How Does the Tort of Negligence Affect My NZ Business?

In Short

• The tort of negligence arises when a party fails to exercise reasonable care, resulting in harm to another, and can significantly impact businesses through legal liability.
• Understanding and managing risks associated with negligence is crucial for preventing potential claims against your business.
• Implementing robust risk management and compliance procedures helps minimise liability.

Tips for Businesses

Regularly assess and identify areas where negligence might occur within your operations. Implement strong policies and staff training to ensure duties are performed with due care. Maintain comprehensive insurance coverage to protect against potential claims. Consulting legal professionals can provide guidance on effectively managing and mitigating these risks.

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Table of Contents

• What are Torts?
• What is the Tort of Negligence?
• What Does the Tort of Negligence Mean for My Business?
• What Can My Business Do to Protect Against Negligence Claims?
• Key Takeaways
• Frequently Asked Questions

The tort of negligence offers compensation to people when a second party owes them a duty of care and breaches that duty, causing harm or other damage.

The Accident Compensation Corporation (ACC) regime covers most instances of negligence in New Zealand. However, it is still useful to have a working understanding of how the tort of negligence might affect your business. This article will:

• explain what torts are; 
• describe the tort of negligence and how it works; and 
• consider what that may mean for your business.

What are Torts?

Torts are different types of legal obligations. They reflect situations where the action of an individual harms another individual in some way, where that action is not a crime. The aim is to compensate those individuals for the harm they have suffered. By contrast, criminal law aims to protect society by punishing individuals who commit certain crimes.

What is the Tort of Negligence?

Negligence is the most well-known and common type of tort. In practice, some may find negligence quite complicated, but essentially, it occurs when a person breaches their duty to another. Specifically, the tort of negligence covers situations where:

• a person owes a duty to a second person;
• the first person breaches their duty; and
• the second person suffers some kind of harm or loss as a result.  

There are lots of types of duties that the courts have developed over time. For example, a tradesperson may owe a duty of care to do their job to a particular standard. Alternatively, a building company may owe a duty of care to construct a building without a leaky roof. 

Damage is key to a negligence claim. To make a case of negligence, you must prove this beyond the balance of probabilities. This means that it is more likely than not that the breach of a duty resulted in the harm. If you prove this, the responsibility shifts to the other party to show that they took all reasonable precautions. 

What Does the Tort of Negligence Mean for My Business?

One important aspect of negligence in New Zealand, particularly relative to other countries around the world, is that the ACC covers all personal injuries. The ACC operates a no-fault scheme that covers everyone injured by an accident in New Zealand, including international visitors. This is relevant because most negligent cases overseas are concerned with personal injury. However, part of the ACC regime means that you cannot usually take a case in negligence against someone for personal injury. 

Consequently, the main types of damages people seek in New Zealand are ‘exemplary’ or ‘punitive’ damages. The bar for these damages is relatively high, as the name suggests, and goes towards serious or reckless breaches of a duty.

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For your business, the key is to ensure that you are acting reasonably at all times, particularly when you owe a duty of care. The details of this will change depending on the circumstances of your business and workplace. For instance, as a builder, you may owe a duty of care to those using your services and trusting you to do a good job.

Contributory negligence is a key defence to negligence claims where a person’s actions have partly contributed to their injury or damage. This defence recognises the responsibility for the accident or injury was not solely on you. Although the ACC primarily covers personal injury claims, contributory negligence remains relevant in cases involving property damage or economic loss.

The assessment for contributory negligence is:

• the degree of departure from the standard of care expected of a reasonable person;
• the causal relationship between the injured plaintiff’s actions and their loss; and
• the relative blameworthiness of each party.

What Can My Business Do to Protect Against Negligence Claims?

You can take many practical steps to protect your business from negligence claims. Taking these steps will not prevent all claims, but they can significantly reduce your risks and help defend your business if a claim does arise. You could:

• implement robust health and safety measures and regularly check your business for risks;
• speak to an insurance broker and ensure you have the right insurance;
• provide regular training to your staff and document policies and procedures;
• ensuring you keep your procedures, insurance, and training up to date; and
• when something goes wrong, be vigilant in documenting the accident and get all necessary information. This will serve as your evidence foundation should a claim arise.

Key Takeaways

The tort of negligence involves situations where someone owes a duty to another person, that person breaches their duty, and the second person suffers some kind of harm or loss as a result. Relative to other countries, New Zealand sees fewer negligence claims due to the ACC regime, which precludes people from recovering damages for personal injury. However, there are still successful negligence claims in New Zealand. For your business, the key is to ensure it behaves reasonably and always upholds its obligations. 

If you want to know more about the tort of negligence or the risks around torts and liability more generally, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions