The Legal Consequences of Max Being Unable to Sell the Allotments - Case Study Example

Question This question focuses on the legal consequences of Max being unable to sell the allotments due to the suspension placed by the Department of Environment and Safety. From the facts of the case, the council made negligent misstatements. The main issue is whether there was a negligent misstatement on the part of the council or not and its implications Rules In the case of Shaddock v Parramatta City Council1, it was established that a government department is responsible for providing accurate information to citizens since in most cases, they are privy to critical and specialised information that citizens are likely to believe and act upon2. Failure to do so creates a situation of professional negligence which allows the aggrieved party (that is the citizen) to sue for damages. Application In the case at hand, the Council was privy to preliminary findings of the Department of Environment and Safety about the land that Max bought. Being a public organisation, the Council had the duty of ensuring that anyone who builds on the land adhered to the limitation and/or the potential limitations that the toxic substances found on the land caused. Thus, in granting the authorisation to build on the land, the Council should have factored that in before considering whether to grant or reject the license to build. However, they went ahead and granted a license to Max which gave him the right to build or advertise for others to build on the land. Conclusion It is therefore conclusive that by granting the authorisation to build on the land, when the council was privy to information about the dangers of inhabiting the land and the potential freeze on the land, the council was guilty of professional negligence. Max therefore has the right to sue the council for damages. Question 2 The issue with the case involving Tom/Bella and Fancy Homes is whether the contract in question has been frustrated or not and the implications for both parties in the situation. Rules One of the primary elements of consideration in contracts is that, it must be humanly possible3. Thus, when two people enter a contract, they assume that the contract is capable of being performed by each party. A frustrated contract is one in which a major incident makes it impossible for it to be performed by either or both parties. In Taylor V Cadwell 18634, it was established that frustration occurs where there is a destruction of the subject matter. .Also, in other cases, a contract could be formed on the assumption that certain significant events would take place5. Thus, under English Law, if the main event upon which the entire contract is based does not occur, both parties to the contract have the right to exit the contract because it is considered a frustrated contract. Under Australian Law however, the South Australia Frustrated Contracts Act (1988) reforms regulates the settlement of parties in a frustrated contract. Section 7(1) of the Act states that when a frustration occurs, there will be adjustments so that none of the parties is unfairly advantaged or disadvantaged because of the frustration. Thus the value of benefits enjoyed by each party will be aggregated and subtracted from the value of the performance by each party to date (Section 7(2)a-d). Application. In the case of Tom/Bella and Fancy Homes, it is apparent that the freeze placed on building on the lands in question is a significant event that makes it impossible and illegal for them to go ahead with the building project. This therefore means that the contract with Fancy Homes to build is frustrated. Conclusion Under the SA Frustrated Contracts Act, Tom/Bella and Fancy Homes will have to aggregate their benefits individually and subtract it from their performance to the day of frustration. This means that the deposit of $20,000 must be aggregated against the value of work carried out by Fancy Homes to date. This should be subtracted and a refund should be made by Fancy Homes if the value of work was less than $20,000. On the other hand, if Fancy Homes did work worth more than $20,000, Tom/Bella must pay for the extra work. Question 3 The issue involving Tigger/Ellen and Arrogant and Partners is about whether the financial statements presented by Arrogant and Partners contained elements of professional negligence or not. Rules This is a situation of professional negligence which can be handled under the laws of tort. Australian law draws from a landmark case in English Law (Hendley) to establish the framework for the handling of professional negligence6. For a person to be charged with professional negligence, he should posses some specialised skills, give an advise to another party which that party relies on and suffers some damages for it. However, in Esanda Finance v Peat Marwick7, it was established that an auditor did not have the duty of forecasting potential financial losses for all classes of accounts users. This is because although the auditor passes a professional opinion on financial statements prepared by a client, s/he owes a primary responsibility to the client and not to all classes of users of the financial information prepared. This therefore places a limitation on the Hendley principle for third-party users of advice that causes financial losses to them. This prevents them from suing for damages for pure economic losses. Application In this case, Tigger/Ellen relied on the financial statements presented by Arrogant & Partners in taking an investment decision. However, they were not the primary party for which the financial statement was prepared. Due to this, it was too remote for Arrogant and Partners to be held responsible for the pure economic losses they incurred. This is because Arrogant and Partners was not in the position to foresee all the detailed requirements of all potential users of the financial statements of Oceanic. Also, because Tigger/Ellen were third party users of the financial information, the Hendly principle cannot be invoked successfully in this case since the advise was not prepared specifically for them by the accountatns. Conclusion Tigger and Ellen are therefore limited in their claim for damages from Arrogant and Partners because their claim against Arrogant and Partners is too remote. Question 4 In this section, the main issue is whether the failure of Chris to inform the excavator operator of the existence of the cable that caused the power outage negligent, and whether he and Axis are liable for the losses incurred by Oceanic because of the power outage or not. Rules In the landmark case of the law of tort established by Donoghue V Stevenson, each individual owes a duty of care to people s/he interacts with8. In Spartan Steel & Alloys v Martin9 where power was severed due to the negligence of a construction team, they were not liable for the pure economic loss that ensued because of the power outage and idle time. However, they were liable for damages that occurred because of the power outage. Application In this case at hand, it is apparent that Axis group, in rehabilitating the area within which Oceanic operated should have taken into consideration the factors that could potentially affect the operations of Oceanic. The failure of Chris to inform his team of the cable that caused the power outage was negligent. However, the Spartan Steel & Alloys Ltd v Martin rule limits the extent to which Oceanic can make claims for pure economic losses. This therefore limits the economic losses to just losses that can be directly attributed to the power outage process like voltage fluctuations. This means Chris and Axis cannot be held responsible for the 24-hours of no production and of course for the increase in prices on the Japanese market. Endnotes Benson, Carson (2001) Common Law and Equity Leeds: Drakesfield Publishing Doyles Construction Lawyers (2011) Case List Available online at: http://www.doylesconstructionlawyers.com.au/resources/casewatch-list/show/181/SHADDOCK+V+PARRAMATTA+CITY+COUNCIL+(1981)+ALR+385 Paterson Jeannie, Robertson Andrew & Duke Arlen. Principles of Contract Law. Sydney Lawbook Company. (2009) Selwyn, Philip (2007) English Law & Practice in the British Commonwealth London: OB Publishing Read More