Legal Analysis: Negligence Claim Against Yokohama Sushi Bar And Negligent Misstatement By Jack

Concept of Duty of Care in Negligence Claims

1.Norm, a business law student, is driving home from lectures one evening and stops at the Yokohama Sushi Bar for some food to take home. He buys a ‘Quick-Pack” of sushi, which he starts to eat as he drives along the Eastern Freeway. One piece of sushi has a peculiar flavour, so Norm turns on the car light, takes a quick glance and sees that he has eaten the head of a cockroach. He feels ill immediately, and loses the control of the car, which crashes into a car driven by Paula in the next lane. Both Norm and Paula suffer injuries in the accident and are taken to hospital. Norm’s mother, Edna, visits him that night in the casualty department of the hospital soon after police contacted her. Edna is so distressed by seeing Norm in hospital injured, and hearing his sad tale about the cockroach, that she develops a phobia about sushi and cockroaches, such that she won’t leave the house.

Norm, Paula and Edna are all keen to sue someone. Advise each of them and the Yokohama Sushi Bar, as to their respective rights and liabilities.

2.Jack owns a successful restaurant business in Parramatta. Jack’s friend, Max, wishes to purchase a restaurant at Parramatta. On Friday evening, Max finds a Lebanese restaurant call Kebabs Galore for sale. The restaurant is full of customers and is located at the corner of George Street and Smith Street, Parramatta. Kebabs Galore is also very close to Tom’s restaurant at Duck Avenue in Parramatta. The following Monday, Max speaks with Jack about his plans. Max explains to Jack that he is keen to buy the restaurant but that he has never owned a restaurant or even worked in the industry before, and that he would appreciate Jack’s advice and guidance. Jack assures Max that Kebabs Galore appears to be a very successful restaurant and that he is “almost guaranteed’ to make a profit in the first year itself. Max immediately decides to purchase Kebabs Galore with his brother Cameron. One year later, they are on the verge of bankruptcy. The restaurant was not as popular or profitable as they expected and the turnover has declined even further since they took over the business.

Has Jack made a negligent misstatement? In your answer focus on whether Max and Cameron can bring an action against Jack; the likelihood of success and any appropriate defences which may be raised by Jack, giving full legal reasons and referring to decided cases to support your answer.

Application of Caparo Test in Injury Claims

Whether Norm can bring a claim for damages under the law of negligence with respect to the injury caused to him against Yokohama Sushi bar.

The contemporary law of negligence had been established via Donoghue v Stevenson [1932] AC 562. A claim in relation to negligence would only succeed in the court of law if the plaintiff provides that the defendant had towards them a “duty of care”, there was a breach of such duty, damages resulted out of the reach and the injury was not very remote. 

The type of injury which has been caused is to be considered to indentify the nature of test which should be applied to find out a duty of care.  Injury in relation to property and personal injury is analyzed by the application of “caparo test”. Caparo Industries pIc v Dickman [1990] 2 AC 605 is the case where this test had been provided. In this case it had been stated by the court that there is no duty of care owed where there is any sufficient proximity between the plaintiff and the defendant.  The test analyzes reasonable forseeability of injury and proximity between the parties. Where the parties are within proximity and the injury can be foreseen then there is a duty of care.

The test which needs o ne applied to find out if the defendant is in contravention of the duty is objective. The case of COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD [2004] HCA 29 discussed this test.  The defendant is in contravention of the duty where there is failure to meet the standards set out by law in relation to the care to be taken. The objective test signifies that there is requirement of meeting the standards of a reasonable person. However this test can be varied in certain situation such as it was done in Condon v Basi [1985] 1 WLR 866 where a amateur player cannot be adjudged according to the standards of a professional player.

The general test for indentify causation in a situation is the “but for” test as derived from the case of Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. The harm must be a result of the breach of duty. The harm would not have taken place but for breach of duty for the defendant.

In the case of Re Polemis & Furness Withy & Company ltd. [1921]3 KB 560 the court clarified that the not all injuries which the plaintiff has suffered can be compensated under negligence. The loss which results out of the direct consequences of the injury would be allowed to be recovered. However this rule had been overruled by the remoteness test as provided by the case of The Wagon Mound no 1 [1961] AC 388 where damages which cannot be foreseen and are too remote cannot be recovered.

