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Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. Now based in Melbourne he spends his time advising businesses on how to communicate to their customers as well as writing on various subjects of interest in this blog.

Friday, February 27, 2009

Occupier's Liability

If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier would be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. - Justin Santiago

The law governing the duty owed by an occupier to a trespasser was left unaltered by the 1957 Act. Historically there was no duty owed to a trespasser and was only liable if it could be proved that he had done some act intending to harm the trespasser or with reckless disregard for the trespasser’s safety – Robert Addie & Sons v Dumdreck. This was altered in BRB v Herrington where it was held that trespassers were owed the common duty of humanity.

Under the Occupiers Liability Act 1984 – S1(1)(a) duty is owed by an occupier to persons other than visitors, in respect of injury on the premises by reason of any danger due to the state of the premises or things done or omitted to be done on them

A duty arises if three separate conditions are satisfied S1(3) :-

a. he is aware of the danger and has reasonable grounds to believe that it exists
b. he knows or has reasonable grounds to believe that the other is in the vicinity of the danger concerned or that he may come into the vicinity of the danger and
c. the risk is one which in all the circumstances of the case, he may reasonably be expected to offer the other some protection

Standard of care S1(4) - owes a duty to take such care as is reasonable in all the circumstances of the case to see that the trespasser does not suffer injury on the premises by reason of the danger concerned – what constitutes reasonable care will vary according to the circumstances

The duty owed may be discharged when warning of a danger is given S1(5)

If the courts were to take a very broad view of what the occupier `ought reasonably' to protect against, the occupier will be liable simply on the basis that both the trespasser and the danger were reasonably forseeable. This reasoning led to concerns that the 1984 Act represented a “trespasser's charter”. The House Of Lords decision in Tomlinson v Congleton Borough Council 2003 was therefore broadly welcomed as a reintroduction of common sense. The central theme of the Lords' ruling is that the cause of the claimant's injury was his own folly, not something that the defendants did or failed to do. The danger of the lake was obvious, and the authority had erected signs to that effect, and had directed its park staff to eject people from the lake if they were found there. There could be no dount that the claimant had known of the danger, and that he must therefore have been deemed to have accepted it voluntarily.

Two points brought up by Lord Hoffman : the first is the social value of the activities which would have to be prohibited in order to reduce or eliminate the risk from swimming. And the second is the question of whether the council should be entitled to allow people of full capacity to decide for themselves whether to take the risk.

Social Value

The Court of Appeal made no reference at all to the social value of the activities which were to be prohibited. The majority of people who went to the beaches to sunbathe, paddle and play with their children were enjoying themselves in a way which gave them pleasure and caused no risk to themselves or anyone else. This must be something to be taken into account in deciding whether it was reasonable to expect the council to prevent people from using the beaches or to deprive people form using the beach in a harmless way.

Free will

The second consideration, namely the question of whether people should accept responsibility for the risks they choose to run, is the point made by Lord Phillips of Worth Matravers MR in Donoghue v Folkestone Properties Ltd[2003] QB 1008, 1024, para 53 :

Mr Tomlinson was freely and voluntarily undertaking an activity which inherently involved some risk. By contrast, Miss Bessie Stone (Bolton v Stone [1951] AC 850), to whom the House of Lords held that no duty was owed, was innocently standing on the pavement outside her garden gate at 10 Beckenham Road, Cheetham when she was struck by a ball hit for six out of the Cheetham Cricket Club ground. She was certainly not engaging in any activity which involved an inherent risk of such injury.

I think it will be extremely rare for an occupier of land to be under a duty to prevent people from taking risks which are inherent in the activities they freely choose to undertake upon the land. If people want to climb mountains, go hang-gliding or swim or dive in ponds or lakes, that is their affair. Of course the landowner may for his own reasons wish to prohibit such activities. He may be think that they are a danger or inconvenience to himself or others. Or he may take a paternalist view and prefer people not to undertake risky activities on his land. He is entitled to impose such conditions, as the Council did by prohibiting swimming. But the law does not require him to do so.

My Lords, as will be clear from what I have just said, I think that there is an important question of freedom at stake. It is unjust that the harmless recreation of responsible parents and children with buckets and spades on the beaches should be prohibited in order to comply with what is thought to be a legal duty to safeguard irresponsible visitors against dangers which are perfectly obvious. The fact that such people take no notice of warnings cannot create a duty to take other steps to protect them. I find it difficult to express with appropriate moderation my disagreement with the proposition of Sedley LJ, ante, p 62B-C, para 45, that it is "only where the risk is so obvious that the occupier can safely assume that nobody will take it that there will be no liability". A duty to protect against obvious risks or self-inflicted harm exists only in cases in which there is no genuine and informed choice, as in the case of employees whose work requires them to take the risk, or some lack of capacity, such as the inability of children to recognise danger (Herrington v British Railways Board [1972] AC 877) or the despair of prisoners which may lead them to inflict injury on themselves: Reeves v Comr of Police of the Metropolis [2000] 1 AC 360.

So this appeal gives your Lordships the opportunity to say clearly that local authorities and other occupiers of land are ordinarily under no duty to incur such social and financial costs to protect a minority (or even a majority) against obvious dangers. On the other hand, if the decision of the Court of Appeal were left standing, every such occupier would feel obliged to take similar defensive measures.

Two other differences should be noted between the duty of care to lawful visitors and that to trespassers. First, the 1984 Act only applies to personal injury. The 1957 Act is not so limited. This means that, in effect, the occupier carries no liability for damage to a trespasser's property, however expensive. Secondly, the 1957 Act allows that a visitor may waive his protection under the Act by a clear disclaimer, subject to the provisions of the Unfair Contract Terms Act 1977. The 1984Act makes no such statement. It is not entirely clear why a person is allowed to waive his responsibility to lawful visitors, but not to trespassers. It could be that, in practice, the 1977 Act would prevent any effective waiver anyway. Alternatively, the duty of care to a trespasser is so low that it would unjust to allow the occupier to lower it still further by a disclaimer. Another argument is that, while it would be possible to get a lawful visitor to express his agreement to the terms of a disclaimer, it is not clear how one would get a trespasser to do so.

Thursday, February 26, 2009

Vicarious Liability

Vicarious liability runs counter to two principles of the law of tort, namely that a person should only be liable for loss or damage caused by his own acts of omissions and secondly that a person should only be liabile when he has been at fault. Discuss.

Vicarious liability is one person’s liability for another’s act/omission which caused loss to another. An example of vicarious liability is the liability of an employer for acts by his or her employee. The burden of the liability on the employer is justified because the employer derives economic benefit so needs to bear any losses/liability incurred and it is justifiable to impose liability as he has substantially greater means and may have the necessary insurance to cover such contingencies.

Employers are vicariously liable, under the respondeat superior doctrine, for negligent acts or omissions by their employees in the course of employment.However there has to be a balance between firstly furnishing an innocent victim with recourse and secondly hesitation to foist undue burden on business enterprises.
For an act to be considered within the course of employment it must either be authorised or be so connected with an authorised act that it can be considered a mode, though an improper mode, of performing it.

Various tests have been formulated in order that this balance is achieved.

An employee has to be clearly defined under a contract of service as opposed to contract for service.Under the control test formulated in Yemen v Noakes an employee is one who is subject to the command of his master as to the manner in which he shall do his work. This test was further elaborated in Ready Mixed Concrete v Minister of Pensions which said a contract of service exists if these three conditions are fulfilled.

(i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. The wage represents the consideration and if there is no consideration there is no contract of any other kind.

(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. However, it was also made clear in the judgment that, although a right of control is an important factor in determining employment status, it is not necessarily a determining factor.

(iii) The other provisions of the contract are consistent with its being a contract of service. Factors such as ownership of significant assets, financial risk and the opportunity to profit are not consistent with a contract of service.

The "Salmond Test" is used to determine if an act of an employee occurred in the course of employment and, therefore, whether the employer should be liable. This test deems an act to have been committed in the course of employment if it is either:

(a) something authorised by his employer, or
(b) an unauthorised mode of doing something authorised.

The second limb of the Salmond Test is particularly difficult to apply and the House of Lords in the U.K. has recently expressed its preference for a less technical test which was followed by the Court of Final Appeal. This new test focuses on whether the employee's act is so closely connected with his employment that it would be fair and just to hold his employer vicariously liable (Lister v Hesley Hall Limited [2002] 1 AC 215).

Ultimately, the focus of the "close connection" test is still whether or not the act of the employee in question is carried out in the course of employment. However, in determining this point, the "close connection" test appears to allow a broader and more flexible examination of the facts and circumstances of a particular employment as the court does not have to determine if the act in question is authorised, whether expressly or impliedly. The law was deemed mature enough to hold an employee vicariously liable for deliberate, criminal wrongdoing on the part of an employee overruling Trotman v North Yorkshire.

To avoid vicarious liability, an employer must demonstrate that the employee was acting in his own right rather than on the employer's business. Factors to take into consideration whether it was a frolic or detour : Joel v Morrison, fow own benefit, whether it was wholly independent act, or was it incidental to employment or was it a prohibited conduct : Rose v Plenty.

