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Southern Cross Refrigeration Co v Toowoomba Foundary

SOUTHERN CROSS REFRIGERATING CO V. TOOWOOMBA FOUNDARY PTY LTD [1959] 71 CLR 592

High Court of Australia – 15 December 1954

FACTS

Southern Cross sought to register a trademark consisting of the words “Southern Cross” in respect of refrigeration on the ground that it would be likely to deceive consumers. Toowoomba built and registered trademarks for milking machine, windmills, well-drilling machines and parts.

ISSUE

Would the registration of the trademark “Southern Cross” for refrigerators deceive consumers in believing there was a connection between Toowoomba’s products and the refrigerators?

FINDING

A trademark registration should be refused if there is a real risk that the consumers would wonder or believe that the two products came from the same source.

QUOTE

The Court said:

“In part the confusion resulted from the use by the appellant of a mark which had long and widely been used by the respondent, in part from the fact that it was a mark which had been used by the latter with respect to such diverse objects as both manual and power well-drilling and boring machinery, milking machines and engines and windmills, in part from the fact that in the course of business those articles frequently are and have, for a long time, been sold in country stores where, side by side with them, domestic refrigerators are stocked and sold, and last but not least from the circumstance that the name “Southern Cross” is a mark of general character and – as appears from what we have already said – of a wide and varied significance.

A careful scrutiny of the evidence convinces us that the respondent made out a clear case not only that a user of the mark by the appellant for the purposes proposed by it would be likely to deceive, but that it has already done so ….”

IMPACT

A trademark should not be registered if the registration and use of the trademark could confuse the market place into believing that products produced by the established entity already using a similar trademark.

Shaddock v Parramatta City Council

SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385

High Court of Australia – 28 October 1981

FACTS

Shaddock wanted to purchase property located in the area governed by the council. Shaddock’s solicitor both orally and by a written standard form, asked the council whether the property was the subject of any proposals to widen roads.

The council carelessly said there were no proposals when in fact there were such proposals. The value of the property was reduced by the proposal.

The appellants claimed that they had sustained loss by reason of their reliance on erroneous information supplied to them innocently but negligently by the respondent. The trial judge found that the respondent had been careless but that it owed no relevant duty of care to the appellants. This decision was affirmed by the Court of Appeal on appeal to the High Court.

ISSUE

The court had to decide the circumstances in which a local government body could be held liable for information it supplied to the general public.

FINDING

A person comes under a duty of care in relation to the provision of advice or information if he carries on a business or profession and in the course of it provides advice or information of a kind which calls for skill and competence or he otherwise professes to possess skill and competence and he provides advice or information when he knows or ought to know that the recipient intends to act or rely on it.

Liability for negligent mis-statement is not confined to those who carry on, or profess to carry on a profession, business or occupation involving the possession of skill and competence.

QUOTE

Mason J said:

“In the present case we are not concerned with advice given by a life assurance company in relation to an investment in which it had special knowledge, but with information furnished by a local authority, in relation to proposed road-widening proposals. There is no ground for confining the liability to those who engage in a business activity and for excluding those who provide negligent advice or information in the course of discharging a government or administrative responsibility.

The citizen is just as likely to rely on the accuracy of advice or information given to him by a government department, a statutory authority or a local authority as he is to act on similar advice or information given by a person who carries on a business. And  there is no persuasive reason for saying that the citizen who sustains damage as a result of information negligently given by a government department or authority has no remedy, although the citizen who sustains similar damage as a result of information negligently given by an investment adviser has a remedy”

“The specialised nature of the information, the importance which it has to an owner or intending purchaser and the fact that it concerns what the authority proposes to do in the exercise of its public functions and powers, form a solid base for saying that when the information (or advice) is sought on a serious matter, in such circumstances that the authority realises or ought to realise, that the inquirer intends to rely act upon it, a duty of care arises in relation to the provision of the information and advice”.

IMPACT

This case establishes that liability for negligent mis-statement will arise where the government authority ought to have known that the person seeking the information would rely on that information and could suffer loss if the information was incorrect.

