Tuesday, July 13, 2010

ERICK MACHUA-Famous cases in law


BUSINESS LAW


Macaura v Northern Assurance Co Ltd [1925] AC 619 appeared before the House Of Lords concerning the principle of lifting the corporate veil. Unusually, the request to do so was in this case made by the corporation's owner.

FACTS

Mr Macaura owned the Killymoon estate in County Tyrone, Northern Ireland. He sold the timber there to Irish Canadian Sawmills Ltd for 42,000 fully paid up £1 shares, making him the whole owner (with nominees). Mr Macaura was also an unsecured creditor for £19,000. He got insurance policies - but in his own name, not the company's - with Northern Assurance covering for fire. Two weeks later, there was a fire. Northern Assurance refused to pay up because the timber was owned by the company, and that because the company was a separate legal entity, it did not need to pay Mr Macaura any money.

JUDGEMENT

The House of Lords held insurers were not liable on the contract, since the timber that perished in the fire did not belong to Mr Macaura, who held the insurance policy. Lord Sumner said,

It was not his. It belonged to the Irish Canadian Sawmills Ltd, of Skibbereen, co Cork… He stood in no ‘legal or equitable relation to’ the timber at all… His relation was to the company, not to its goods, and after the fire he was directly prejudiced by the paucity of the company’s assets, not by the fire…

Lord Buckmaster, Wrenbury, Atkinson and Phillimore concurred.


ADMINISTRATIVE LAW

Ridge v Baldwin
[1964] AC 40:

Following acquittal in a trial on corruption charges in which the judge criticised him, a Chief of Police (Ridge) was sacked without a hearing. After reconsideration by the Police Authority and an unsuccessful appeal to the Home Secretary, Ridge brought an action for a declaration that the dismissal was unlawful. The House of Lords granted the declaration. In cases of dismissal on grounds of neglect of duty, a hearing was required. Neither the reconsideration nor the appeal to the Home Secretary cured the original defect in the decision, as both failed to give Ridge an opportunity to contest the material on which the decision was based. In any event, the original decision was a nullity, so that it could not be rendered valid by the appeal to the Home Secretary, nor did this appeal exclude recourse to the courts. Lord Reid dismissed the Police Authority’s claim that because it was implementing a policy, the principles of natural justice did not apply.


LAW OF TORT

Donoghue v Stevenson [1932] AC 562

This was a decision of the House of Lords that established the modern form of the tort of negligence in English and Welsh law, and delict in Scots law, by setting out general principles whereby one person would owe another person a duty of care. The case originated in Paisley, Renfrewshire under Scots law, but the House of Lords determined that the English law of negligence and the Scots law of delict were identical. Donoghue v Stevenson is often referred to as the "Paisley snail" or the "snail in the bottle" case, and is one of the most famous decisions in British legal history.


On the evening of Sunday 26 August 1928 May Donoghue, née M’Alister, boarded a tram in Glasgow for the thirty-minute journey to Paisley. At around ten minutes to nine, she and a friend took their seats in the Wellmeadow Café in the town's Wellmeadow Place. They were approached by the café owner, Francis Minchella, and Donoghue's friend ordered and paid for a pear and ice and an ice-cream drink. The owner brought the order and poured part of an opaque bottle of ginger beer into a tumbler containing ice cream. Donoghue drank some of the contents and her friend lifted the bottle to pour the remainder of the ginger beer into the tumbler. It was claimed that the remains of a snail in a state of decomposition dropped out of the bottle into the tumbler. Donoghue later complained of stomach pain and her doctor diagnosed her as having gastroenteritis and being in a state of severe shock.

On 9 April 1929, Donoghue brought an action against David Stevenson, an aerated water manufacturer in Paisley, in which she claimed £500 as damages for injuries sustained by her through drinking ginger beer which had been manufactured by him. The case was settled in court, and the manufacturer was held liable for damages as he owed a duty of care to the ultimate consumer- from that judgment onwards the particular caselaw has been founded and has been exercised through precedent. The identity of Donoghue's friend is unknown, but that person is referred to as "she" in the case reports (including the first paragraph of the judgement of Lord MacMillan in the House of Lords). Other factual uncertainties include whether the animal (if it existed) was a snail or a slug, whether the bottle contained ginger beer or some other beverage (as 'ginger' in Glaswegian and West of Scotland parlance refers to any fizzy drink) and whether the drink was part of an ice-cream soda.

Legal background

In common law, a person can claim damages from another person where that other person owed the first person a duty of care and harmed that person through their conduct in breach of that duty. This concept existed prior to Donoghue, but it was generally held that a duty of care was only owed in very specific circumstances, such as where a contract existed between two parties or where a manufacturer was making inherently dangerous products or was acting fraudulently.