Monday, February 23, 2009


The nature of a cif contract remains unclear. Discuss. - Justin Santiago

The discussion revolves around whether a CIF contract is a sale of goods or a sale of documents pertaining to the goods or both. A CIF contract is a cost, insurance and freight contract. Under a CIF contract the seller is required to arrange the carriage of the goods and their insurance in transit, and the cost of those arrangements is included in the contract price. The seller obtains a bill of lading and a policy of insurance and forwards them to the buyer, together with an invoice for the price, and the buyer pays on receipt of the documents.

It has been argued that a CIF contract is a sale of documents in the lower courts in the case of Arnold Karberg v Blythe, Green, Jourdain and Co by Scrutton, J who said the contract was a sale of documents based on the fact goods can be paid for or sold on the strength of the documents. Support for Scrutton, J's judgement comes from the fact that a number of legal rights and liabilities are attached to the documents such as the buyer's obligation to pay against the tender of the documents or the right to reject the goods against a bad tender of documents.

However the correct definition of a CIF contract was later addressed in the same case at the level of the Court of Appeal and reiterated in Hindley & Co v East India Produce Co where it was stated that it was the contract of the sale of goods to be performed by the delivery of documents. The case of Kwei Tek Chao v British Traders it was stated there were 2 rights of rejection – rejection of documents and rejection of goods emphasised the point that two conditions needed to be fulfileed and that a cif contract meant both a sale of documents or a sale of goods. Additionally this rule is subject to the proviso that the documents tendered are strictly in conformity with the contract i.e. the goods correspond with the description.

Some cases will illustrate the duality of this definition. In Gill and Dufus v Berger – normal duty of the buyer to pay the price against the documents even though the seller has failed to perform his duty to ship conforming goods.
The rationale is that it is the buyer who will take benefit of insurance and eliminates difficult questions of proof of the actual time when the goods were lost/damaged. This is an exception to the provision on the allocation of risk is Section 20(1) in SOGA which states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not."

The buyer is also protected in cases where it is physically impossible to deliver the goods. In cases like Manbre Sacharin where the goods did not exist or were destroyed before the passing of documents, the contract was invalid.

In contrast to a CIF contract, in an FOB contract, S20 of the Sale of Goods Act 1979 is applied and risk prima facie passes with property so that risk normally passes to the buyer when the goods are put across the ship’s rail – Pyrene v Scindia - the tender was at the sellers risk when it was dropped during loading prior to crossing the ship’s rail.

Risk of loss may also remain with the seller by virtue of he provisions of s32 of the Sale of Goods Act. Section 32 (3) provides that:

“where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give to the buyer such notice as will enable the buyer to insure them during the sea transit”

If the seller fails to supply such information, the goods are at his risk during the sea transit. It has been argued that s32(3) can have no application to FOB sales because the contract requires the seller to deliver the goods “free on board” and delivery to a carrier is normally deemed to be delivery to he buyer.

In the alternative, risk may pass to the buyer prior to shipment. In Cunningham v Munro it was suggested that if the goods deteriorate because of the buyer’s delay in giving the seller shipping instructions (it is the obligation of the buyer to nominate an effective vessel and nominate the port of loading) or because the buyer induces the seller to deliver goods to the port before the goods can be loaded the buyer would be liable for such deterioration; he would be entitled to reject the goods for non-compliance with the implied conditions as to quality in the Sale of Goods Act, but would be liable to the seller in damages for the deterioration.

Risk may also remain with the seller under the following circumstances :-

1.Seller has reserved the right of disposal by retaining the bill of lading
2.Contract goods are unascertained

Sunday, February 22, 2009

The Rule in Rylands v Fletcher

The rule in Rylands v Fletcher should be abolished and absorbed within negligence or alternatively should be generously applied and the scope of strict liability extended. Discuss. - Justin Santiago

The principle of the decision in Rylands v Fletcher was expressed in the famous words of Blackburne J:

“The person who brings on his land for his own purposes, and collects and keeps there, anything liable to do mischief if it escapes, must keep it in at his peril...”'

The rule in Rylands v Fletcher applied the doctrine of strict liability into the tort and the primary justification for this was premised upon the belief that the rights of individuals should not be sacrificed in the furtherance of the public interest in cases where the acts were "one off" and therefor difficult to be liable under nuisance which requires the acts to be continuous or where it was difficult to prove that the defendant had not taken all reasonable precautions to prevent the mischief since the escape would not have been foreseeable.

The application of strict liability, that is, liability without fault is contentious because it looks at the harmful result rather than to the kind of conduct. This is very different from the traditional fault-based formulation in negligence.

However, the situation is quite a lot more complicated than it first appears, because true strict liability would be extremely burdensome. Consequently, the courts, just like in the law of nuisance, have imported fault elements into the rule in other guises. To succeed in the rule under Rylands v Fletcher, the claimant has to show that the defendant's activities amounts to a `non-natural' user of land. Clearly this will be easier if the defendant's activities are inherently unreasonable. In addition, it appears that a remoteness test applies to this tort as it does for nuisance.

In Cambridge Water v Eastern Counties Leather 1994, the House held that the concept of `non-natural user' was a valid one, and what the defendants had been engaged in did constitute a non-natural use; nevertheless, the same tests for remoteness as applied in negligence also applied to the rule. The loss suffered by the claimants was not of a type forseeable by the defendants, and the damage was therefore too remote. Under strict liability it would not matter whether the loss was foreseeable or not. So, even if the defendant's activities amount to `unreasonable user', he may still escape liability if he could not reasonably be expected to foresee the type of damage that would result.

In short, Ryands v Fletcher is not subject to an explicit test for fault as negligence is, but it has features which at least overlap with a test for fault. The main procedural difference is that the claimant does not have the burden of proving that the defendant was at fault - this is assessed by the court with regard to the reasonable user and remoteness considerations.

Whether this warrants that the rule be absorbed into negligence is debatable because under negligence there would be several more elements that may be difficult to prove by the claimants who would be deprived of the right to use their land. The rule itself, said the House of Lords in Transco v Stockport MBC, fulfilled an important social objective, in making people think very carefully about the ways they used their land.


There continues to be uncertainties about the basis for suing under private nuisance - Justin Santiago

There has been a preference to sue under private nuisance because it is not based on fault and therefor is less difficult to prove. Private nuisance is the continuous, unlawful and indirect interference with a person’s use or enjoyment of land or some rights over or in connection with it and as long as all these elements are present there is a valid case. However several cases have pointed to the limitations of this definition that makes it difficult to start an action under nuisance.

Because private nuisance is a tort against land, not against the person only those with rights to the land namely an interest in land or exclusive possession can sue.
It has never really been clear what amounts to a proprietary interest in land for the purposes of nuisance, and on closer inspection it is obvious that it isn't a particular helpful concept in general – Pemberton v Southwark LBC 2000 decided that a tenant, who had reverted to being a trespasser by his non-payment of rent, but was tolerated by the landowner, had standing to sue in nuisance.

In Khorasandjian v Bush the law of nuisance could be invoked by those who had a substantial link to the land, and this would include the relatives of landowners however Hunter v Canary Wharf reinstated the proprietary interest principle stated in Malone v Laskey that the claimants must have an interest in the land and must have exclusive possession tin their own right and overturned the decision to allow occupiers with a substantial link to the landowner to sue.

Although Hunter seems clear enough, there continue to be uncertainties about who has a right to sue in nuisance. The first problem arises from those cases where the courts have accepted that it is a nuisance to prevent someone getting access to land (rather than interfering with his use of that land). These cases have mostly arisen out of the actions of pickets on industrial disputes. In both Thomas v NUM [1986] Ch 20 and Newsgroup v SOGAT [1987] ICR 187 the courts accepted that pickets caused a nuisance by preventing non-striking workers getting into their places of work. In none of these cases had the victim of the nuisance had any proprietary interest in land; at best they were licencees. However, unlike Malone, these cases concerned rights of access to land, not right of enjoyment of land, and might represent a different species of nuisance.

Limiting who can sue to those with rights to land is contrary to Article 8 of the European Convention on Human Rights which demands respect for private and family life, and if a person occupies his home as a licencee, or even as a trespasser, it seems that he should still be able to get the protection of the Article.

Another contentious point is the requirement for the interference to be continuous which is said to distinguish nuisance from negligence which can be based on a single event. In British Celanese v Hunt Capacitors 1969, the defendant's metal foil blew onto a power line and shut off power to the claimant's plant. This was a single event, but the defendants were liable. The reasoning was that the single event followed from an ongoing state of affairs (the inadequate storage of the foil). Then, in Leakey v National Trust 1980, the defendants were held liable for a (single) landslide onto the claimant's property. Again, the reasoning was that the defendant's land was defective, and had been so for a long time.

