Background of the case
This paper contains a number of legal issues that a company called Healthy Eating wants to be addressed. This company produces ready cooked food that is additive free. The company fully owns two subsidiaries Estate Ltd, that manages the land and the buildings where healthy eating carries out its business, and Research Ltd, the aim of which is to carry out investigations concerning the possible health benefits of eating additive free food. Under the compulsory purchase order, the local authority acquired the land owned by Estate Ltd in the bid to extend the public car park.
The only compensation that the local authority offered is for the value of the land, the buildings and the loss of profit suffered by Estate Ltd, but did not compensate the loss suffered by the subsidiary, Healthy Eating Ltd. Later, Research Ltd asked some volunteers to test some of its latest products that it claimed would reduce the levels of cholesterol in the body but this product was found out to be contaminated with bacteria that were dangerous and this seriously affected 5O volunteers health. The claims by the volunteers are very substantial in relation to the assets of the company that are worth only 50,000 pounds. Healthy Eating has been doing good business and there is surplus cash that the company wants to invest. The managing director of Healthy Eating, Mr. Robert, approached the solicitor of the company for the investment advice.
The solicitor informed the managing director of healthy eating that there was an investment scheme that would provide very high returns and that everybody would get paid. The solicitor also asserted that the funds of the company would be protected promising that there would be no risk for the money. The managing director of healthy eating then signed the agreement and an escrow agreement that gave the company a guaranteed security from the bank. The managing director of healthy eating proceeded to pay 100,000 pounds to the account of the solicitor where in return, and as a share in the company, he would receive 500,000 pounds in a month which was an annualized return of 6000 percent. This money was never seen again.
This paper will give the management of Healthy Eating the legal advice on the entitlement for the compensation for the loss the company suffered because of the compulsory purchase and the order issued by the local authority. It will also advice the company on the liability to compensate the injured volunteers and the claim against the companys solicitor, Brown, Black and Co, for the tort of deceit in reference to the investment scheme and the damages suffered from the breaching of the escrow agreement.
The compulsory purchase and compensation
The compulsory purchase act of 1965, part 2, section 10 defines the rights to compensation. The law states that the right to compensation shall not be dependent on the power exercised by the compulsory authority and the compulsory powers of acquisition. This may be applied when the purchase of a certain piece of land was conducted by an agreement. While many of the acts that empower the agreement based purchase of land, there is an exclusion of the provision of some sections of the law (Aaron, 2003).
The local government act of 1972 specifies the restrictive covenants that concern the land subject to the settlement of the compensation. In order to succeed, a claim for compensation must have statutory provisions that derive their power from the various decisions that were consolidated by the metropolitan board of works vs. McCarthy that led to the establishment of the McCarthy rules, where rule number one states that the consequence of the actions of the statutory powers that have negative effect on an organization can be remedied by a legal action. Though the local authority may be using its statutory powers, the claims are governed by the law in section three and the other three rules of McCarthy (Kahn, 2009).
If the action that causes the injurious affection goes beyond the powers of the state, or is a result of the powers that are being exercised in a manner that is negligent, the owner of the land has by any means a remedy that can only be satisfied by an injunction or payment of damages (Belinda, 2003). In this case, the healthy eating company cannot have any claim for compensation for the loss of profit arising by the acquisition of the land owned by its subsidiary, the estate limited, because the local authority acted within the statutory powers that allow for the compulsory purchase situations, especially, if the land being purchased is for the public use. Secondly, the fact that the local authority compensated the subsidiary, the estates limited for the cost of building and then land means that the local authority acted within its statutory obligations (Berliner, 200).
A claim would rise against the local authority only if it fails to settle the compensation for the real value of the solid investments that were affected to the first party (Sullivan, 2004). In this case, the Healthy Eating Company is a second party, because there is no way it is involved directly with the local authority since the local authority has not touched any investment it directly owns.