Government bodies which provide information for tender submissions must make sure that all such information is as accurate s possible. Failure to do so in the absence of an appropriate disclaimer could lead to liability for negligent mis-statement. This duty  to ensure that information is accurate extends to all dealings which governmental authorities have with the public.

Secured Income Real Estate v ST Martin Investment

SECURED INCOME REAL ESTATE (AUST) LIMITED V. ST MARTIN INVESTMENT PTY LTD (1979) 144 CLR 597

High Court of Australia – 12 October 1979

FACTS

The Supreme Court of Queensland dismissed a claim for damages for breach of an implied term in a contract for the sale of an office building. The alleged implied term provided that the purchaser would actively co-operate with the vendor, to the extent reasonable necessary, in efforts to secure tenants and that it would not obstruct such efforts. The contract provided that the purchaser had to approve tenants of the office building, with approval not to be withheld capriciously or arbitrarily.

The vendor claimed that the purchaser was in breach of the implied term by rejecting the vendor as a tenant of unlet space in the office building. The effect of the purchaser’s refusal was that the purchase price remaining to be paid to the vendor was reduced as lease income for the building has not reached a specified figure.

ISSUES

The court had to decide whether there was an implied term in the contract that the purchaser would actively co-operate with the vendor to secure tenants for the office building.

FINDINGS

There is a rule of contract interpretation that a duty to co-operate in the performance of the contract by the parties or one of them of fundamental obligations under a contract will regularly be implied.

However when the obligations in question, though necessary to entitle the other party to a benefit under the contract, but are not essential to the performance of the contract, the correct interpretation of the contract depends not so much on the general rule of contract interpretation but on the intention of the parties manifested by the contract itself.

QUOTE

Mason J said

“It is easy to imply a duty to cooperate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of the parties obligations and are not fundamental to the contract.

Then the question arises whether the contract imposes a duty to cooperate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done even if the consequence of his decision is to disentitle the other party to a benefit.

In such a case, the correct interpretation of the contract depends, as it seems to me not so much on the application of the general rule of construction as on the intention of the parties as are manifested by the contract itself.” – page 607 of (1979) 144 CLR 597

IMPACT

Courts will imply terms into contracts to facilitate the performance of the contract only if this can be supported by the intention of the parties as manifested by the contract itself.

In this case the contractual right for the purchaser to refuse to accept a tenant had been properly exercised as the purchaser had concerns about the ability of the vendor to pay rent.

Scott v Davis

SCOTT V DAVIS [2000] HCA 52

High Court of Australia – 5 October 2000

FACTS

Davis was a licensed pilot and owned several light aircrafts which he kept at his property.

During a private function held by Davis, Scott’s parents asked if Scott could go on a joy-ride in one of the aircrafts owned by Davis. Davis agreed and asked one of his guests Bradford, a licensed pilot, to take Scott on a joy ride. Bradford was neither Davis’ employee not an independent contractor working for Davis.

The aircraft crashed killing Bradford and seriously injuring Scott. Scott’s parents’ suffered nervous shock and claimed that Davis as the owner of the aircraft was vicariously liable for the negligence of the pilot. Scott and his parents sued Davis for negligence.

ISSUE

Was Davis vicariously liable for the negligent act of Bradford given the circumstances that Bradford was neither his employee nor his agent?

FINDING

Majority: Gleeson CJ, Gummow J, Hayne J, Callinan J, McHugh (Dissenting) There was no finding of a master-servant relationship between Davis and Bradford because Bradford was not Davis’ employee acting in the course of his employment.

Bradford was not an agent of Davis because at the time of his negligent act Davis was not in the position to assert any power of control or direction over the manner in which Bradford was flying the aircraft. Davis did not have any radio or other means of communicating with Bradford whilst he was flying nor was he able to take control of the aircraft himself.

The fact that Bradford was using the aircraft at Davis’ request and for his purpose does not make him a representative or delegate of Davis and therefore vicariously liable because Bradford merely rendered a voluntary service in a social function at the request of the Davis.