Additionally in deciding nuisance cases, the courts have to balance the right of the claimant to use his land, with the right of the defendant to use his. Not every trivial interference will amount to a nuisance. It must be a balancing exercise between rights of the claimant and other householders : Miller v Jackson. Factors to take into consideration :-

- defendant’s conduct in light of the circumstances
- nature of the locality – Sturges v Bridgman making a disruptive amount
of noise is more likely to be unreasonable in a quiet rural area than in
an industrial zone
- abnormal sensitivity – Robinson v Kilvert
- malicious – Christie v Davey, Holleywood Silver Fox Farm v Emmet 1936, the defendant's shooting was perfectly lawful, and would not
have amounted to a nuisance had it not been done with malice.
- does not normally occur
- occurs at an unreasonable time
- objectives could have accomplished in a less intrusive manner
- dangerous
- natural nuisance recognised and the same duty of positive action on
the part of the occupier of the land was recognised – Leakey v
National Trust

Unsure what amenity interests are protected. In Tetley v Chitty 1986, noise from a go-kart track was held to be an actionable nuisance, as was the bad smell emanating form a pig farm in Bone v Seal 1975. But no action lay in the blocking of a view or prospect : AG v Doughty or prospect of TV and radio reception : Hunter v Canary Wharf.

If a loss of amenity resulting from personal discomfort can be actioned, then the courts have from time to time extended this head of liability to encompass actual personal injury. After all, it seems logical in a way that if discomfort is actionable, injury should be actionable. However, in Hunter v Canary Wharf the House of Lords doubted that personal injury could amount to a nuisance - nuisance is concerned with the rights in land, not with bodily integrity.

Although some losses of amenity value may be actionable, the courts have not accepted that all losses are so actionable. For example, in Hunter, interference with television reception was not held to amount to a nuisance. In a way this is strange, because many people would be deterred from owning land that did not obtain adequate television reception; this particular part of the Hunter decision has been rejected by some other common-law jurisdictions (e.g., in the Canadian Nor-Video case).

A further problem with the principle that loss of amenity is recoverable is that whether there is a loss of amenity will depend on what the claimant does on his land. If the defendant has the poor fortune to live next to someone who carries on a particular line of business, and the defendant's actions are deemed to reduce the amenity of the neighbouring land with respect to that business, then he will be liable. Admittedly the courts have been reluctant to impose liability where the claimant's activities are unsually sensitive to interference (e.g., Robinson v Kilvert 1889).


F.H. Newark in his article The Boundaries of Nuisance

Public Authorities

There is a clear reluctance to hold public authorities such as the police, emergency services, social services in the UK liable. No special principles govern the liability of public authorities. The ordinary requirements of foreseeability, proximity and fairness, justice and reasonableness must be satisfied must still be satisfied. - Justin Santiago

The argument is that liability should not be imposed on public bodies for three reasons :-

1. They are set up for the purpose of protecting the public or a section of it and it is clearly foreseeable that harm may be suffered if the supervisory or regulatory work is carelessly done. It would be putting too much liability on public bodies preventing them from administering their duties.

2. Any award for damages will come out of public funds.

3. There will be intrusion by the courts into the workings of bodies which form part of the democratic process.

There have been several case law developments which point to making public authorities more liable for negligence as well as HRA 1998 which has forced courts to not make it so easy for defendants to deny there was a duty of care and hence escape liability.

However what would would tilt the balance in favour of the public bodies being held liable for negligence would be if the there was a single claimant involving personal injury. Kent v Griffiths – single claimant, personal injury held liable contrast with Capital and Counties plc v Hampshire County Council Capital and Counties – multiple claimants, property damage not held liable. Also Barret v Ministry of Defence – claimant can be identified as an individual who is in real and imminent dangerand not merely in the same position as the public at large held liable.

Some cases involving failure to act will also shed light on the extent to which the courts will hold public authorities liable. In Stovin v Wise: public authorities cannot generally be held liable for a failure to act, so long as they have not actually created the danger themselves. Lord Hoffmann left open the possibility that a public body could be held liable for a failure to exercise a statutory discretion where (1) the failure to do so is Wednesbury unreasonable or irrational and (2) there are exceptional grounds for holding that the policy of the statute requires compensation.

Gorringe v Calderdale further suggested that in the absence of a right of action for breach of statutory duty and in the absence of any underlying common-law duty owed by that public body to an individual, the omission on the part of the public body can found a private law right of action by that individual.

The effect of the HRA 1998 has been twofold :-

1. Vertical effect – allows any person who is the victim of a public authority’s breach to bring proceedings against the authority - the message to the English courts is that they have been wrong to afford public authorities an immunity from negligence liability for instance allowing pre-emptive tactics such as preliminary striking out applications on the bases there was no duty of care, Hill v Chief Constable of West Yorkshire and X (Minors) v Bedfordshire County Council, Osman v Ferguson on appeal to Osman v UK based on Article 2 – everyone’s right to life shall be protected by law, Article 8 – right to family life, Z and others v UK (petition by X (minors) v Bedfordshire County Council).

2. Horizontal effect – one may rely on the convention even in litigation against another private person and the courts must ensure that all their decisions are human-rights compatible since the courts are public authorities under the HRA 1998. The central provision of the Act is to be found in S6(1) which states : “It is unlawful for a public authority to act in a way which is incompatible with a Convention right.”

Sale of Goods by Non-Owners

Situations involving sale of goods by non-owners

a. Stolen goods

If the goods turn out to have been stolen, the buyer is entitled to the return of the whole of the purchase price – breach of condition implied by S12(1) – right to sell the goods must have a title that can be conveyed - Rowland v Divall. It is not only breach of an implied condition but there is no consideration as the buyer has paid the purchase money without any corresponding detriment on the seller's part. The whole object of a sale to transfer property from one to another has been defeated.

b. Imitation goods

Property is in the goods but no title and therefor there is no sale as there is no title to convey – Niblett v Confectioners’ Materials.

c. Mistake as to identity

Whether the title is voidable or void - the real test lies in the intention of the original seller. If his intention was deal with and pass title to the original buyer, regardless of the fraud, then the contract will merely be voidable : Ingram v Little. If his intention was to pass title not to the original buyer but to someone else, but was defrauded into dealing with the original buyer then the contract will be void – Shogun Finance Ltd v Hudson . A however can void B’s title by making a report to the police : Car & Universal Finance Ltd v Caldwell.

The original owner word argue that the title transferred by the seller was not merely voidable but void in order to continue to assert his right as owner.


Battersby and Preston The concepts of property, title and owner used in the Sale of Goods Act 1993

Graham Battersby A Reconsideration of Property and Title in the Sale of Goods Act

David Tiplady When is a seller not a seller

Product Liability

The trend towards strict product liability is becoming increasingly evident. Discuss. - Justin Santiago

The duty of manufacturers has been extended and refined since Donoghue and Stevenson and has taken on elements of strict liability under the Consumer Protection Act 1987 because of the difficulties in proving negligence namely causation. Although fault need not be proved it is important to remember that the defendant’s actions caused their loss, that the loss is recoverable and that there are no defences which obstruct their claim or limit their damages. It should also be noted that strict liability does not mean automatic liability but simply that the claimant does not have to prove that the defendant has been at fault.

As a general rule anyone who suffers personal injury or property damage that is caused by a defective product may recover to the full extent of his loss. S5(1) allows for recovery for personal injury. Property damage is claimable under S5(3) and 5(4).

Under provisions of this law, a producer would be found liable if a consumer is injured by a defect in the product even though it was not negligent and exercised all proper care necessary protect the producer or even if the risk could not have been recognised at the time of supply : Abouzaid v. Mothercare (UK) Ltd.
The case depended on whether the product had a defect as defined in Section 3 of the act. Section 3 provides that a product has a defect if the safety of the product is not such as persons generally are entitled to expect at the time the product was purchased.

The Court of Appeal considered that a defect, within the Consumer Protection Act, depended on a consumer's "expectations" of safety. The court considered whether public expectations had changed between 1990 and 1999. It concluded that there had been no change. Therefore the product was defective in 1990. The court accepted that the public was entitled to expect a certain level of safety in a product even where a producer could not reasonably have anticipated a particular risk and guarded against it. In A v National Blood Authority – as long as the risk of infection was known it was irrelevant that all reasonable steps to detect such risks.

Consumer expectations of safety are the key to defining a defect under the Consumer Protection Act. However the fact these expectations may change over time is an unresolved problem under the act. Also, it is not the consumers' actual expectations of safety that is important under the act but what consumers are entitled to expect. Grey areas will still cause problems until more cases have been through the courts. For example, in Richardson v. LRC Products it was held by the High Court last year that, in the case of a condom which ruptured in use, the product was not defective because the public was not entitled to expect that any method of contraception intended to defeat nature would be 100% effective.

The case also demonstrated the difficulties with using the development risks defence. The argument that an undiscoverable risk at the time the product was in circulation could be used was rejected by the courts citing that such a defence would undermine the effect of the strict liability provisions in the act. The Court of Appeal considered that whether a producer might be expected to have discovered the defect had nothing to do with the state of scientific or technical knowledge at the time. It would have been a simple matter to discover the defect by performing a practical test. No advance in scientific or technical knowledge between 1990 and 1999would have been required to perform such a test. The only reason that such a test had not been carried out was that the manufacturers had presumably not thought of doing one. This risk was the same in 1990 as it was in 1999 and therefore, if it constituted a defect in 1999, it constituted a defect in 1990.

