CHAPTER 2

Tort Liability Relevant to Business

 Meaning of Tort
• A tort is a civil wrong which usually relates to the breach of a duty
imposed by law
• It is however to be distinguished from criminal law in the sense that
the law of torts is about providing a remedy for people for harm they
have suffered whereas criminal law is about meting out punishment
to law breakers. The mode of remedy is also different; monetary
compensation for tort and punitive remedies for criminal law.
Further, the enforcer of criminal law is the state whereas in tort, it is
the claimant.
• While contract and tort are both civil laws, both differ in that in a
contract, the obligations of parties are entered into voluntarily
whereas in tort, the obligation on the infringing party is imposed by
the law.
• Examples of relevant torts in the business context:
i. Business whose operations disrupt the peaceful enjoyment of their
neighbours
ii. Defective consumer products
iii. Negligent advice by professionals
 Passing-off
• It is a common law tort where competitors of a trader pass off their goods as the
trader’s. It is a form of intellectual property enforcement. Examples include:
i. Using another’s trade name
ii. Using similar wrappings, identification marks and descriptions

• Note the concept of “goodwill”

• Cases that illustrate passing-off:

i. Bollinger v Costa Brava Wine Co Ltd (1959)
ii. United Biscuits (UK) Ltd v Asda Stores Ltd (1997)
iii. HFC Bank plc v Midland Bank plc (2000)
iv. Pfizer Ltd v Eurofood Link UK) Ltd (1999)
 Tort of Negligence
Duty of Care
Donoghue v Stevenson (1932) - ‘Neighbour Principle’
Caparo Industries v Dickman (1990) – Three stage test:
(i) Reasonable foreseeability
(ii) Proximity between the parties
(iii) Fair, just and reasonable
Aspects of duty of care
A. Pure Economic Loss
• Recovery is very limited
• Pure economic loss arising from negligent statements:
i. Hedley Byrne & Co Ltd v Heller (1964) – special relationship
ii. Caparo Industries v Dickman (1990):
(a) defendant knew the statement would be communicated to the claimant;
(b) advice given in relation to identifiable transaction;
(c) defendant reasonably anticipated defendant would rely without seeking
further independent advice
B. Psychiatric Injury
• Primary victim
i. Under actual threat of bodily harm or reasonably believed to be [Dulieu v
White (1901)]
ii. Reasonably foreseeable that person of ‘reasonable fortitude’ would have
suffered some form of personal injury [Page v Smith (1995)]
iii. Rescuers must be, or reasonably believed himself to be, in danger of physical
injury to qualify as primary victim [White v Chief Constable of South Yorkshire
(1999)]

• Secondary victim
i. Alcock v Chief Constable of South Yorkshire Police (1991):
(a) close tie of love and affection;
(b) geographical proximity and must have seen or heard the accident with his own
unaided senses;
(c) medically-recognised psychiatric illness.
 Breach of Duty of Care
• Standard of care depends on type of defendant:
i. Generally, that of a reasonable person [Nettleship v Weston (1971)]. In
Blyth v Birmingham Waterworks Co., it was mentioned that
‘[n]egligence is the omission to do something which a reasonable man, guided upon those
considerations which ordinarily regulate the conduct of human affairs, would do, or doing
something which a prudent and reasonable man would not do’.

i. Standard lower for a child [Orchard v Lee (2009)]

ii. Skilled/professional defendants – accepted practice in a profession
[Bolam v Friern Hospital Management Committee (1957)] but there
must still be some logical basis to that decision [Bolitho v City and
Hackney Health Authority (1997)]
iv. Court also assesses a range of factors:
(a) Likelihood of harm
 Bolton v Stone (1951)
 Miller v Jackson (1977)
(b) Severity of harm
 Paris v Stepney Borough Council (1951)
(c) Practicality of taking precaution
 Haley v London Electricity Board (1965)
 Latimer v AEC (1953)
(d) Utility of the conduct
 Watt v Hertfordshire County Council (1954)

