligent reports of auditors Accepted that auditors owed a DoC to the company, but directly to shareholders? 6

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Held: No DoC because the statutory duty of the companys auditor was only to enable shareholders to exercise their rights as shareholders, not enable them to indulge in speculation; secondly, the plaintiffs were unable to establish proximity between themselves and the auditors.

FIDUCIARY OBLIGATIONS

Auag Resources v Waihi Mines Ltd [1985] Joint venture agreement to find and mine gold and other minerals Detailed joint venture agreement provided that a participant had to give notice if it changed its status as a subsidiary or related company of a principal. Auag complained Amax had breached their fiduciary duty by engaging in a transaction that affected its status as a related company Held: Contractual and fiduciary relationships may co-exist. However, parties had chosen to regulate their relationship through carefully drawn up contract in the relevant area. No scope for fiduciary duty.

Chirnside v Fay [2006] Development of commercial property in Dunedin Both parties worked, but Chirnside acted to exclude Fay from venture Completed the project through a company where his family trust was the major shareholder Held: Relationship was fiduciary in nature (analogy of a partnership)

Lloyds Bank v Bundy Bank persuaded an old client to act as guarantee for a loan with

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Client had a strong relationship with the bank and its manager Held: Bank had undue influence on him to get him to act as guarantee

Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Employees were moonlighting at night setting up their own business in direct competition with their employers company (conflict of interest situation) Also persuaded some of the plaintiffs other employees to moonlight in their spare time Held: Employees had knowingly, deliberately and secretly set themselves to moonlight, inflicting great harm on their employers business

Aberdeen Railway Ltd v Blaikie Brothers Blaikie directly involved in managing railway Also partner of a firm selling chairs to the railway Possibility of unfairness not about end result, but the PROCESS

Logans Leisure Products Ltd v Capper, MacDonald & Gauld Anderson Accountancy firm where two partners acted for opposite parties in the same transaction Should have at least told plaintiff to seek independent advice Held: Breach of fiduciary duty

Clark Boyce v Mouat Boyce sued by Mouat (elderly widow) because he advised both widow and son on the same transaction (mortgage security)

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Told them about conflict of interest but they insisted on him continuing Held: Not Liable at Privy Council

Witten-Hannah v Davis Solicitor had intimate relations with client (had twins) Advised her on property developments (he also had a personal stake) Held: He did not put her interests before his own. Client must be aware of ALL IMPLICATIONS and seek independent advice

Day v Mead Business friends Mead was the director of a company and advised Day to invest He did not disclose the companys problems Held: Breach. Had not recommended Day obtain independent advice.

Taylor v Schofield Peterson [1999] Held: Not sufficient to simply provide opportunity for independent advice o Lawyer should have been proactive about IA o A signed acknowledgement of COI on lawyers file is NOT sufficient

Buckell v Stormont Interior designer called to take over a business for owners while away, but personally entered into contracts with clients instead of on behalf of the principal Held: Liable.

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Aas v Bentham Partnership involved in ship chartering One partner got involved independently with a business in ship building Held: No competition because they were not in the same line of business.

Bentley v Craven Sugar refinery partnership Defendant responsible for buying raw materials for the firm, but was secretly selling at a higher price to the firm (keeping secret profits) Held: Disgorgement or Account of wrongful profits, not simply compensation.

Reading v Attorney General While Reading was a British soldier in Egypt, he was making secret profits by using his army truck and uniform to smuggle black market goods across the border Applied for a pension which was refused by the government.

Industrial Developments v Cooley Gas Board (3rd party) approached Cooley (architect working for ID) for architectural work personally Cooley pretended he was sick to work for GB Held: Disloyalty; breach of good faith. Liable for account of profits.

Nottingham University v Fishel

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Defendant (mis)used a university team of researchers (employees) to assist him with private contracts

Russell McVeagh v Tower Corporation Auckland Office acted for Client G (involved in an intended takeover of Tower Ltd) Wellington Office acted for Client T (Tax dispute) RM aware of this and made formal internal arrangements so there was no flow of information between the two files (Chinese Wall) Held: HC No information revealed, but the RISK is there. CoA cancelled injunction no risk of disclosure of confidential information, no duty breached.

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