There have been some criticisms levelled at the CPA because it is no easier to prove that a product is defective than to prove that it was negligently manufactured.

There are also criticims that express warnings on the packaging would be absolved from liability following Worsely v Tambrands Ltd where a claim would fail if :-

1. There was a clear and legible warning on the outside of the box
directing the user to the leaflet
2. The warnign was legible, literate and unambiguous and contained all the material necessary to convey both the warning signs and the action required if any of them were present

Tuesday, February 17, 2009

Nemo dat rule

In what ways does commercial law protect a bona fide purchaser of personal property? - Justin Santiago

In commercial transactions, balance has to be made between rights of a bona fide purchaser and the strict application of the nemo dat quod non habet rule – no one can give a better title than he himself possesses enshrined under common law and under statute - Sale of Goods Act 1979 S21(1). This is exemplified in Lord Denning’s judgement in the case of Butterworths v Kingsway North Finance - in the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title.

From the historical point of view, the law has leaned towards the owner. However more recently the priority is given to security of transactions and the innocent purchaser has been given slightly more protection. The reason for the alteration might be owed to the following two realities :-

Firstly, it is often the case that the owner voluntarily transfers possession to the fraudster and he is certainly able to assess the risks inherent in the transaction, eg the fraudster’s creditworthiness. The buyer, on the other hand, rarely has either the time or the ability to investigate the title to the goods as, unlike real property, there is no certain method of ascertaining such title.

Secondly, the owner is frequently insured against the loss of his goods and will be able to claim on his insurance policy.

There are several exceptions to the nemo dat rule

1. Estoppel

An estoppel, when successfully raised, prevents the true owner from claiming that the sale of goods was unauthorised. An estoppel arises when the true owner leads the innocent purchaser to believe that the unauthorised seller has the right to sell the goods. In such a case the owner of the goods is precluded (estopped) from denying the seller’s authority to sell : S21(1) of the Sale of Goods Act. In order to be successful in estoppel, the following points must be established:-

(i) The true owner intentionally or negligently represents that the seller has the owner's authority to sell the goods as his agent;
(ii) The innocent buyer acts in reliance on the representation; and
(iii) The innocent buyer buys the goods.

However the scope of estoppel has been narrowed :-

Moorgate Mercantile Co Ltd v Twitchings – for estoppel by negligence to take effect there must be a duty owed, carelessness in handing over possession of goods or documents of title is not enough. The significance of the case lies in the fact that the court treated the existence and the nature of the duty to take care in such circumstances as the same as those which arise in the ordinary law of negligence. In other words, negligence must be more than mere carelessness and amount to a disregard of the owner’s obligation towards a person setting up the defence. The bona fide purchaser must be able to show that the owner owed him a duty of care.

Mercantile Credit Co Ltd v Hamblin – there was no estoppel by negligence because although there was a duty of care there was no breach of that duty, additionally the proximate or real cause was the fraud of the dealer

Shaw v Metropolitan Police Commissioner the estoppel principal did not apply where there was only an agreement to sell.

Debs v Sibec Development Ltd suggested that, even though the owner’s statement may be an unequivocal representation of the seller’s authority to sell the goods, it will be insufficient unless it is made voluntarily.

2. Factors Act 1889

This exception applies where a mercantile agent is, with the consent of the owner, in possession of goods or documents of title to goods, any sale, pledge, or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this act, be as valid as if he were expressly authorised by the owner of the goods to make the same, provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition noticed that the person making the disposition has no authority to make the same.

In order to pass a good title to the innocent purchaser, the following must be established:

(i) The mercantile agent must be in possession of goods or of the documents of title to goods. A bill of lading is a document of title but not the registration documents for a motor vehicle. Furthermore, it is generally accepted that a person must be a mercantile agent at the date he receives the goods and it is insufficient that he subsequently becomes one, unless there is further consent to this possessing the goods at the date when he has become a mercantile agent.

(ii) The possession must be with the consent of the owner. Consent is presumed in the absence of evidence to the contrary, and withdrawal of the consent is not effective as against a third party who takes without knowledge of the withdrawal of consent and under a disposition which would have been valid if the consent had continued. At Common law, if I deliver my car to a motor dealer for sale, I entrust my car to him as a mercantile agent. Then I leave my car for the purpose of repair, then even though he is a mercantile agent I have not consented to his possession of the car in that capacity and the section will not apply to a wrongful disposition made by him. Consent obtained by fraud is nevertheless an effective consent with the meaning of this section.

(iii) The sale must be in the ordinary course of the mercantile agent’s business. As to this question, I think Buckley LJ has given the best explanation in Oppenheimer v. Attenborough & Son. It reads as follows: ‘acting in such a way as a mercantile agent acting in the ordinary course of business of a mercantile agent would act’; that is to say, within business hours, at a proper place of business, and in other respects in the ordinary way in which a mercantile agent would act, so that there is nothing to lead the buyer to suppose that anything wrong is being done, or to give him notice that the disposition is one which the mercantile agent had to authority to make.

(iv) The person taking under the disposition must act in good faith and without notice of the mercantile agent’s lack of authority. The onus of proof on these issues lies upon the buyer.

3. Voidable contract (S23)

Under this exception a voidable title that has not been avoided yet could be transferred to a buyer that did not know about the deficiency of the title. If a contract is voidable, but sold before it is avoided the 3rd party would have good title.

4. Seller in Possession (S24)

Basically, a seller who is possession of the goods that he sold, can sell them again to a 2nd buyer and that buyer can acquire a good title if he receives them in good faith and without notice of the first sale. To a great extent, this exception derives from the fact that it is difficult to establish ownership in respect of goods, and therefore possession of goods is to be taken as prima facie evidence of ownership. Here several aspects have to be considered before the exception applies.

Firstly, in relation to possession, it should be noted that this exception applies not only in the situation where the seller ‘continues’ in possession but also where he is ‘in possession’ at the time of the second disposition. In Worcester Works Finance Ltd v. Cooden Engineering Co Ltd, Lord Denning MR considered that this phrase referred to the situation where the seller did not have possession when he sold the goods but ‘they came into his possession afterwards’.

Secondly, as to the delivery or transfer of goods or documents of title, it is not the document itself or the issuing of such a document of title which confers rights of ownership; it is the transfer to a second buyer of a document of title which is already in the possession of the seller, and which he was not parted with under the first contract of sale, that defeats the claims of the first buyer. The second buyer will not acquire title unless there is a delivery of goods or transfer of documents of title. For the second buyer to acquire good title, the seller must deliver possession of the good or documents of title, merely contracting a sale is not sufficient to give title to the second buyer : Michael Gersno v Wilkinson.

Thirdly, when we turn to look at good faith and want of notice, this exception mostly resembles the above exceptions. Furthermore, this good faith and want of notice must exist at the date of delivery of the goods, or transfer of documents title, as well as at the date of the seller’s disposition. If the seller wrongfully resells the goods to an innocent purchaser but before the delivery of the goods to him that purchaser becomes aware of the previous sale, then he is subordinated to the rights of the original buyer and does not acquire title. His remedy is to rescind the contract of sale and/or claim damages for breach of the condition of title.

5. Buyer in Possession (S25)

This exception allows a buyer who has been allowed by the seller to take possession of the goods or documents of title before property has passed, and then resells. Provided that there is actual delivery, the new purchaser who takes in good faith and without notice will obtain a good title. In terms of detailed discussion on seller in possession, here I just would like to add little difference of buyer in possession. The goods must be with the buyer with consent from the seller, it does not matter if he acquired the goods by a criminal offence as long as the owner consented and does not matter if the owner revoked his consent later. Another requirement is that the buyer must obtain possession of the goods or the documents of title to the goods. Constructive possession is sufficient here if the first buyer requested the seller to deliver the goods directly to the 2nd buyer. Also, the nature of the possession does not matter even temporary would suffice : Marten v Whale. It also seems possible for delivery to take place in an undivided bulk, although it would seem to conflict with s16 which does not permit a transfer of property in an undivided bulk of goods except in the circumstances set out in s20 inserted by the 1995 Act.

6. Part 3 of the Hire Purchase Act 1964

A bona fide purchaser for value of a motor vehicle from a person in possession under a hire-purchase agreement or a conditional sale agreement obtains a good title. This protects purchasers of motor vehicles who buy cars from hirers of cars on hire-purchase terms.

The details of Part 3 are quite complex, but the most important points are as follows:

(i) In respect of motor vehicles, the seller must be someone who is hiring the vehicle under a hire-purchase agreement or buying it under a conditional sale agreement.
(ii) The sale must be to a private purchaser, who must not be a dealer (or a finance house) carrying on business in the motor trade. This is so even where the dealer acquires the car for his own private purposes : Stevenson v Beverly Benticle Ltd.
(iii) Only the first private purchaser from the hirer (or ‘debtor’, as he is termed in the Act) is protected.

