Topic 8 and 9 Sample Answers PDF

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Topic 8 Discussion Question – 1 The central issue here is whether Frank is liable for unconscionable conduct regarding the Ng’s under ss 20 or 21 ACL. Section 20(2) states that it does not apply to conduct covered by s 21. Conduct alleged to be unconscionable will fall under s 21 if it occurred in ‘trade or commerce’ and was in connection with the supply or acquisition, or the possibility thereof, of goods or services from a person (other than a listed company). As neither the Ng’s nor Frank are publically listed companies, and as the granting of an interest in land is a ‘service’ under the ACL, Frank’s conduct will come within s 21. Under s 22, the court may have regard to any matters it thinks fit in determining whether a person is liable for unconscionable conduct under s 21, but may have regard to a list of matters under s 22. Relevantly in respect of Frank’s conduct, these include the following. With respect to the renewal of the lease, Frank is in a much stronger bargaining position regarding the Ng’s, as at this stage they have already been leasing the property for a year, and are clearly acting on the belief that they will have the land for four years: s 22(1)(a). Under s 22(1)(c) the Ng’s would be unable to properly understand the exact terms and nature of the both the initial lease and the renewed lease due to their poor grasp of the English language. This is further evinced by the fact they believed the lease was for four years whereas it was only for one year. Under s 22(1)(d) Frank’s fostering, or at lease lack of correction, of a belief in the Ng’s as to the terms and duration of the lease could rise to the level on unfair tactics, given he took advantage of their relative lack of business sophistication and language skills. Under s 22(1)(i) Frank disclosed no intention to alter the terms of the new lease when it came for renewal. Alone this may not be sufficiently egregious, but given the Ng’s believed the agreement was for four years, there is a strong argument that Frank’s conduct elicited a belief in the Ng’s as to Frank’s future conduct, which he has not adhered to. Finally, in light of the above, Frank has not acted in good faith with respect to the Ng’s: s 22(1)(l). Indeed, the circumstances of this case are somewhat analogous to aspects of ACCC v Dukemaster, where Dukemaster as landlord took advantage of tenants’ lack of English language skills regarding their leases. In that case, Dukemaster was found to have engaged in unconscionable conduct under what is now s 21. Accordingly, Frank will likely be liable under s 21 to the Ng’s. Topic 9 Discussion Question – 1 The issue here is whether Alan is liable to Brian and Charlie for negligent misstatement. Under s 5 Civil Liability Act 2002 (NSW) (“CLA”) harm includes pure economic loss. A person will be liable for such loss by reason of negligence if the person failed to exercise reasonable care and skill. Under s 5B CLA a person will be liable for negligence occasioning pure economic loss providing that harm was reasonably

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foreseeable, the risk of it occurring was not insignificant, and the law holds that the person failed to take reasonable precautions to avoid the risk of harm occurring. In considering whether reasonable precautions were taken, the court must consider the probability of the harm occurring, its seriousness, the cost of taking precautions and the social utility of the activity that generates the risk: s 5B CLA. Under s 5D CLA, liability may only be imposed however, if the person’s negligence actually caused the harm, known as factual causation, and even if so, the harm should be within the person’s scope of liability. In order to properly understand what this means, it is necessary to refer to the appropriate case law. With respect to negligent misstatement, the test as set out be the High Court of Australia in Esanda Finance is that: 1) the defendant knew, or ought reasonably to have known that its information would be communicated to the plaintiff either individually, or as a member of an ascertained class; and 2) that the information would be communicated for a purpose that would be very likely to lead the plaintiff into the transaction; and 3) that it would be very likely the plaintiff would enter into the transaction in reliance on the information; and 4) as a result risk economic loss if the information was unsound or untrue. That being said, liability for pure economic loss will only extent to the person(s) to whom the statement was made directly; it does not cover situations where that information is passed onto a third-party by another person: Esanda Finance at 254 per Dawson J. On these facts, Alan knew that the information was communicated to Brian, as it was delivered in the context of a conversation given immediately following a speech he gave about investment strategies. Further, given the information was conveyed in that context it is very likely that the information was communicated for the purpose of leading Brian into investing in New Mine Co shares. This is supported by the fact that Brian made a specific request regarding New Mine Co shares. In other words, Alan knew or ought to have known that the information he gave was being relied on, due to him holding himself out as an individual possessed of special skill: Hedley Byrne. Finally, there was obviously a real risk of economic loss would result if the information was relied on, given Alan knew that Brian was considering investing his life savings in New Mine Co shares. Under these circumstances, Alan was under an obligation to exercise due care and skill in giving the advice regarding the shares, which the facts show he did not: he was told by colleagues the following day that it was, in effect, a bas investment, which is something he should have known as someone who held himself out as a person possessed of special skill regarding investment strategies. Brian did suffer economic loss due to his investment in the New Mine Co shares; however, there is a question as to factual causation. While Alan’s advice certainly contributed to Brian’s final decision to invest, the facts show Brian was already considering it as an investment due to other favourable recommendations. In these circumstances, there is an argument to be made that Brian was contributorily negligent under s 5R CLA, in the sense that Alan’s advice was not the only thing that led Alan to make his investment decision. As the court held in March v Stramere contributory negligence will serve to reduce a plaintiff’s damages by a percentage that represents the plaintiff’s own fault/responsibility for the plaintiff’s own harm.

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Accordingly, while Alan will certainly be liable to Brian for negligent misstatement, Brian will likely have the quantum of damages he can expect to receive reduced due to his own negligence regarding his own loss. Finally, with respect to Brian’s brother Charlie, as noted above in Esanda Finance a person will not be liable for negligent misstatement to third-parties. In this case, Alan did not convey the information to Charlie; rather Brian communicated it. Therefore Alan will not be liable to Charlie for negligent misstatement, as a duty of care never arose between Alan and Charlie....