There was no contractual relationship between Donoghue and the drinks manufacturer or even, as Donoghue had not ordered or paid for the drink herself, between Donoghue and the café owner. Although there was a contractual relationship between the café owner and Donoghue's friend, the friend had not been harmed by the ginger beer. As ginger beer was not a dangerous product, and the manufacturer had not fraudulently misrepresented it, the case also fell outside the scope of the established cases on product liability. On the face of it, the law therefore did not provide a remedy for Donoghue.

Donoghue's solicitor, Walter Leechman of W G Leechman & Co in Glasgow's West George Street, had already tried to establish liability against aerated water manufacturer A. G. Barr when a dead mouse was alleged to have found its way into a bottle of its ginger beer. However, an action for damages was rejected by the Inner House of the Court of Session, when the appeal court judges ruled that there was no legal authority allowing such an action.

Progress of the case

The writ lodged in the Court of Session on April 1929 alleged that May Donoghue had become ill with nervous shock and gastroenteritis after drinking part of the contents of an opaque bottle of ginger beer, and David Stevenson, the manufacturer, "owed her a duty to take reasonable care that ginger beer he manufactured, bottled, labelled and sealed, and invited her to buy, did not contain substances likely to cause her injury." Donoghue claimed damages of £500.

Counsel for the manufacturer denied that any such duty was owed, but in June 1930 the judge, Lord Moncrieff, ruled there was a case to answer. Stevenson appealed the ruling on a number of legal grounds, and the judges of the Inner House granted the appeal in November 1930, dismissing Donoghue's claim as having no legal basis following the authority of their earlier decision in Mullen v AG Barr. One of the judges said that "the only difference between Donoghue's case and the mouse cases was the difference between a rodent and a gastropod and in Scots law that meant no difference at all."

Donoghue was allowed to appeal her case to the House of Lords but, whilst her legal team had agreed to provide their services free, she was unable to put up the security needed to ensure the other side's costs were met should she lose in the Lords. However, as such security would not be required if she could gain the status of a pauper, she petitioned the House of Lords, saying, "I am very poor and am not worth in all the world the sum of five pounds, my wearing apparel and the subject matter of the said appeal...". A certificate of poverty signed by a minister and two elders of her church was attached to the petition, and the House of Lords agreed to grant her pauper status.

Nine months after her petition was granted, Lords Buckmaster, Atkin, Tomlin, Thankerton and MacMillan heard counsels' arguments. Donoghue's counsel - George Morton KC and W. R. Milligan (later a Lord Advocate) - argued that a manufacturer who puts a product intended for human consumption onto the market in a form that precludes examination before its use is liable for any damage caused if he fails to exercise reasonable care to ensure it is fit for human consumption. Stevenson's counsel - W. G. Normand KC (then Solicitor General for Scotland and later a Law Lord), J.L. Clyde (later Lord Advocate and then Lord President of the Court of Session), and T. Elder Jones - argued that there was no authority for such a principle of law.

Judgment

The leading judgment was delivered on 26 May 1932 by Lord Atkin. The most famous section was his explanation of the "neighbour" principle, which was derived from the Christian principle of "loving your neighbour" (see James 2:8 and cf. the Parable of the Good Samaritan):

There must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. ...The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer's question: Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions that are called in question . . . a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with knowledge that the absence of reasonable care in the preparation or putting up of products will result in an injury to the consumer's life or property, owes a duty to the consumer to take that reasonable care.

"A man has a Duty of Care to conduct himself in such a way as to avoid harm to others, where a reasonable man would have seen that such harm could occur".

Lords Thankerton and MacMillan supported Lord Atkin's opinion, with Lords Buckmaster and Tomlin dissenting. Buckmaster said it was impossible to accept such a wide proposition and (anticipating later "floodgates" arguments) that it was difficult to see how trade could be carried on if Lord Atkin's principle was law. Buckmaster also opined, as did Lord Tomlin, that if such a duty of care existed it must cover the construction of every article, not just food: "If one step, why not fifty?" Tomlin referred to the Versailles train crash in 1842 caused by a defective axle, noting that, if Lord Atkin's principle were to be law, every injured party would be permitted to sue the axle manufacturer in such a case.

The case was returned to Scotland for the Court of Session to apply the ruling to the facts of the case. In the event, David Stevenson died within a year of the decision and his executors settled out of court, for less than the original claim of £500.

Significance

As Justice Allen Linden has pointed out, Donoghue is an extension of a principle articulated by Benjamin Cardozo in an earlier case in the United States, MacPherson v. Buick Motor Co., which the judges referred to in Donoghue. MacPherson pioneered the tortious principle of a general duty of care, the starting point for any action in negligence, though the principles were expressed within the context of product liability only.

Donoghue is perhaps best known for the speech of Lord Atkin and his "neighbour" or "neighbourhood" principle, where he applied Luke 10 to law so that, where an established duty of care does not already exist, a person will owe a duty of care not to injure those whom it can be reasonably foreseen would be affected by their acts or omissions. The effect of this case was not only to provide individuals in the United Kingdom with a remedy against suppliers of consumer products even where the complainant had no privity of contract with those individual or company tortfeasors, but to allow such individuals to bring negligence claims in any circumstance where the conditions for establishing a duty of care were met.

In 1990, the House of Lords revised Lord Atkin's "neighbour" principle to encompass public policy concerns articulated in Caparo Industries Plc. v Dickman ([1990] 1 All ER 568). The three-stage Caparo test for establishing a duty of care requires (i) foreseeability of damage, (ii) a relationship characterised by the law as one of proximity or neighbourhood and (iii) that the situation should be one in which the court considers it would be fair, just and reasonable that the law should impose a duty of given scope on one party for the benefit of the other. In other jurisdictions, such as New Zealand, there is now a two-part test for novel fact situations, where the establishment of a duty must be balanced against applicable policy matters.

Because of the significance of the case, in 1996 former Supreme Court of British Columbia Justice Martin Taylor, Vancouver lawyer David Hay and filmmaker Michael Doherty produced an educational documentary of the case. Besides recreating the events leading up to the case and "interviews" with actors playing the significant participants in the case, the production includes a 1995 interview with Lord Denning—then aged 96.[3] This was one of the last interviews with Lord Denning, who died three years later. The film has been exhibited worldwide.[4]



CONTRACT LAW

Carlill v Carbolic Smoke Ball Company
[1892] EWCA Civ

FACTS

The Carbolic Smoke Ball Company made a product called the "smoke ball". It claimed to be a cure for influenza and a number of other diseases. The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (phenol). The tube was then inserted into the user's nose. It was squeezed at the bottom to release the vapours into the nose of the user. This would cause the nose to run, and hopefully flush out the viral infection.

The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay £100 to anyone who got sick with influenza after using its product according to the instructions set out in the advertisement.

“£100[1] reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks, according to the printed directions supplied with each ball.

£1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.

During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.

One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address: “Carbolic Smoke Ball Company, “27, Princes Street, Hanover Square, London.”

Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used three times daily for nearly two months until she contracted the flu on January 17, 1892. She claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, who had trained as a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke ball's efficacy, but "to protect themselves against all fraudulent claims" they would need her to come to their office to use the ball each day and be checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract.


JUDGMENT

LINDLEY, L.J. * * * We are dealing with an express promise to pay £100 in certain events. Read the advertisement how you will, an twist it about as you will, here is a distinct promise expressed in language which is perfectly unmistakable: "£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball."

We must first consider whether this was intended to be a promise to all, or whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is "No," and I base my answer upon this passage: "£1000 is deposited with the Alliance Bank, shewing our sincerity in the matter." Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called in aid by the advertiser as proof of his sincerity in the matter, that is, the sincerity of his promise to pay this £100 in the event which he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it.

Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the conditions accepts the offer. In point of law this advertisement is an offer to pay £100 to anybody who will perform these conditions, and the performance of the conditions, is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v. Carwardine, 4 Barn. & Adol. 621, which has been followed by many other decisions upon advertisements offering rewards * *


It appears to me, therefore, that the defendants must perform their promise, and, if they have been so unwary as to expose themselves to a great many actions, so much the worse for them.

Bowen, L.J. I am of the same opinion. * * *

Then it was said that there was no notification of the acceptance of the contract. One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to the English law-I say nothing about the laws of other countries-to make a contract. But there is this clear gloss to be made upon that doctrine, that is notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification. * * *

Now, if that is the law, how are we to find out whether the person who makes the offer does intimate that notification of acceptance will not be necessary in order to constitute a binding bargain? In many cases you look to the offer itself. In many cases you extract from the character of the transaction that notification is not required, and in the advertisement cases it seems to tnp to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition notification is dispensed with. It seems to me that from the point of view of common sense no other idea could be entertained. If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write a note saying that the: have accepted my proposal? Why, of course, they at once look after the dog, and as soon as they find the dog they have performed th condition. The essence of the transaction is that the dog should b found, and it is not necessary under such circumstances, as it seems to me, that in order to make the contract binding there should be an notification of acceptance. It follows from the nature of the thing that the performance of the condition is sufficient acceptance without the notification of it. and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of the common sense reflection. He does, therefore, in his offer impliedly indicate that he does not require notification of the acceptance of the offer. * * *

Appeal dismissed.

No comments:

Post a Comment