The onus of proof is on the purchaser to prove that he bought the car in good faith : Barker v Bell and without notice, if he succeeds, the HP company might want to show that B1 was not a purchaser in good faith, so that no title can pass from the start, or it might want to claim that the car was not disposed by the hirer at all, but was, for example, stolen from him, or was disposed by someone else.

It is elementary learning to identify nemo dat quod non habet as the most important conveyancing principle in English commercial law, however, that the innocent purchaser who buys in good faith needs some protection, and so there are various exceptions to the nemo dat rule. The main difficulty with the legislative response is that on the one hand it is too extensive in terms of legal consequence whilst on the other it is too restrictive in its scope because the protection to the innocent buyer is somewhat piecemeal.

Some reforms have been suggested, such as the adoption of uniform treatment for all transactions whereby a security interest is reserved in relation to goods, and the introduction of a system of registration for non-possessory securities. The most fundamental proposal might be the creation of an ‘entrusting’ principle. That is, whenever an owner has entrusted his goods to another or acquiesced in their possession by that other (‘the possessor’) in a wide range of contractual situations, any sale of goods by the possessor in the ordinary course of business to an innocent buyer would confer a good title on the latter.

Reform in this area of law is found in the judgement of Devlin LJ in Ingram v Little Devlin LJ as he then was, suggested that it might be possible to apportion the loss which occurs when an innocent owner and an equally innocent bona fide purchaser are left to dispute over the title to goods after some dishonest middle party has quit the scene. However this was rejected by the Law Reform Committee on the bases where the goods pass through several hands.

Comparison between different legal systems

Although the nemo dat rule is firmly entrenched in English law, many people hold the opposite view and they believe that the bona fide purchaser should be equally protected or even prior to the owner. In fact, many European systems invert nemo dat and consider the dominant principle to be protection of the bona fide buyer of goods.

In France, the sale of a thing belonging to another is treated as being voidable, which may give rise to damages if the buyer is ignorant that the thing belonged to another. Nevertheless, the sale may be treated as valid if the buyer has dealt with someone he considered to be capable of selling and both parties were induced by a common and legitimate error into concluding the sale. Where the buyer sues for rescission and damages from the would-be seller, a judge may decide not to award damages if in his opinion the seller has acted in good faith. This may be contrasted with the situation prevailing in the United Kingdom which are remarkably complex and subject to many common law and statutory exceptions.


The significance of property in commercial transactions. - Justin Santiago

Property as a concept is not the physical goods themselves but the proprietary right or legal interest in the goods. The importance of property pertains to the passing of property and correspondingly the passing of risk and the rights of buyers and sellers.

The Sale of Goods Act sets out the rules for determining when property passes from the seller to the buyer. The importance of determining when the property passes is :-

i) that the risk of accidental loss or damage passes to the buyer when the property passes unless otherwise agreed.

ii) once the ownership passes the owner can sue for the price, under the provisions of s49 (1). S.O.G.A.

iii) If the seller resells the goods once ownership has passed then the subsequent buyer does not take title to the goods unless he comes under an exception to the Nemo Dat Rule under s24 S.O.G.A.1979.

In the case of the passing of risk Section 20(1) in SOGA states, "Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not." Therefor we need to know whether property can pass, when does property pass and implications for buyers and sellers.

Whether Property Can Pass

The state that the goods are in will determine whether property can pass - if it is identified or scertained at the time the contract is made, then it is one for the sale of specific goods. If they are not identified at the time of the contract they are unascertained goods : Re London Wine Shippers. In this case the company was an insolvent wine dealer which had stocks of wine in several warehouses. Some of the wine had been sold to customers for laying down or investment purposes. Although it was clearly contemplated that the wine would belong to the purchasers and would be stored by the company, no appropriation from the bulk of the wine in storage had been made to answer any particular contracts. In the absence of appropriation by earmarking or otherwise setting aside each purchaser’s wine, legal property did not pass under S16 of SOGA 1979. Accordingly nor had the company created a completely constituted trust sufficient to pass the equitable title.

Property will only pass when it is know to what the property refers to as per Lord Mustill’s dictum in Re Goldcorp Exchange. The time for ascertainment is at the time the contract was made. However under Section 20A, a buyer who has paid all or part of the price of an unidentified part of an identified bulk will be an owner in common of the bulk.

When Does Property Pass

If the goods are specific or ascertained, the parties are free to make whatever agreement they like about when property is to pass S(17) which can be inferred from the terms of the contract, conduct of the parties and circumstances of the case. This is in line with the basic freedom of contract philosophy where the parties are free to decide for themselves what contract to make and what terms to incorporate.

If the terms are not clear then intention will be a governing factor. If this intention is not apparent there are several rules under S18 Rules 1 to 5 to determine this intention :-

Rule 1 : Goods in a deliverable state : Underwood Ltd v Burgh Castle – a machine that was attached to a factory floor and therefor was not in a deliverable state was deemed not to be intended to pass.
Rule 2 : Goods not in a deliverable state
Rule 3 : Price to be ascertained
Rule 4 : Sale or return
Rule 5 : Unascertained goods and appropriation : Unconditional appropriation – irrevocable identification of the goods and beyond the power fo the seller to substitute goods – Carlos Federspiel & Co SA v Charles Twigg & Co Ltd.

Another provision S35 SOGA 1979 provides that property must finally pass when the buyer has accepted the goods or where he indicates to the seller that he as accepted the goods or when the goods have been physically delivered and the buyer has had a reasonable chance to examine them and after a reasonable lapse of time keeps the goods not having said he is rejecting them or there is inaction : Pignataro v Gilroy.

Implication for buyers, sellers

The passing of property also has implications for the type of action that can be brought by the seller against the buyer.

If the property has passed to the buyer, the seller has either the right to sue for the price S49(1) if the buyer has accepted the goods or sue for damages if the buyer has not accepted or refuses to accept the goods. If property has not passed then the seller can only sue for breach of contract.

The passing of property would also have important implications in the passing of risk. If property is passed, the risk is passed along with the property and the party to whom the property passes bears the risk i.e. bears any loss should anything happen to the goods - lost or damage.

However the general rule will not apply in the following instances :-

1. Where parties have explicitly agreed that the risk should pass even thogh property has not passed : Head v Tatersall;

2. Where it involves a CIF contract which is an exception to the general rule in S20 - the goods are deemed to be at the buyer’s risk from the time of shipment even though property passes at the time the contract is made which may be after the shipment;

3. Where the seller has done all that he had undertaken to do by enabling the buyers to take delivery even if the goods are unascertained : Sterns v Vickers;

4. Where one party is the bailee of the goods and the loss occurs through their lack of reasonable care in which case that party will be liable : Wiehe v Dennis Bros.

Implications for third parties

The right of property can also have an effect on third parties - determines the ability of the party to bring an action under negligence against third parties who has carelessly inflicted damages upon the goods : Leigh & Sullivan Ltd v Aliakmon Shipping Co Ltd. However right of property alone will rarely be decisive. Usually it is combined either with a right to possession or with a contractual right against the third party for example the person who is entitled to sue in respect of goods damage at sea is usually the person who holds the bill of lading and that person has a contractual right both against the carrier and also the property.

Where the seller is required by contract to send goods to the buyer via a carrier, delivery to the carrier is presumed to constitute a delivery to the buyer and the buyer bears the risk of the loss S 32(1) – delivery to carrier buyer bears loss, S33 – delivery to a distant place and deterioration in the goods buyer bears loss.

The approach to passing of property as the determining factor in the allocation of risk has been abandoned by the Uniform Commercial Code (UCC) in the US. It was felt that there was an over reliance on property as the central organizing concept. The location of title was used to determine the risk of loss, insurable interest and place and time for measuring damages. The single title or “lump” title concept proved unsatisfactory because of the different policy considerations involved in each of the situations that title was made to govern. Furthermore the concept of single title although it worked well for cash on the barrel type sales it did not reflect modern commercial practices with the introduction of deferred payments, security arrangements, financing from third parties or delivery by carrier which required a fluid concept of title. The classic example of this was the rule
that property cannot pass to the buyer where he purchases goods in an undivided bulk – S16 SOGA 1979. The result of this statutory rule in cases where the seller has become insolvent is that the buyer loses both the money he has paid for the goods and the goods themselves to the seller’s creditors – hardly a just result – this was the reason for S20A.

It would be logical to link the passing of risk with physical possession of the goods :-

1. It is the person in possession who has the greatest ability to take care of the goods to see that they are not stolen, burnt, damaged, etc. If he has to bear the risk of any loss then he has the consequent incentive to exercise that care.

2. It is likely to be much easier to secure insurance cover for goods on your own premised or otherwise within your own possession.

Retention of Title

Retention of title clauses affords adequate protection for the seller. Discuss. - Justin Santiago

A retention of title clause (also called a Romalpa clause in some jurisdictions) is a provision in a contract for the sale of goods that property in the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer. These clauses first appeared in Aluminium Industrie BV v Romalpa Aluminium.