QUOTE

Gleeson CJ said:

“The principle by which the existence of vicarious liability is to be determined is to be distinguished from evidentiary consideration concerning the facts relevant to the application of the principle.

The nature of the chattel or motor vehicle in question, or the nature of the occasion of its use may be significant for the purpose of drawing inferences as to the relationship between an owner or bailee and a person for whose negligence the owner or bailee is claimed to be responsible.”

IMPACT

The court suggested that vicarious liability should be imposed when the principal benefits from the actions of the agent but indicated that it was reluctant to extend this principle beyond the idea that an owner of a motor vehicle could in certain circumstances be vicariously liable.

In this case there was no reason for the owner of the aircraft to be liable for the actions of the volunteer who flew the aircraft.

Queensland Wire Industries v The Broken Hill Prop Co

QUEENSLAND WIRE INDUSTRIES V THE BROKEN HILL PROP CO (1988) 167 CLR 77

High Court of Australia

FACTS

BHP manufactured ‘Y Bar’, a product used for the popular ‘star picket post’ style of fencing in rural Australia. This product was sold mostly to AWI, a wholly owned subsidiary of BHP. BHP and AWI held the vast majority of the Australian market as  far as this product as concerned. The applicant (QWI) was in competition with BHP and AWI in the ‘star picket post’ market and sought its ‘Y Bar’ supplies from BHP.

The applicant was initially refused this supply and later offered it at an extremely high price. BHP and AWI explained that the high prices reflected a desire of the 2 companies to preserve their business in the ‘star picket post’ market.

ISSUES

Had BHP breached section 46 of the Trade Practices Act by abusing market power. A breach of section 46 requires that the respondent corporation (1) has a substantial degree of power in a market; and (2) takes advantage of that power for the purpose of eliminating (3) substantially damaging a competing corporation by (4) preventing their entry into the market; or (5)deterring or preventing them from engaging in competitive conduct in the market.

FINDINGS

The first step for the Court to follow is to identify the relevant market and discover the degree of the respondent’s power in that market. The market constitutes not only the respondent’s product but similar products which can substitute or compete with the original product. The degree of market power and determining whether it is “substantial”, is done by considering the following factors:

i. Ability to raise prices without losing customers

ii. What percentage of the market share was held

iii. The extent to which the respondent’s conduct in the market was constrained by competitors

iv. What degree of vertical integration the respondent assumes (a large degree is often evidence of monopoly)

v. Then identify whether the respondent has taken advantage of their power for the purpose of substantially damaging a competitor.

It was held that ‘take advantage’ did not imply some hostile intent was necessary in the use of the power – it simply means ‘use of the power’.

In finding that the respondents were in breach of section 46, it was noted that the relevant market was steel and steel products and the respondents had a substantial degree of power as they were one of only 2 steel producers in the country; and the respondent had taken advantage of the power for the requisite purpose when it refused to supply the product to QWI in order to prevent their entry into the market.

QUOTE

Mason CJ and Wilson J said:

“The phrase “take advantage” in 46 (1) does not require a hostile intent … If the purpose of section 46 were the economic well-being of competitors, then a similar implication of intent might well be appropriate … But the object of section 46 is to protect the interests of consumers.”

IMPACT

A person with substantial market power may be liable for abuse of market power if they exploit their market power.

Perre v Apand

PERRE V APAND PTY LTD [2007] HCA 36

High Court of Australia – 12 August 1999

FACTS

Apand was a national manufacturer of potato crisp chips which supplied experimental potato seeds to Sparnon in the Berri region of South Australia. Sparnon and his potato growing neighbours (who included Perre and the other Plaintiffs) had a lucrative trade selling potatoes to Western Australia as the price of potatoes in Western Australia was higher than in  South Australia.

The seeds supplied to Sparnon were infected with bacterial wilt and his potatoes became infected. Western Australian law prohibited the import of infected potatoes and the import of potatoes from farms in a 20 kilometre radius surrounding an infected farm. Sparnon and other potato farmers were therefore prohibited from exporting potatoes to Western Australia for five years.

