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Assessment item 3 - Problem Solving Questions Length: 2200 This assessment consists of two parts, both of which are based on the scenario below Part A (10 marks) After reading the scenario, read the student response to it, then answer the following: Do you agree with the student’s approach taken to the scenario? Why/why not? Did he identify all relevant legal issues? Did he discuss all relevant legal principles and were they correctly applied? Did he provide a tentative conclusion? What feedback would you give the student? Make sure you comment on the way the student response was structured, including its cohesiveness. Part B (20 marks) Draft your own answer to the scenario using the ILAC method of legal problem solving. QUESTION 1 Robert Potter graduated from the world renowned University of Hairdressing and Beauty with a major in hairstyling for men. After attending his graduation, Robert watched a Youtube video that inspired what he deemed to be his true calling; opening and owning a chain of hairdressing and beauty salons in Western Sydney specialised in male grooming. In early 2020, Robert decided to expand his business across New South Wales. He scheduled and attended a meeting with Courtney Knowsitall, an accountant and financial adviser, for the purpose of discussing his financial position and the prospects of business expansion. They discussed Robert’s expansion plans and Courtney agreed to prepare a business plan for Robert and his alleged hairdressing empire. Courtney advised Robert that he was in a sound position to expand the business and recommended that he borrow money to set up five salons in Sydney's Eastern suburbs. Robert relied on Courtney and acted on his advice. In July 2020, he borrowed $2,500,000 from Badboys Credit, a small credit union that provided a loan and overdraft facilities. Robert then signed five three-year leases, bought hairdressing equipment, employed two international celebrity hairstylists, and hired Denise’s Designs & Graphics to design a webpage for his growing business. Then things went sour and financial tragedy stroke. Courtney admitted that she had not adequately factored in Robert’s pre-existing debts, had underestimated the significant establishment costs associated with setting up businesses in Sydney’s Eastern suburbs. Courtney explained to Robert that in addition to reviewing his financial position, she also consulted her tarot cards on the matter and the reading showed that Robert’s business would reach financial glory. Robert has suffered great losses as a result of this advice and is unable to pay Badboys Credit. Please advise Robert on any on any rights and/or liabilities arising out of these facts. QUESTION 2 John Stone, owns several Thai restaurants in New South Wales. He and his family has solicited your advice as to their contractual liabilities and rights arising out of these circumstances: On 22 September, John meets Julianne over lunch. Julianne owns a small dairy farm called ‘The Mighty Cow'’. After some negotiations, Julianne offers to sell John 100 kgs of Wagyu beef and 20 kgs of lamb-shanks for $4600. She also tells him that she will keep the offer open for the next 24 hours. Four hours later, Julianne receives a call from Tracy who offers $4900 for the meat. She immediately accepts Tracy's offer. John calls five hours later (and so within the 24 hours period) and informs Julianne that he accepts the offer, want his meat delivered and that he will sue her for breach of contract if she does not comply with their deal. John agrees to buy a new motorbike for home deliveries. He approaches The Speedy Brothers Bikes & Motors Pty Ltd and makes enquiries about a couple of bikes. He agrees to purchase a Honda CBR 500, 2019 model for $8,000. After the contract is signed he asks Glen, the sales manager, if they will provide the first service free of charge. Glen agrees. Two months after the purchase, the bike needs to be serviced and Glen is reluctant to honour his promise. John commenced negotiations to lease some commercial premises to be used for their new restaurant in Bullaburra. Part of the negotiation concerned the ability of John to demolish a wall in order to remodel the interior and build a pizza oven. Ian, the landlord, shook John's hand and told him they had a deal and that he could go ahead and get started. John took a large bank loan to finance the re-modelling. Four weeks later, John received a letter from Ian indicating that he did not intend to proceed with the lease. John has already spent $120 000 on the remodelling but has not received a signed lease as yet. He has also hired two International chefs to work at the new restaurant. John's parents, Mr and Mrs Stone, migrated to Australia from Thailand in 1957. They are dependent on their two sons, John and Michael, for advice and support. They