Who can sue your business for negligence?
09 September 2005Being sued for negligence is a cost that all businesses want to avoid. So, what should your business be doing to avoid a claim in negligence?
Part of the answer to this question depends on who can bring such a claim. Sometimes the number of people who might come into contact with a business’s products can appear limitless. For example, a product may come into the hands of a wholesaler, a retailer, a member of the public who purchases the product, family and friends of that person, a second-hand purchaser and so on.
Ascertaining who can make claims of negligence against your business is an important step in managing or even avoiding such claims.
Duty of care
A person can only make a claim for losses said to flow from negligent behaviour if that person is owed a duty to take reasonable care.
It is well-established that a duty of care is owed only in certain relationships. So, for example, a manufacturer of a consumer product will usually owe a duty of care to a consumer of that product who suffers physical loss or injury as a result of the manufacturer’s conduct.
However, in other situations it is more difficult to work out whether a duty of care exists.
Financial product liability
An example of a situation where it may not be clear whether a duty of care is owed is where a consumer of a product only suffers financial harm. This may occur where the consumer purchases a financial product, such as insurance, superannuation or interests in a managed investment scheme.
The courts have been careful to limit the circumstances in which a duty of care will be owed to a person who only suffers financial harm. This is because they have recognised that commercial activities will often cause financial loss to others—one business’s gain will often be another’s loss.
Recently, the courts have said that a duty of care is more likely to be owed to a person who only suffers financial harm where the person is vulnerable in the sense of not being able to protect himself or herself against the loss.
Conclusion — What should your business be doing to avoid negligence claims?
It is important for your business to be aware of the classes of people who might be able to make claims of negligence.
This may be straightforward where it is well-established that a particular relationship gives rise to a duty of care. However, in certain situations it may not be clear whether or not a duty of care exists—for instance, where a person only suffers financial harm.
Remaining conscious of the classes of people who might be able to bring a claim in negligence will assist your business in avoiding court proceedings at a later time.
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