Objective Test to Identify Breach of Duty

In this case the Norm will be considered as a plaintiff and he has suffered the injury and Yokohama Sushi Bar would be considered as a defendant as a claim is to be brought against them.  The plaintiff will succeed in relation to the claim of he is able to provide that defendant had towards him a “duty of care”, there was a breach of such duty, damages resulted out of the reach and the injury was not very remote.  Duty of care for Injury in relation to property and personal injury is analyzed by the application of “caparo test”.  Thus if there is sufficient proximity between Norm and Yokohama there will be a duty of care owed. In this situation it can be stated that from the position of Yokohama it is can be foreseen that anyone who consumes the defective sushi can be injured. thus a duty of care is owed by Yokohama to Norm as per the application of the case of Caparo Industries pIc v Dickman. The defendant is in contravention of the duty where there is failure to meet the standards set out by law in relation to the care to be taken. The objective test signifies that there is requirement of meeting the standards of a reasonable person. A reasonable person would have ensured that there is no cockroach in the sushi. Thus the duty of care had been breached as per the application of the case of COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD. To establish causation the harm must be a result of the breach of duty. The harm would not have taken place but for breach of duty for the defendant. Here Norm would not have been ill if there was no cockroach in the sushi and causation is identified as per the application of the case of Barnett v Chelsea & Kensington Hospital. Damages can only be obtained as per the Wagon Mound no 1 if they can be reasonably foreseen and are not “too remote”.  In this situation t can be stated that it would not be foreseeable to Yokohama or any reasonable person n their position that a person can meet an accident by consuming a cockroach. It would also not be foreseeable for Yokohama to known that Norms mother would develop a phobia. Thus these damages can be regarded as too remote and a claim against them cannot be made.

Causation Test in Negligence Claims

Conclusion

There is negligence on the part of Yokohama but the claim would only be limited to the illness as other damages are too remote

Whether a negligent misstatement has been made by Jack n relation to Max and Cameron

According to Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502,  in normal circumstances a person is not imposed with a duty of care in relation to avoiding a loss to another person which is in relation to a “purely economic loss”. This is a kind of loss where there is no relationship between the financial loss caused with any injury or damages of a personal nature or a property.

This rule is subjected to a few exception one of which have been provided in the case of Hedley Byrne & Co v Heller [1963] 3 WLR 101. This case signified that the damages can be claimed against pure economic losses which such loss is a result of a negligent mis-statement rather than a negligent action. The case introduced the idea of “assumption of responsibility”. In the case the plaintiff wanted to verify the financial condition of a client from the defendant bank. The bank stated that the financial condition was good in relation to general business engagements. However the client was subjected to liquidation and the plaintiff had incurred a loss of £17,000 on contracts. The court stated in his case that there was “sufficiently proximate” between the parties to impose a duty of care under tort law on the defendant. The provisions had been affirmed in the case of SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385.

On the other hand in Mutual life and citizen’s Assurance Co Ltd V Evatt [1971] AC 793 the court stated that there was no duty of care on a part of a person who has provided an advice out of its professional capacity. 

In the given situation it has been stated that Max has taken advice from Jack for the purchase of a restaurant which is near Jack’s restaurant. However the advice has not been effective thus there has losses have been suffered by Max and Cameron. In the given situation the plaintiff is Max and Cameron and the defendant is Jack. Although the loss here is pure economic loss the general rule of Spartan Steel & Alloys Ltd v Martin will not be applied as there is a negligent misstatement. The provisions of Hedley Byrne & Co Ltd v Heller & Partners Ltd as discussed above have set a precedent that in case of a negligent misstatement a claim for negligence can be made. In this case it can be stated that the plaintiff had relied on the advice provided by the defendant to purchase the restaurant just like in the case of SHADDOCK V PARRAMATTA CITY COUNCIL where the plaintiff had purchased a property relying on the advice of the defendant and the court held the defendant liable for the loss faced by the plaintiff. Thus here also Jack can be held liable for the loss which have been incurred by Max and Cameron as they relied the advice provided by Jack to purchase the restaurant. However in the given situation if the provisions of the case of  Mutual life and citizen’s Assurance Co Ltd V Evatt are applied where it was stated that that there was no duty of care on a part of a person who has provided an advice out of its professional capacity it can be derived that there is no duty owed by Jack as he is not a professional financial advisor

Conclusion

Thus in this case Max and Cameron cannot make a successful claim against Jac

References

Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428

Caparo Industries pIc v Dickman [1990] 2 AC 605

COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD [2004] HCA 29

Condon v Basi [1985] 1 WLR 866

Donoghue v Stevenson [1932] AC 562

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465

Mutual life and citizen’s Assurance Co Ltd V Evatt [1971] AC 793

Re Polemis & Furness Withy & Company ltd. [1921]3 KB 560

SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385

Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502

The Wagon Mound no 1 [1961] AC 3