v. Note also the Compensation Act 2006 which balances the requirement to take
precautionary measures with the effect of preventing or discouraging desirable activities
from being carried out
vi. ‘res ipsa loquitor’ – presumption of negligence. Must prove:
(a) Defendant in control of thing or situation causing damage
(b) Damage would not have occurred without carelessness
(c) Exact cause of accident cannot be determined
See:
 Ward v Tesco Stores (1976)
 George v Eagle Air Services Ltd (2009)
Stress in the workplace
• Walker v Northumberland CC (1995)
- the fact that he had suffered a mental breakdown once meant that it was reasonably
foreseeable that if he is not given assistance, another breakdown could result

• Sutherland v Hatton (2002)

- Some guidelines by the Court:
i. Nature and extent of work undertaken
ii. Signs exhibited by employee
iii. Size of business; availability of resources

• Barber v Somerset County Council (2004)

- Absent from work for 3 weeks
- Stress and depression certified by GP
- Duty to make enquiries?
• Hartman v South Essex Mental Health and Community Care NHS Trust (2005)
- need for specific signs to be evident to the reasonable
employer that a problem exists
- provision of occupational health service does not lead to
conclusion that employer had foreseen risk of injury

• Daw v Intel Corp (UK) Ltd (2007)

• Dickins v O2 (2008) provision of counselling services
not sufficient to discharge liability

• Yapp v Foreign and Commonwealth Office (2014)

– withdrawal of post of High Commissioner in Belize
- There must be indications of some problem or psychological vulnerability
on the part of the employee.
 Causation
• ‘But for’ test – would the claimant have suffered the damage but for the
defendant’s negligence?
 Barnett v Chelsea & Kensington Hospital Management Committee
(1969)

• Varying situations of causation:

i. Multiple causes operating simultaneously
ii. Loss of chance
iii. Multiple causes operating in succession
iv. Novus actus interveniens
Multiple causes operating simultaneously
• McGhee v National Coal Board (1973)
 plaintiff only had to show that defendants had “materially increased
the risk” of the plaintiff contracting the disease by failing to provide
washing facilities – driven by policy considerations?

• Wilsher v Essex AHA (1988) – House of Lords adopted ‘all or nothing

approach’

• Fairchild v Glenhaven Funeral Services Ltd (2002) – House of Lords

affirmed the principle in McGhee: material contribution
Loss of Chance
• Hotson v East Berkshire Area Health Authority (1987)
 25% chance if treated promptly; 75% chance that avascular necrosis would have
developed in any event
 Plaintiff failed to prove his case on a balance of probabilities

• Gregg v Scott (2005)

 42% chance of full recovery with prompt treatment; 58% chance would not recover
anyway
 plaintiff failed to prove his case on a balance of probabilities

• Chester v Afshar (2005)

 1-2% risk of complication from surgery
 Claimant cannot say with certainty that she would not have opt for the surgery
 On policy grounds, ‘but for’ test was relaxed
Multiple causes operating in succession
• Baker v Willoughby (1970)
 amputation of claimant’s leg did not obliterate defendant’s full
liability of the injury including those prior to the amputation

• Jobling v Associated Dairies (1982)

 supervening illness that was unrelated to the condition caused by
the defendant must still be considered in assessing compensation
Novus actus interveniens
• Act of 3rd party – was the act foreseeable?
 Home Office v Dorset Yacht (1970)
 Lamb v Camden LBC (1981)
 Knightley v Johns and Others (1982)

• Act of claimant – has the claimant acted reasonably?

 McKew v Holland (1969)
 Damage
• Must be reasonably foreseeable and not too remote - Overseas Tankship
(UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound) (1961)

• What must be foreseeable?