have limited education, no business acumen and poor language skills. Their only income is their age pension. They own their home which is valued at around $550,000. Michael is a charming but feckless business man who is always on the verge of something great. In 2018, he needed $265,000 to pursue a dot com opportunity that would make him as rich as his brother John. He is able to borrow money from The Onecon Bank but only after he persuades his parents to act as guarantors. He misleads his parents as to the extent and purpose of the loan. The bank is unaware of this. After investigating their financial position the bank manager meets with Mr and Mrs Stone and go over the guarantee contract. He asks whether they had any questions and when they do not, they signed the documents as required. Michael uses the money in an internet company. The company becomes insolvent and Michael loses his entire investment. When he is unable to repay the loan, Onecon Bank looks to the parents to honour their obligations as guarantors. Assume that you are John’s solicitor and that he has asked you for legal advice. Advise him as to what contractual liability, if any, he and, or his family have in the above circumstances, citing relevant case law authority and using the ILAC format. Student Response Question 1 Issues Did Courtney breach the duty of care that she owes to Robert? Law 1st Essential - Establish that a duty of care is owed: Donoghue v Stevenson [1932] All ER 1 S 5B(1) Civil Liability Act 2002 (NSW) The word ‘tort’ is a French word and means ‘ civil wrong’. The law of torts is about the infringement of an individual’s rights and the protection of those rights. Foreseeability (Ultramares Corp v Touche, Niven & Co 174 NE 441 (1931) & Perre v Apand (1999) Proximity (Jaensch v Coffey(1984)) Drivers owe a duty of care to pedestrians (Harvey, 2013, p. 151) ‘Novel’ cases as summarised in Caltex Refineries ( Qld) Pty Ltd v Stavar [20029] NSWCW 258 Hedley Byrne & Co Ltd v Heller and Partners 2nd Essential - Causation of harm Section 5D Civil Liability Act 2002 (NSW) ‘But for test’ (Cork v Kirby Maclean [1952] 2 All ER 402) also stated in s 5D (1) (b) 3rd Essential – Breach of standard of care: Civil Liabilities Act 2002 (NSW) S5B Bolton v Stone [1951] AC 850 Paris v Stepney Borough Council [1951] AC 367) Latimer v AEC Ltd [1953] The likelihood that the defendant’s acts would cause harm The seriousness of the harm if it does occur Steps needed to avoid the risk of harm Social utility of the defendant’s conduct The cost and effort that would have been required to avoid the harm Defences –must be raised by the defendant. S5G and 5H Application The facts indicate that Courtney ought to have realised that Robert was trusting the information or advice that she was providing. The subject matter of the transaction was of a serious business nature, it was related to the expansion of Robert’s business. Courtney knew that Robert intended to act upon the advice that she provided as the purpose of their meetings was to discuss Robert’s expansion plans. Courtney fell short of the standard of care of a reasonable person on her position. If ss 5B and 5C are applied, it could be argued that the Courtney breached her duty of care to Robert and that as a result of this breach, Robert suffered financial losses (5D). Courtney did not have a duty to warn Robert of the obvious risk associated with following her advice (5H). Robert is presumed to have been aware of this risk (5G). Conclusion Courtney will be liable for Robert’s losses but her liability will be reduced by the court due to the obvious risk that he assumed. Student Response Question 2 Issues Julianne breached her contract with John. Whether John would be able to enforce Glen’s promise, that is, to service the motorbikes free of charge? Can John enforce Ian’s promise? Whether the consent provided by The Stones was vitiated by operation of undue influence? Application John and Julianne John could argue that there was an agreement between John and Julianne given that Julianne promised to keep the offer open and he accepted it on time. John could argue that she did not communicate her revocation and therefore a valid agreement existed and she breached it . John and Glen John did not provide fresh consideration for Glen’s promise to service the bike free of charge. John and Ian It could be argued that the principles of promissory estoppel would prevent Ian from going back on his word. The Stones and Michael The Stones did not genuinely consent to the agreement with Michael. The contract will be rendered void or voidable. Arguably, Michael took advantage of his position of power to procure their consent to the agreement Conclusion Julianne breached her contract with John. Glen’s promise is not enforceable. Ian’s promise is enforceable. The consent of the Stones was vitiated by operation of undue influence.