Retention of title clauses are a device to protect the seller against the buyer’s insolvency. If the buyer becomes insolvent, a seller who has a valid retention of title clause will have a significantly improved position and enables the seller to recover goods that are unsold or moneys that have been paid into a separate account from the sale of goods.

However in practice they provide sellers with rather less protection than might be expected due to several obstacles namely difficulties in recognising such clauses and distinguishing them from charges, practical difficulties in identifying goods covered by the clauses and the fact that goods will remain at the seller's risk until additional clauses are inserted:-

1. Difficulties in recognising such clauses as incorporated in a contract

The use of Romalpa clauses has been criticised in Borden (UK) Ltd v Scottish timber Products Ltd where Templeman LJ said : It is therefore surprising that this court looked with sympathy on an invention designed to provide some protection for one class of unsecured creditors, namely unpaid sellers of goods although there is no logical reason why this class of creditor should be favoured as against other creditors such as the suppliers of consumables and services.

His argument also stems from the fact that Retention of title clauses are not required to be registered as a charge under S.365 of the Companies Act 1985 and are enforceable without being registered : Armour v Thyssen unlike the four types of consensual security: pledges, contractual liens, charges and mortgages which are created by the buyer and can be registered under Companies Act S395. The clauses are seen as an anomaly in that it gives a proprietary right and is enforeceable without being registered and that because the full legal title remains with the seller, the buyer simply does not have the capacity to create a charge.

Such clauses can be confused with charges that are not registered. This point was argued in the case of Re Bond Worth where the contract of sale provided that equitable and beneficial ownership of the goods remain in the sellers until the price is paid. It was held by Slade J that these provisions were consistent with the creation of a floating charge and it was void for non-registration as a charge under the Companies Act. Romalpa clauses can be thought as “sham devices” masquerading as equitable charges.

2. Practical difficulties in relation to the identity of the physical goods :-

a. Because possession is with the buyer problem of obtaining access to the buyer’s premises or other place where the goods are believed to be in order to identify them

b. Distinguishing the seller’s goods from those supplied by others or those that have been paid for from those that have not

c. Retention of title caluse will cease to be effective once the goods have lost their identity by becoming incorporated into something else : Borden v Scottish Timber Products – resin becomes incorporated into chipboard.

d. The goods may have been sold.

3. Goods will remain at the seller’s risk until property in them passes to the buyer

Therefore a clause stating that the goods will be at the buyer’s risk from the moment of delivery or else to cover by insurance for loss or damage caused after delivery by accident, act of God or act of a third party has to be inserted.

Additionally other clauses will have to be included :-

- ‘manufactured goods’ clause, whereby the seller retains title to the goods even after they have undergone a manufacturing process;
- ‘proceeds clause’, whereby the seller is entitled to the proceeds of a sale of the goods to a third party; and finally
- ‘all monies’ clause under which the seller retains to the goods until all the debts owed by the seller to the buyer are extinguished.

Decription and Satisfactory Quality

Description and satisfactory quality are ambiguous terms and need more clarity. - Justin Santiago

Knowledge of the distinction between description and satisfactory quality is essential in any sale of goods. The description is said to denote the essence of the goods whereas mere quality does not. The relevant case law is Ashington Piggeries Ltd v Christopher Hill Ltd – a term ought not to be regarded as part of the description unless it identifies the goods sold. Goods may comply with the description but be of unsatisfactory quality, or unfit for the purpose, unsafe, not durable, contain minor defects of have a defective appearance and finish. Alternatively, goods may be of satisfactory quality but fail to correspond to their description. Statements as to the quality are not normally descriptive but there may be an overlap, for instance. ‘A woollen suit’. If the suit is a mixture of wool and other fabrics it does not correspond to description. If the suit is not of a satisfactory quality then it is not of satisfactory quality.

The relevant law pertaining to description is found in SS13(1) and S13(1A) of the Sale of Goods Act 1979 there is an implied condition that the goods correspond with the description. If there is a breach of this implied condition the buyer has the right to reject the goods. The rule is very strict and a sale of goods is not prevented from being a sale by description solely because the buyer himself selects the goods S13(3), Grant v Australian Knitting Mills.

There are however difficulties in determining what amoungs to a description. In Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd the description must have a sufficient influence in the sale to become an essential term of the contract. If the buyers did not rely on the description of the painting as one by Gabriele Munche but instead relied on their own assessment then it will not be considered a sale of goods by description. In Gill & Dufus SA v Berger & Co Inc one must look to the contract as a whole to identify the kind of goods that the seller was agreeing to sell and the buyer to buy.

Test to determine breach of S13 have traditionally been very strict. In Re Moore an Landauer it was held that a consignment of canned goods although were in the correct quantity were packed in the wrong configuration failed to match the description. However the modern view is more toleant and in Reardon Smith Line v Yngvar Hansen Tangen it was held that where the ship was constructed did not make a difference as long as a ship was delivered - they were words of identification not words of identity. Also the comparison between the goods as described and the goods as delivered is made according to the assessment of a business person or a reasonable consumer and not that of a scientist : Ashington Piggeries v Christopher Hill. However this raises uncertainty in the law where for example a designer bag made in China may be construed differently from one made in Italy although it is essentially the same bag - what exactly amounts to identity and identification is not clearly defined.

S15A has further limited the scope for parties to avoid the contract based on slight variations in the description. Unless the contract now declares that the description is a condition entitling the innocent party to avoid the contract it would now be up to the court to decide whether or not the breach is so slight that it would be unreasonable to reject the goods.

In the case of satisfactory quality there is no general rule that the seller undertakes to guarantee the quality of goods and fitness for a particular purpose.
S14(1) confirms traditional broad principle of caveat emptor with regard to quality and fitness for purpose and only lays down exceptions under S14(2) when a seller sells in the course of business albeit even if it is only incidental : Stevenson v Rogers.

Under S14(2A) – satisfactory quality would depend on the opinion of a reasonable person taking into account all relevant circumstances : Rogers v Parish. Also the question was not whether the reasonable person would find the goods acceptable but was an objective comparison of the state of goods with the standard which a reasonable person would find acceptable: Clegg v Olle Andersson.

S14(2B) lays down what is meant by quality and includes fitness for the purpose, appearance and finish, freedom from minor defects, safety and durability.

There will be no breach of S14(2) if the defect was brought to the buyer’s attention : S14(2)(C)(a) and where the buyer examined the goods before the contract was made which that examination ought to reveal S14(2)(C)(b)

Fitness for purpose is defined under S14(3)to mean goods will be fit for any particular purpose made known by the buyer to the seller.

2 questions to be asked : Bristol Tramways etc Carriage Co Ltd v Fiat Motors Ltd

1. Did the buyer make fully known the particular purpose for which the goods would be required or could it have been reasonably foreseen : Griffiths v Peter Conway
2. The seller has to show that that the buyer did not rely on his skill and judgement and that it was unreasonable for him to do so.

However even the strictness of S14(3) is diluted and the seller can be absolved of responsibilty under the following circumstances :-

1. The generality of the stated purpose : Aswan Engineering v Lupdine
2. The abnormal features or the idiosyncracies of the goods not made known to the seller : Slater v Finning
3. Abnormal sensitivity of the buyer : Griffiths v Peter Conway

Rejection of Goods

Acceptance, Rejection, Delivery, Non-Payment - Justin Santiago


S34 – reasonable time and opportunity to examine, not deemed to have accepted the goods until buyer as had a reasonable opportunity of examining the goods in order to ascertain whether they conform with the contract

S35 - buyer is deemed to have accepted the goods in the following situations :-
S35(1)(a) - When he intimates to the seller that he has accepted the goods
S35(1)(b) - When the buyer does some act in relation to the goods inconsistent with the ownership of the seller
S35(2) - In a sale by sample whether the sample conforms with the bulk
S35(3) - Right to examine can be waived or excluded by the contract but not in consumer contracts
35(4) - Retaining the goods beyond a reasonable time
35(6)(a) - Buyer will not be deemed to have accepted the goods merely by agreeing to their repair S35(6)(a), buyer will lose the right to reject if the buyer agrees to the repair of the goods and the repair is properly effected : J&H Ritchie Ltd v Lloyd Ltd.
S35A – Right of partial rejection
S35A(3)- Where the contract is for a sale by installments, these rules apply to the right to reject each installment as if it were a separate contract of sale


Rejection of goods by a buyer carries with it serious consequences as it would entitle the innocent party to treat the contract as discharged - S11(3)resulting in the termination of the contract and the awarding of damages for the breach.

A buyer can reject goods if there is a breach of an express condition or a breach of an implied condition.

Effect of rejection

a. Reject the goods and claim damages for any loss
b. Accept that part of the goods which conform to the sale contract and reject those that do not conform

Where the buyer rejects the goods, the property in them revests in the seller.