 Hughes v Lord Advocate (1963) – precise way the damage is caused
need not be foreseeable
 Jolley v London Borough of Sutton (2000)

• Eggshell Skull principle – defendant must take victim as he finds him

 Smith v Leech Brain & Co Ltd (1962)
 Lagden v O’Connor (2003) – financial situation of the claimant
 General Defences
A. Contributory negligence
• Before 1945, claimant cannot recover damages at all if he had been
contributorily negligent
• Law Reform (Contributory Negligence) Act 1945 – recoverable damages will
be reduced to an extent that reflects the share of responsibility for the
damage
• It is now a partial defence
• Note that the contributory negligence must be in relation to the damage
suffered and not to the causing of the incident
• See example: Froom v Butcher (1976); Capps v Miller (1989); Jones v Livox
Quarries (1952); Fitzgerald v Lane (1989)
B. Consent
• complete defence
• Also known as volenti non fit injuria (no wrong is done to one who
consents)
• Knowledge of the risk is insufficient; must freely and voluntarily consent to
the risk
 Smith v Baker & Sons (1891) – economic pressure?
 ICI v Shatwell (1965)
• Note that the defence of consent does not apply to road traffic cases by
virtue of the Road Traffic Act 1988. But applies to other vehicles – see
Morris v Murray (1991)
• Defence of consent not normally applicable in ‘rescue cases’. Why?
 Haynes v Harwood (1935)
C. Illegality
• There is a strong policy reason that a claimant should not be able to
recover damages if he is engaged in an illegal conduct (ex turpi causa non
oritur actio)
• There must be a clear link between the illegal conduct and the loss suffered
• Note that there is a limit to the defence of illegality (although it is unclear
where the limit is in case laws). Consider the following cases:
i. Ashton v Turner (1980)
ii. Revill v Newberry (1996)
iii. Clunis v Camden and Islington Health Authority (1998)
iv. Gray v Thames Trains Ltd (2009)

D. Note section 2 Unfair Contract Terms Act 1977 – death or personal injury
resulting from negligence cannot be excluded
 Professional Negligence
• Before 1964, an action for pure economic loss caused by a false statement was
only available in the tort of deceit where there must be proof of dishonesty

Hedley Byrne & Co Ltd v Heller and Partners Ltd (1964)

 special relationship – defendant must possess special skill and
judgment
 assumption of responsibility – defendant knows claimant would rely
on advice
- claimant in fact relied on the advice

This ‘special relationship’ has been taken to apply in the context of other
professional groups such as lawyers, accountants, valuers and surveyors.
Accountant and auditors
• JEB Fasteners Ltd v Marks, Bloom & Co (1983)
– claimant was more interested in acquiring expertise of the directors and had also formed independent judgment of
the company’s worth

• Caparo Industries plc v Dickman (1990) – must be specifically prepared for the claimants in order to attract liability

• James McNaughton v Hicks (1991)

– not foreseeable that the claimant would have relied on the accounts which were only draft copies without seeking
further information or independent advice
cf
• Morgan Crucible v Hill Samuel Bank (1991)
- financial information was specifically provided for the purpose of a takeover bid
• Yorkshire Enterprise Ltd v Robson Rhodes (1998)
- defendants were aware of the claimants and the use to which the prepared accounts would be put

• Law Society v KPMG Peat Marwick (2000) - statutory duty for solicitors to produce annual accounts to the Law Society
Lawyers
• Ross v Caunters (1980) – will witnessed by beneficiary’s spouse
• White v Jones (1995) – solicitor failed to carry out testator’s
instructions before testator died
• Dean v Allin and Watts (2001) – loan transaction and effective security
- identity of interest

• Barristers are immune from actions in negligence based on public policy.

However, this immunity extends only to conduct of a case in court or work
intimately connected with the conduct of the case in court [Saif Ali v Sidney
Mitchell (1980)].
• On the other hand, solicitors no longer enjoy immunity in both criminal
and civil proceedings [Arthur JS Hall & Co v Simons (2000)].
Surveyors
• Smith v Eric Bush (1989) – modest price of house indication of
likelihood that claimant would rely on
valuation report?

• Merrett v Babb (2001) – personal liability

- surveyor signed the valuation report in
personal capacity
cf
• Matthews v Ashdown Lyons and Maldoom (2014)
- surveying company went out of business
- Claimant instructed the surveying firm
- Ordinary commercial risk?
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