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Law for New Zealand Business session 4

Overview of the New Zealand law of torts

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Tort: what is it?

Civil wrong in the absence of contract

So what do they entail and why do we recognise them? Commission of an act that offends against

society’s idea of “rightness” Social harmony and “ethics” assume certain

boundaries to behaviour- reaction when breached Does not necessarily (although it may) involve a

crime or direct act

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What categories do we have?

Basically two: Trespass

Categories are closed Normally related to malicious action or intent Includes assault and trespass

Actions on the case Categories are NOT Not closed but evolve depending on

changing societal expectations and standards Do not require malicious action or intent Includes a range of torts that does change over time

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So what about actions on the case?

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So what about actions on the case?

negligence

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So what about actions on the case?

negligence

defamation

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So what about actions on the case?

negligence

defamation

libel

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So what about actions on the case?

negligence

defamation

libel slander

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So what about actions on the case?

negligence

defamationnuisance

libel slander

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So what about actions on the case?

negligence

defamationnuisance

private nuisance

libel slander

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So what about actions on the case?

negligence

defamationnuisance

private nuisance

publicnuisance

libel slander

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What is the most significant category?

Without a doubt: negligence

Why?Relatively recent recognitionContinuing development through common

lawReacting to societal, economic and

scientific change

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So what does Negligence involve?

Leading case: Donoghue v StevensonSee here: Donoghue

v Stevenson, UK Law OnlineWe can extract four requirements:

Duty of careBreach of that duty of care Injury or damage to the plaintiffConnection between that breach and the injury

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How have these requirements been applied?

Based on the connected concepts of foreseeability- that is, both the plaintiff and his/her injury must be reasonably foreseeable, and reasonableness- the defendant (tortfeasor) must have acted unreasonably

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Various cases have reinforced that concept

Donoghue v Stevenson

Bourhill v Young

Re the Wagonmound

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And negligence has been expanded to include:

Property loss

Nervous shock (notion of secondary victims)

Pure financial loss- the tricky one!

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Particular case study

Negligent misstatement by professionals- particularly auditors

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What is the role of the auditor?

Accounts of companies are required to be audited unless (in limited circumstances) the members agree otherwise- why? Auditors can provide independent judgment on the

validity and completeness (the truth and fairness) of the financial reporting

Auditors have the professional expertise to assess the financial records and control systems

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So how are they expected to act?

Professionally-collect information and investigate matters that concern them- Re Thomas Gerrard and Son Ltd (1967), Dairy Containers Ltd v NZI Bank (1995) Report on relevant matters“Watchdog not a bloodhound” (Re Kingston Cotton Mill (1896) per Lopes L.J.)- standard of skill, care and caution expected of a reasonably competent, careful and cautious auditor- expectations have increased

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What are their relationships?

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What are their relationships?

Contract- to the company

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What are their relationships?

Contract- to the company To outsiders

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What are their relationships?

Contract- to the company To outsiders

Shareholders

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What are their relationships?

Contract- to the company To outsiders

Shareholders

Creditors

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What are their relationships?

Contract- to the company To outsiders

Shareholders

Creditors

Society

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The problem: how far should the non-contractual

responsibility extend?

To shareholders?

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The problem: how far should the non-contractual

responsibility extend?

To shareholders?

To creditors and investors or potentialinvestors?

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The problem: how far should the non-contractual

responsibility extend?

To shareholders?

To creditors and investors or potentialinvestors?

To society?

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This is a contentious issue:

Traditionally:Auditors could only be considered liable in

the tort of negligent misstatement where:Held out as having special skill and knowledgeWas in a special relationship with the recipientKnowledge of reliance on reportActual reliance on the report causing loss

Hedley Byrne v Heller (1964) Dimond Manufacturing v Hamilton (1969)

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But moves from there to widen the test

Nb- a reflection of a more general move in the development of the tort of negligenceAnns v London Borough Council of Merton

(1967) and other casesReasonable foreseeability of damage?Degree of appropriate proximity giving rise to a

duty of care?Public policy- questions of society standards and

expectations?

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This was reflected in:

Scott Group v McFarlane (1978)- two of three judges (CA) considered reasonable foreseeability of both damage and plaintiff was an adequate measure of proximity

There were no public policy reasons for refusing to recognise that liability

However, the auditors were not found liable

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This can be compared to the House of Lords

Caparo Industries Plc v Dickman (1990)Foreseeability of damageProximity must be more than foreseeability

of the plaintiffMust be public policy reasons for imposing

liability

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So what did you have?

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So what did you have?

Scott Group-Provided there was proximity,giver of advice or report could be liable unless contrary to pp

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So what did you have?

Scott Group-Provided there was proximity,giver of advice or report could be liable unless contrary to pp

Caparo-Must have closeproximity andpp reasons in favour

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What has happened since?

South Pacific Manufacturing v NZ Security Consultants and Investigations (1992)

Jagwar v Julian (1992)

Boyd Knight v Purdue (1998)

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Likely conclusion

The trend is towards a more limited scope of liability for givers of advice

Concern with: the potentially indeterminate scope of liability the increased tendency for litigation balance between the need to have

assessment (audits) and costs involved in high levels of liability

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But on the other hand:

What should an auditor be doing?

What is the point of an audit and public availability of reports if third parties are not expected to rely on them?

American tendency has been to widen the liability rather than limit

Remains a vexing issue

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Finally- statutory modification to negligence

New Zealand accident compensation- under the Injury Prevention, Rehabilitation and Compensation Act 2001- see Accident compensation legislation Concept of a no-fault, state- driven compensation

system for personal injury by accident Arose out of recommendations of the Woodhouse

Report Been fiddled with by those with political agendas

ever since

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Up-side

No suing for compensation

Available to all, not just those with deep pockets

Cheap relative to alternative systems

Covers non-work and non-vehicle accidents

Spreads the risk

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Down-side

Limited compensation- no lump-sum

Claimed lack of motivation for personal safety

Claimed costs for business

Claimed lack of right to sue

Claimed risk-bearing for those with no responsibility

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summary

Tort law, particularly negligence is still developing

Some statutory modification and negation to some principles

Some gaps evident in treatment across common law countries