Perre and the other potato farmers sued Apand for the economic loss they had suffered as a result of the loss of access to the Western Australian market. Apand was aware of the Western Australian law prohibiting the importing of potatoes in such circumstances

ISSUES

Did Apand owe a duty of care to Perre and the other potato farmers to avoid damage which would cause financial loss to them, even if there was no connected physical injury to property or a person?

FINDING

Apand was found to owe duty of care to Perre and the other potato farmers.

The Judges of the High Court had differing reasons for determining how a duty of care was imposed on Apand but all agreed that Apand should have foreseen that its supplying infected seeds to a potato farmer in South Australia would effect the ability of neighbour potato farmers to sell potatoes, and thus cause economic loss.

QUOTE

Kirby J supported the following approach:

“As an approach or methodology for deciding whether a legal duty of care in negligence exists, I suggested that the decision-maker must ask three questions:

  1. Was it reasonably foreseeable to the alleged wrongdoer that particular conduct or an omission on its part would be likely to cause harm to persons who have suffered damage or a person in the same position?
  2. Does there exist between the alleged wrongdoer and such person a relationship characterised by the law as one of “proximity” or “neighbourhood”?
  3. If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrongdoer for the benefit of such a person?” – paragraph 259 of [1999] HCA 36.

IMPACT

Traditionally, the law of negligence has only allowed claims for physical damage either to a person or property, save for a small class of matters where the economic loss was foreseeable and easily quantifiable.

This High Court decision, however, confirms the more modern view that in certain cases a duty of care may be owed to avoid damage to the economic interests of others. Unfortunately it is not yet clear when such a duty of care will be imposed. A negligence claim for purely economic losses is now more likely to be successful. For example, a Contractor or Sub-
contractor, which is a party, claiming that a direction or action by the Principal or Contract Administrator was negligent and caused economic loss may be prepared to issue legal proceedings for negligence.

Pavey & Matthews v Paul

PAVEY & MATTHEWS PTY LTD V PAUL (1987) 162 CLR 221

High Court of Australia

FACTS

Pavey & Matthews Pty Ltd (‘Pavey’) held a builders’ licence under the Builders Licensing Act 1971 (NSW). Pavey sued Paul for the value of work done and materials supplied under an oral contract. Paul submitted that any such contract was unenforceable by force of the requirements of the Builders Licensing Act 1971, section 45. That section requires that a contract of a licence holder to carry out building work, as defined, is not enforceable unless in writing, signed by the parties or their agent and sufficiently describing the building work.

It was a term of the oral contract that Pavey would do the work requested by Paul and that Paul would pay a reasonable remuneration calculated by reference to prevailing rates in the building industry. Pavey completed the work as requested by Paul and Paul accepted it. The Supreme Court held that the legislation evinced a policy to exclude recovery outside a written contract.

ISSUE

What is the basis of a claim in quantum meruit?

FINDING

Deane J held that the basis of the obligation to make payment for an executed consideration given and received under an unenforceable contract should now be accepted as lying in restitution or unjust enrichment.

The underlying obligation for debt for the work done, goods supplied or services rendered does not arise from a genuine agreement at all. It is an obligation or debt imposed by operation of law which arises from the defendant having taken the benefit of the work done, goods supplied or services rendered and which can be enforced as if it had a contractual origin.

The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case it is that very fact that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.

The High Court concluded that Pavey was entitled to recover the agreed remuneration for building work done notwithstanding that the contract was “not enforceable” for want of writing.

QUOTE

Mason and Wilson JJ held at page 583:

“…an action on a quantum meruit rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment, arising from the respondent’s acceptance of benefits accruing to the respondent from the appellant’s performance of the unenforceable oral contract.” “…the true foundation of the right to recover on a quantum meruit does not depend on the exercise of an implied contract.”

Furthermore, Deane J explained, if there is a valid and enforceable agreement governing the claimant’s right to payment, there is “neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration.”

IMPACT

This case stands for the proposition that quantum meruit is based not on an implied contract, but on a claim to restitution or unjust enrichment and arises from the acceptance of benefits accruing to one party as a result of the work done by the other.

