Commercial Liability
Claims made by and against businesses for negligence, misleading conduct, defective products and professional negligence in NSW.
Commercial liability covers claims made by or against a business for loss it causes or suffers, including negligence, misleading or deceptive conduct, defective products and professional negligence. Vamp Law acts for businesses bringing these claims and, in separate matters, for businesses and insurers defending them, with each matter run directly by Kyra Pastrovic.
What is commercial liability?
Commercial liability is the law that decides when a business must compensate someone for loss it has caused, and when a business can recover loss another party caused it. Vamp Law acts for businesses making these claims and, in separate matters, for businesses and their insurers defending them, never for both sides of the same dispute. Claims for bodily injury are covered under personal injury.
The main types of claim are:
Negligence
a failure to take reasonable care that damages property or causes financial loss, such as defective work by a contractor.
Misleading or deceptive conduct
conduct in trade or commerce that misleads, or is likely to mislead, and causes loss.
Defective products
claims against manufacturers and suppliers of goods that were unsafe or not fit for purpose.
Professional negligence
claims against accountants, engineers, valuers and other professionals whose services fell below the required standard.
Contractual indemnities
claims to enforce, or resist, an indemnity or limitation of liability clause in a commercial contract.
When can a business recover financial loss caused by negligence?
A business can generally recover loss caused by a careless failure that damages its property, but a claim for financial loss alone is harder to establish. For pure economic loss, a key question is whether the claimant was vulnerable, meaning unable to protect itself, for example through the terms of its own contract, as the High Court explained in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36.
For professional negligence, the Civil Liability Act 2002 (NSW) gives a professional a defence if they acted in a way widely accepted in Australia by peer professional opinion as competent professional practice at the time, unless a court considers that opinion irrational (s 5O). A negligence claim for property damage or financial loss generally must be brought within six years from when the cause of action first accrues (Limitation Act 1969 (NSW), s 14).
When is a business liable for misleading or deceptive conduct?
A business can be liable when its conduct in trade or commerce is misleading or deceptive, or likely to mislead or deceive, and that conduct causes someone loss. That conduct is prohibited by s 18 of the Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (Cth), and these claims often arise from sales pitches, forecasts and statements made before a contract is signed.
A person who suffers loss because of the conduct can recover it under s 236, not only from the business but also from any person involved in the contravention, which can include individual directors and employees. The claim must be brought within six years after the cause of action accrues (s 236(2)).
Who is liable when a product is defective?
Under Part 3-5 of the Australian Consumer Law, a manufacturer is liable to compensate people for loss caused by a safety defect in goods it supplies in trade or commerce (ss 138 to 141). That regime covers injuries, and damage to goods, land or buildings only where they are ordinarily acquired, and were used, for personal or private purposes, so damage to commercial stock or premises is usually pursued in negligence or contract instead.
Manufacturers have specific defences, including that the defect could not have been discovered given the state of scientific or technical knowledge when the goods were supplied (s 142). A defective goods action must be brought within three years after the claimant became aware, or ought to have become aware, of the loss, the defect and the manufacturer's identity, and in any case within ten years of supply (s 143).
How does proportionate liability affect a commercial claim?
Proportionate liability means that, for certain claims, each defendant pays only its share of the loss. Part 4 of the Civil Liability Act 2002 (NSW) applies to claims for economic loss or property damage arising from a failure to take reasonable care, other than personal injury claims, and to claims under the NSW application of s 18 of the Australian Consumer Law (s 34). A court limits each concurrent wrongdoer's liability to the proportion it considers just (s 35), and Part VIA of the Competition and Consumer Act 2010 (Cth) applies similar rules to s 18 claims under Commonwealth law.
The scheme does not protect a wrongdoer who intended the loss or caused it fraudulently (s 34A). For claimants, it means identifying every potentially responsible party early. For defendants, it means telling the claimant about other possible wrongdoers as soon as practicable, or risking a costs order (s 35A).
How do indemnities, limitation clauses and insurance affect liability?
Indemnity and limitation of liability clauses can shift or cap liability between businesses, but their effect depends on the exact wording, read with the whole contract. The Civil Liability Act 2002 (NSW) allows parties to make express provision in their contract about matters it covers (s 3A(2)), while some liability cannot be excluded at all, such as a manufacturer's liability under Part 3-5 (s 150).
Public liability, product liability and professional indemnity insurance often decide whether a claim is worth pursuing and who ultimately pays, so notify your insurer early. Under s 40(3) of the Insurance Contracts Act 1984 (Cth), if a claims-made policy applies and the insured notified the insurer in writing of facts that might give rise to a claim as soon as reasonably practicable and before cover expired, the insurer cannot refuse a later claim only because it was made after the policy ended. Kyra Pastrovic has a lengthy history of acting for some of Australia's largest insurance companies; see also insurance law.
How does Vamp Law run a commercial liability matter?
Preserve the evidence
Documents, photographs, samples and correspondence are secured and insurers notified.
Identify every responsible party
Under proportionate liability, choosing the right defendants matters as much as the strength of the claim.
Assess liability and loss
Kyra Pastrovic reviews the contract and the facts, with independent evidence from an engineer or accountant where needed.
Negotiate or mediate
Many commercial claims resolve once each side has tested the evidence.
Commence or defend proceedings
Unresolved matters proceed in the NSW court suited to the amount claimed.
This page is general information, not advice on a particular claim: the answer depends on the facts and the documents.
Frequently asked questions
Yes, in some cases. A damages claim under s 236 of the Australian Consumer Law can be brought against any person involved in the contravention, which includes a person knowingly concerned in it, such as a director or employee.
Whether that applies depends on what the individual knew and did.
Generally six years from when the cause of action first accrues, under s 14 of the Limitation Act 1969 (NSW). In negligence that is usually when the loss is first suffered, which is not always when the careless act happened.
Yes, as early as possible and in writing. Under a claims-made policy, notifying facts that might give rise to a claim before the policy expires can preserve cover for a claim made later.
Sometimes. A clearly worded clause can cap or exclude liability between businesses, but some statutory liabilities cannot be excluded, and an unfair clause in a standard form small business contract can be void.
Speak with Vamp Law about a commercial liability claim
If your business has suffered loss, or is facing a claim, make an enquiry or call +61 431 569 686 to speak with Kyra Pastrovic. For wider business disputes, see commercial litigation.
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