Express Condition - Wrong Quantity

S30(1) Right to reject goods unless for non-consumer buyer discrepancy in the quantity delivered is so slight as to render it unreasonable for the buyer to reject (S30(2A)– de minimis principle. The onus of proof is on the seller S30(2B). Secondly a buyer (whether or not dealing as a consumer) may not reject the whole delivery if the shortfall or excess is not material S30(2D).

Implied Condition

Implied by statute SOGA 1979 - satisfactory quality, fitness for purpose if goods are sold in the course of business.


S29(2) Place of delivery is the seller’s place of business, S32 delivery to a carrier deemed to be delivery of goods to the buyer, at seller’s risk unless informs buyer

S29(3) Delivery at a reasonable hour

S29(4) Attornment situation, T becomes a bailee of the goods for B only if T acknowledges that he is now holding the goods on B’s behalf

S29(6) Putting in a deliverable state borne by seller

S51 Damages for non delivery or late delivery loss naturally and directly resulting in the ordinary course of events – Hadley v Baxendale, market price rule


1. Lien – S41(1) retain possession until price is paid or tendered
2. Stopping goods in transit – S44-46 buyer must also have been insolvent
3. Right of resale – S48(1),S48(3),(4) second buyer acquired a good title against the original buyer
4. S49 Action for the Price – property must have passed

Monday, February 16, 2009

Judicial Review : Malaysian Parliament Attempts to Exclude Judicial Review

The Star, Tuesday February 17, 2009
MCA Youth disagrees with exclusion of judicial review in Bill

The proposed Witness Protection Bill bestows too much power to the Minister in the Prime Minister’s Department, Attorney-General or Director-General and totally excludes judicial review.

MCA Youth Legal Affairs and Parliamentary Research Bureau, headed by Wong Nai Chee, said in a statement that the bureau disagreed with Clause 23 of the Bill.

The clause reads: “There shall be no judicial review in any court or any act done or any decision made by the Minister, Attorney-General or the Director-General of this Act.”

The bureau disagrees with the wording of that clause as it “precludes the court from checking the power exercised by the Minister, Attorney-General or Director-General who will be responsible for the registration of participants as witnesses,” said Wong.

“The bureau is of the view that the power vested is very far reaching and is concerned that this power is susceptible to abuse and misimplementation if the much-needed check and balance are not inserted into the law,” he added.

The bureau also feels that it is becoming the practice of Parliamentary draftsmen to insert clauses which removes judicial review.

“The bureau therefore urges the Parlia–mentary drafters to refrain from inserting the similar position in Clause 23 in future drafting because it makes a mockery of the judicial system when the powers of the courts are removed,” said Wong.

Sunday, February 15, 2009


The concept of voluntary assumption of responsibility has proved a useful tool in solving many of the problems associated with the duty of care - Justin Santiago

The traditional approach of the common law has been to adopt the general rule that for a duty of care to exist there must be a voluntary assumption of responsibility and there is no liability for omissions – no duty to care to prevent harm. This approach is premised upon a highly individualistic political theory which holds that people should be concerned purely and simply with their own self advancement and not subject to legal liability for failing to intervene for the benefit of others.

In broad terms, omission cases are still governed by the principles set down in
Stovin v Wise: a party cannot generally be held liable for a failure to act, so long as they have not actually created the danger themselves.

However cases like Gorringe v Calderdale MBC have placed some curbs on bars to liability for omission cases. Lord Hoffmann left open the possibility that a public body could be held liable for a failure to exercise a statutory discretion where (1) the failure to do so is Wednesbury unreasonable or irrational and (2) there are exceptional grounds for holding that the policy of the statute requires compensation.

Additionally the courts are more willing to hold people liable in tort for their negligent omissions in the following circumstances :-

1. Where they have agreed, expressly or impliedly to take on a responsibility for the benefit of others : Stansbie v Troman, The Ogopogo – duty to take reasonable care to effect a rescue

2. Where the omission is part of an ongoing physical activity

3. Protection of the vulnerable for example very young children : Barnes v Hampshire County Council

4. A level of control that creates a liability for occasioning harm – control imports responsibility: Home Office v Dorset Yacht

5. Creation of a source of danger : Haynes v Harwood, does nothing to contain a danger : Goldman v Hargraves

6. Owners and occupiers of land creates or allows to be created a source of danger : Smith v Littlewoods

Psychiatric Injury

In Alcock v Chief Constable of South Yorkshire (1992), the House of Lords established clear and justifiable rules limiting claims for psychiatric damage in the law of negligence. Subsequent cases on this issue have served only to confuse matters. - Justin Santiago

Difficulties in establishing claimant’s mental condition which amounts to a recognizable psychiatric illness has led to various difficulties. The illness would have to amount to be a recognised condition and is a matter for the court after hearing expert evidence from psychiatrists whether the severe psychological illness would amount to psychiatric injury.

Judges are slow to recognize psychiatric injury or place very high barriers for claimants :-

a. It is not possible to claim for mere psychiatric injury unless it amounts to more than the usual shock reaction to a frightening incident.

b. If medical science does not recognise the mental state as a disorder it is not possible to claim for it unless it is accompanied by some physical injury

c. If accompanied by physical injury, any sort of emotional reaction to an event is compensatable

Rothwell v Chemical & Insulating Co Ltd and Another - all claimants failed because they did not have claims for physical injury. Furthermore there was only symptomless manifestations which were invisible and only a possibility.

Further confusion over psychiatric damage exists in relation to two different areas -secondary victims and foreseeability of harm.

A secondary victim is a person who who suffers mental trauma as a result of witnessing someone else's injury or imperilment as opposed to a primary victim who was within the zone of physical who might foresseaably have suffered physical harm but only actually suffers mental injury.

Many claimants who suffer psychiatric injury will be “secondary victims” - suffers mental trauma as a result of someone else’s physical injury or as a result of fear that such injury might occur and where no personal injury - psychiatric or otherwise - could reasonably have been foreseeable. These are victims whose personal injuries - psychiatric or otherwise would fail the duty of care test. The case of Alcock v CC South Yorkshire Police however allowed for such claims with control mechanisms laid out :-

- “proximate in time and space” to the traumatic event - nearness
- perceived the traumatic events with "his own unaided senses” - hearness
- included under the class of persons whose claims should be recognised - “close ties of love and affection” between the claimant and a primary victim - dearness

These three control mechanisms were extensively debated in later cases which sought to limit the claims by potential victims. However the line of cases has shown there to be inconsistencies with regard to how these criteria are measured :-

In McLoughlin v O’Brian it was held that only where the relationship was husband and wife or parent and child could any claim be sustained. Cases involving less close relationships required very careful scrutiny. The second was the proximity of the claimant to the accident. Lord Wilberforce considered that a strict test of perception of the accident by sight or hearing should be applied subject to an exception where the claimant foreseeably came on “the immediate aftermath” of the accident. That phrase was evidently sufficiently elastic to accommodate the visit of the claimant to the hospital over two hours after the accident. The third criterion was the means by which the claimant became aware of the accident. Sight or sound of the accident or aftermath was necessary. Communication by a third party would not suffice.

However in the case of W v Essex CC although the parents had the necessary ties of love for their children they were neither near enough in time or space to the acts of abuse and they did not have direct visual or oral perception of the incident or its aftermath. The parents only knew about the incidents after they had happened. Yet they were able to claim for mental injury due to the relaxation on the temporal and spatial requirements.

The reasonable foreseeability test in claims for psychiatric injury too has become confusing. In Page v Smith it was decided if physical injury had been foreseeable then a claim might lie for psychiatric injury even if it was not itself foreseeable. The claimant was involved in a car accident caused by the defendant, but suffered no physical injury. However, he contended that his underlying `chronic fatigue syndrome' was made worse, and permanent, by the accident. The claim failed in the Court Of Appeal, on the basis that an injury of the claimant's type could not have reasonably been forseen by the defendant, and thus the defendant owed the claimant no duty of care. However, the House Of Lords held that if it is forseeable that some injury may occur, it is irrelevant whether it turn out to be physical injury or psychiatric injury.

Rescuers are the ultimate suffers of the confusion. In White v CC South Yorkshire Police it was necessary to show that the rescuer had actually been exposed to physical danger in the rescue attempt. The effect of White v CC South Yorkshire Police was that pofessional rescuers who suffered from mental illness alone as a result of the rescue operations neither qualified as primary or secondary victims. They were not considered primary victims as they themselves were not at risk of physical injury or did not reasonably believe themselves to be at risk.They also could not qualify as secondary victime because they did not have the necessary ties of love and affection.

In McFarlane v EE Caledonia efforts by rescuers did not include peripheral work and required that rescuers had reasonable fortitude i.e. there were to be judged by a higher standard in their capacity to withstand impacts to the mind.