Further, the obligation to pay fair and just compensation for a benefit which has been accepted will only arise where such an agreement is frustrated, avoided or unenforceable.

Lumbers v W Cook Builders

Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27

High Court of Australia 18 June 2008

FACTS:

Lumbers owned land in South Australia, and engaged W Cook & Sons Pty Ltd (“Sons”) to construct a house on that land. Most of the work required by that oral contract between Sons and Lumbers, was subsequently delegated to W Cook Builders Pty Ltd (“Builders”) as sub-contractors to co-ordinate trades and supervise the construction work., without the knowledge or approval of the Lumbers.

Sons and Lumbers had a dispute, which subsequently resulted in Builders commencing an action in the District Court of South of Australia alleging that Lumbers or alternatively Sons were liable for the outstanding payments due and owing under the contract or alternatively restitution/unjust enrichment. Builders did not succeed in their claim in the District Court and appealed to the Full Court of the Supreme Court of South Australia who upheld Builder’s appeal, with Vanstone J dissenting. Lumbers then appealed to the High Court.

ISSUE:

Whether Builders was entitled to claim directly against the Lumbers for work done on Lumbers property?

FINDING:

The Court found that there was no basis in which Lumbers were liable to Builders, particularly in restitution and quantum meruit (the latter being the basis on which the Full Court found in favour of Builders) as it could not be established that there had been a conferral or acceptance of a benefit in light of the characterisation of the relationship between the Lumbers, Sons and Builders.

QUOTE:

Gleeson CJ [at 46]

So far as it appears from the evidence, Builders had, and may still have a viable claim against Sons…it was accepted…that in the ordinary case a building subcontractor does not have a restitutionary claim against a property owner, but must look for payment to the head contractor…

[at 54] “Insofar as the Lumbers have been relieved from liability to pay the full agreed price for the work done on their property it appears principally to be the consequence of Builder’s failure to make or pursue a prompt claim against Sons… If that claim had been pursued, it may well have resulted in a claim by Sons against Lumbers…The procedural and evidentiary deficiencies in the case make it impossible to conclude that the conduct of the Lumbers in refusing to pay Builders is unconscionable. If they have been enriched, it is at the expense of Sons. If any party has been enriched at the expense of Builders, it is Sons.”

IMPACT:

This case demonstrates the traditional position that in normal circumstances a subcontractor will have no claim against a property owner for work done on the property. If the subcontractor wished to have payment secured by the property owner a separate agreement or special relationship would be required.

Leibe v Molloy

LIEBE V MOLLOY (1906) 4 CLR 347

High Court of Australia

FACTS

Liebe, the builder, entered into a contract with Molloy, the employer, to erect buildings for over $30,000. The contract provided that no works beyond those included in the contract should be allowed or paid for without an order in writing signed by both the architect and the proprietor. The builder claimed payment for certain works said by him to be extras. There had been no order in writing for these works as required by the contract. They had been ordered by the architect, either in writing signed by him alone, or orally. A dispute arose and there was a finding before arbitrators that the written orders were not endorsed by the employer, but that the fair inference was that he had knowledge of the extra work. The builder submitted that the employer had entered into an implied contract to pay the fair value of the works “as extra works”.

ISSUE

Whether the contractor could recover payment for variations to the work without an order in writing from the employer and the architect when such a written order was by the terms of the contract a condition precedent to payment.

FINDING

The High Court held that if the proper inferences were: that the employer had actual knowledge of the extra works as they were being done; knew that they were outside the contract; and knew that the builder expected to be paid for them as extras then a contract to pay for them could properly be implied.

If, however, the fact was that the owner did not know the particular works were extras or did not know or believe that the builder expected to be paid for them, then it would be proper to conclude that no contract to pay for them should be implied.