Suggestions for reform were posed in Law Commission Report 249 1998)

1. A definition of what is a recognizable psychiatric illness should not be laid down in legislation
2. Where the plaintiff is outside the area of reasonably foreseeable physical injury, it was reasonably foreseeable that the plaintiff might suffer psychiatric illness
3. Reasonable foreseeability of psychiatric illness is not required where physical injury to the plaintiff was reasonably foreseeable
4. In assessing whether the psychiatric illness was a reasonably foreseeable consequence of the defendant’s conduct, the court should consider whether the harm or imperilment to the immediate victim was judged prior to the accident, reasonably foreseeable
5. It may be helpful to continue to assume that the plaintiff is a person of reasonable fortitude, that assumption should be regarded as merely an aspect of the standard approach to reasonable foreseeability that is applied in cases of physical injury
6. No longer a condition of liability that the psychiatric illness was induced by shock
7. Courts should have scope to decide not to impose a duty of care where satisfied that its imposition would not be fair, just and reasonable because the defendant chose to cause his or her death, injury or imperilment
8. Should abandon classification into primary or secondary victim


Liability for Psychiatric Injury, Law Commission Report 249 (1998)

Psychiatric Injury – common sense or legal fiction? by Peter Garsden Partner in Abney Garsden McDonald and Vice President of ACAL (Association of Child Abuse Lawyers)

Civil Justice System Reforms

Why has Lord Woolf’s reforms to the civil justice system not had its desired effect? - Justin Santiago

Lord Woolf’s reforms to solve the three main problems of the civil justice system namely cost, timeliness and complexity was the main thrust of the proposals. Broadly he set out to promote early settlement, better court management and unified procedures at the various court levels. These were incorporated into the Civil Procedure Act 1997 and the Civil Procedure Rules 1998.

However the problems in the civil justice system are inherent and are not going to go away simply because of Lord Woolf’s reforms. There has always been a desire to minimize the main deficiencies in the civil justice system namely delay, cost, complexity and access to justice. There have been no fewer than five reforms since the Second World War the Evershed Report in 1953, the report of the Winn Committee in 1968, the Cantley Working Party in 1979, the Civil Justice Revew in the late 1980s and then Lord Woolf’s reforms.

His attempt albeit one which tries to plug the leaks rather than replacing the plumbing has not had its desired effect.

Judicial Case Management (JCM) was one of the most significant of the reforms. The involvement of the courts in the active management of litigation away from the lawyers was designed to bring cases to trial quickly and efficiently by adhering to strict timetables. JCM also introduced the principle of proportionality where the financial and time resources of the courts are applied appropriately according to the small claims track, fast track or multi track depending on the financial value of the claim. Through this method of dividing cases into the three tracks and ensuring that the courts take an active role in efficiently allocating the cases to the correct court system, Lord Woolf hoped to ensure that trials were handled more quickly and efficiently.

It also introduced a new principle: proportionality. Not only should the time and money spent on a case reflect what was being litigated over, the resources of the courts should also be applied appropriately, taking into account other calls on the courts’ limited time and assets.

The oppositions to judicial case management tend to raise three objections – firstly that it requires judges to make snap decisions based on the stricter time tabling and an interventionist judge hastening the dispensation of justice. Secondly lawyers’ work actually increased as a result of having to respond to the court’s management directions and tended to increase rather than reduce cost. Thirdly it overestimates the judges time, skills or inclination to undertake the task of case management who will want to focus on delivering judgements instead of dealing with other matters.

However Professor Michael Zander explains in his 1999 Hamlyn Lectures that the judge has to make snap decisions based often on inadequate information. There may be problems if a fast track case takes longer than expected resulting in refusal to grant an extension of time which may cause injustice to one party or perhaps to both. Judges who have to ensure that court procedures are followed and to write their judgements may find a third task too heavy a burden.

Zander’s criticisms of the reforms however focused on the fact that they concentrated on the lawyers and courts when the real problem was with the litigious and compensation seeking culture of the English public. The problem with costs will also not go away as there will be front loading of fees by the lawyers and this may even act as a deterrent as litigants will need to come up with the money at a very early stage. There is still no sizeable decrease in delay as the courts are still under resourced in terms of manpower and technology.

Lawyer’s work actually increase as a result of having to respond to the court’s management directions and tended to increase rather than reduce costs. Multi track cases with two pre trial hearings will generate even more additional costs and this is reflected in front loading of costs which does not solve the problem of expensive litigation.

Pre Action Protocols were also proposed where there was a strict timetable for the exchange of documents and claims and encouragement of a culture of openness between the parties by having earlier and fuller exchange of information to facilitate pre-action investigation and to encourage early settlement.

However pre action protocols have also resulted in the front loading of costs. Some complex cases involve lengthy pre-action stages. The case of McGlinn shows that there is a potential irrecoverability of elements of pre-action costs if there are claims that are not subsequently pursued in the proceedings. It was decided that costs incurred at the pre-action stage which dealt with issues that are subsequently dropped cannot be considered costs incidental to the proceedings. This may deter litigants from doing all they can at the pre-action stage and may simply comply with the requirements of the Pre-Action Protocol by indulging in formalities.

In factually complex cases, the pre-action stage can be very time consuming and be extremely costly and as the decision in McGlinn shows, there is a potential irrecoverability of elements of pre-action costs if there are claims that are not subsequently pursued in the proceedings. This may deter litigants from doing all they can at the pre-action stage and may simply comply with the requirements of the Pre-Action Protocol by indulging in formalities only.

Professor Hazel Genn discussed the issue of who were the reforms supposed to benefit and her argument was that out of the many stakeholders in the civil justice system, the party which had the least to benefit were the litigants themselves.
Part of the problem was the retention of the adversarial system which was inherently unjust, inaccessible, inefficient, untimely and costly.

To tackle the root of the problem we would have to look into alternative ways to settle disputes rather than depending solely on adversarial trials. It would appear that the adversarial system goes against achieving the objectives of the civil justice system which was to provide for processes that were just, accessible, efficient, timely and effective. The motivation for having such a platform is clear enough : to encourage people to conduct their daily affairs with the knowledge that they would have recourse to the law

Under this system :-

1.The lawyers dictate the intention of the parties resulting in a boxing ring culture rather than a solution seeking culture. The adversarial system translates into the dominance of lawers in the process which enables them to dictate the intention of the parties and the marginalization of the parties which resulted in a boxing ring culture rather than a solution seeking culture

2.The courts acts as umpire taking a hands off approach in the matter of hand so long as the complex boxing ring procedures are followed.

3.The complex procedures involved meant time and costs which are unsustainable to private individuals and small companies which meant that the Rule of Law is unfavourably balanced on the side of the party with deeper pockets

One suggestion is to bypass the courts altogether through Alternate Dispute Resolutions (ADR) which were emphasized to bypass the courts altogether through arbitration, conciliation/mediation and early independent evaluation. Courts were given power to order parties to attempt mediation failing which the courts could impost cost penalties or cost sanctions on the winning party. ADRs would seem to be the most practical solution to avoid the time and cost wastage in bringing a case to trial as most civil disputes are settled out of court anyway.

However there has been a consistent lack of demand for ADR when when it is provided at very low cost. The volume of mediation is low as there has been resistance to the idea of mediation. The desire for vindication and public acknowledgement of a wrong suffered can be very strong. The settlement rates of cases going for mediation have also dropped dramatically. This could be due to half hearted attempts to comply with mediation for fear of being judged unreasonably for not considering mediation.

To increase the demand for ADR new rules under the Legal Aid scheme stated that an application for legal aid for representation may be refused if there are ADR options which ought to be tried first. The government has also stated that it would attempt to resolve all disputes involving government departments through ADR wherever possible.

The reforms were implemented in the Civil Procedure Rules implemented in April 1999 and the courts were given power to order parties to attempt mediation failing which the courts could impose cost penalties or cost sanctions on the winning party. This was put into practice in cases such as Dunnet v Railtrack plc where it was stated that if a party rejected ADR out of hand, they would suffer the consequences of a discretionary order. In Halsey v Milton Keynes General NHS Trust it was added that members of the legal profession should routinely consider with their clients whether their disputes are suitable for ADR.

These cases typify the cold response to ADR and the low take up rate. The perception is that successful ADR saves the likely cost of proceeding to trial and may save expenditure by promoting earlier settlements. However unsuccessful ADR can increase the costs for the parties. There is also a death of knowledge about and familiarity with mediation and other ADR processes not only among the general public but among the legal profession as well.

In suggesting changes, the ultimate goal should be that justice is served on the parties making the claim. To solve the inherent problems of delay, cost and complexity the following suggestions are proposed :-

1.Moving towards a more inquisitorial system in which the judge would take a more investigative role and the two parties would be required t cooperate by revealing all the evidence to each other. Tactics would be less important. This can already be seen in Small Claims Courts where arbitrators now take a more interventionist approach which seems to have received strong support from the public according to J.Baldwin in his article "Litigants’ Experiences of Adjudication in the County Courts"

2.Reducing the time and costs factor by cutting down on the number of cases that eventually go to court with greater use and legitimacy of the ADR process. This would mean making it compulsory for selected cases to solve their disputes via this route. Another way to do this is to create encouragements to the legal profession to go via this route as ultimately they act as an important gatekeeper to clients’ choice of dispute resolution process.

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