QUOTE

Griffith CJ said at 353-354:

“The question therefore is whether, notwithstanding the absence of written orders, the contractor is entitled to recover these sums, or in other words, whether under the circumstances of the case an implied contract to pay for them is to be inferred. That is an inference of fact to be drawn by the tribunal which is called upon to determine the matter, that is, the umpire. Now, the only fact found is that the employer had such knowledge as to these works as may be fairly inferred from the fact that he was constantly on the work, and taking an active interest therein. But a further inference must be drawn before a liability to pay arises, namely, that there was an implied contract to pay. It might be inferred, on the one hand, that, having regard to the nature of the works, the fact of the owner’s presence, and the nature of the interest he took, he knew that they were outside the contract, and knew that the contractor expected to be paid for them as extras. On the other hand, it might be inferred as to all or some of them that he did not know that they were extras, or did not know or believe that the contractor expected to be paid for them.

An implied contract may be proved in various ways. When a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value. Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would arise from the owner standing by and seeing the work done by the other party, knowing that the other party, in this case the contractor, was doing the work in the belief that he would be paid for it as extra work. If the umpire was of opinion that any of this work was done under such circumstances that the owner knew or understood that the contractor was doing the work in the belief that he would be paid for it as extra work, then the umpire might, and probably would, infer that there was an implied promise to pay for it.”

IMPACT

This case stands for the proposition that if the work claimed for had been work required by the contract to be done, then the builder could not recover for it, because he had not complied with the contractual requirements. However, if the work was work which the builder was not required to do by the contract (i.e. outside the contract) then a builder may recover on the basis of quantum meruit if the employer:

(i) had actual knowledge of the extra works as they were being done,

(ii) knew that they were outside the contract, and

(iii) knew that the builder expected to be paid for them as extras.

Hackshaw v Shaw

HACKSHAW V. SHAW [1984] 155 CLR 614

High Court of Australia – 11 December 1984

FACTS

Shaw was the owner of a farm where petrol was stored for farming machinery. The petrol was being stolen at night and Shaw decided to ambush the next thief of petrol. He therefore lay in wait near the petrol tank.

Hackshaw was in a stolen motor vehicle with Cox when Cox drove into Shaw’s farm, with the headlights turned off, and started stealing petrol. Shaw fired two warning shots at the car and hit Hackshaw who was in the front seat.

It was accepted that Shaw had not known that Hackshaw was in the car. Hackshaw sued Shaw seeking compensation for her injuries.

ISSUES

  1. Did Shaw owe a duty of care despite her being a trespasser on his hand?
  2. Had Shaw breached a duty of care to Hackshaw when he shot his rifle at the car?
  3. Was Hackshaw pertly liable for her injuries by trespassing on the land?

FINDING

Shaw owes a duty of care to Hackshaw to avoid injuring her by his rifle. He should have foreseen that it was likely that there could be a passenger in the car and was negligent in firing the rifle at the car.

Hackshaw’s actions accompanying Cox had contributed to the injury as she had illegally entered Shaw’s property.

QUOTE

Deane J said:

“All that is necessary is to determine whether, in all the relevant circumstances including the fact of the defendant’s occupation of premises and the manner of the plaintiff’s entry upon them, the defendant owed a duty of care under the ordinary principles of negligence to the plaintiff. A prerequisite of any such duty is that there be the necessary degree of reasonable of proximity of relationship.

The touchstone of its existence is that there be reasonable foreseeability of a real risk of injury to the visitor or to the class of person to which the visitor is a member.

The measure of the discharge is what a reasonable man would, in the circumstances, do upon the land, the mere relationship between occupier to take reasonable care to avoid a foreseeable risk of injury to him or her. When the visitor is on the land as a trespasser the mere relationship of occupier and trespasser has imposed upon the occupier will not satisfy the requirement of proximity or give rise to a reasonably foreseeable risk of relevant degree of proximity. Something more will be required.

The additional factor or combination of factors which may, as a matter of law, supply the requisite degree of proximity or give rise to a reasonably foreseeable risk …..they will include either knowledge of the actual or likely presence of a trespasser or reasonable foreseeability of real risk of such presence.”

IMPACT

It is now clear that an occupier of property can owe a duty of care to a trespasser if it can be proven that it was foreseeable that the trespasser could be injured by the negligent acts of the occupier.

Contract Managers should be aware that sometimes a duty of care can be owed to people who commit the illegal act of trespass.