This means that the loss accrued by a third party after the compulsory purchase cannot be included in the compensation package, because the law only provides for the compensation of the first party, especially, if the compulsory purchase is made within the statutory provisions (Theodore, 2009) McCarthys rule number two brings in the principle test of the admissibility where it sates that the injurious affection that can be compensated must arise from an action which, if done without authority of the state, would give rise to a cause for action.
In this case, concerning Healthy Eating Company versus the local authority, there is nothing that would give rise to a cause of action because the injurious affection that arises is compensated to the direct owners of the land that is the Estate Ltd. This means that there is nowhere this rule touches the admissibility of Healthy Eating company because, there may be losses suffered as a result of the acquisition of the land by the city council .The situation of the healthy eating company is not addressed by the law from the dimension of the second rule of McCarthy.
The third rule of McCarthy covers the value of the land and the interest that must be paid and in this case, it states that it must be paid to the directly affected individual or company without the physical interference of some legal claims that emanate from a third party whether public or private (Salanie, 2003). The quantum of the claim of Healthy Eating Company is also affected by this rule, because under it is the direct owner who is entitled to any form of compensation. The compulsory purchase order that was given by the local authority under the laws can only be served to the owner of the property and not the third party using the property.
This means that though Healthy Eating owns Estates Ltd, the law identifies Estates Ltd only as the direct recipient of any compensation package and does not recognize any link in ownership between the two companies. This means that the loss for Healthy Eating cannot be construed as a loss for the estates limited and vice versa and as such, estates limited cannot be compensated for the losses accrued by its sister or subsidiary company.
The fourth rule of McCarthy does not in affect this case in any way, and, therefore, my advice to Healthy Eating Company is that under all the rules that govern the compulsory purchase and compensation, there is no way the company can be compensated by the local authority for the losses it accrued from the acquisition of the land belonging to Estates Ltd. However, Healthy Eating Company can be compensated by estates limited because it is a direct injurious victim, but the complication here is that the two companies are related and there is no way they can sue each other for damages.
Healthy Eating Company, if it were to sue for damages caused by the local authority, would find itself bound by the section 10 of the 1965 act that claims that the damages payable must be in accordance with the land compensation act of 1973 and no satisfactory answer would be received to validate the claims of Healthy Eating Company. This means that the company would automatically lose the case and be forced to pay the damages to the local authority. The best thing is for Healthy Eating Company to consider the compensation given to its subsidiary, the estates limited enough to cover all its losses because the law does not support any claim it may raise concerning compensation for the loss of business.
Liability to compensate the injured volunteers
Research Ltd, another company affiliated to Healthy Eating asked some volunteers to test one of its latest products that it claimed would reduce the levels of cholesterol in the body but this product turned out to be contaminated with bacteria that were dangerous and this seriously affected 5O volunteers health. The claim by the volunteers can be classified under the tort of negligence. Negligence is not carelessness because in the former, there is a certain degree of care shown the only problem is that the care does not reach the expected levels (Loman, 2001).
Thus, negligence is a conduct that can be said to be culpable, because it is short of what a reasonable conduct ought to be. A reasonable conduct, according to the law, ought not to subject people to some harm of risk (Loman, 1990). This means that Research Ltd was negligent when it asked some volunteers to participate in an exercise that turned out to be a health hazard. The fact that the food had some contaminations that resulted in the sicknesses of many of the volunteers points out to a tort of negligence. In the tort of negligence, the law states that through a civil litigation, if the victim of the injury proves that the assailant acted in a negligent manner that resulted in that injury, heshe can be compensated for the harm done to him or her by claiming for the recovery of damages. When it comes to the tort of negligence, a victim can prove a case for harm made to their body, top their mental state, financial status or even lost relationships (Greenhut, 2004). In the case of research limited, the injury caused to the victims was not accidental, but it is due to negligence. Should the victim sue for damages, they can be awarded compensation based upon three grounds. The first ground is the internal bodily harm that was caused by the contaminated food that was a risk to their health. Secondly, the victims may be required to be compensated for the damages, because of the impact the poisoning has on their mental state and thirdly, these victims can be compensated for the loss of income or financial compensation because of the losses that were incurred during the period of their sickness (Thomas, 1999).
This is because the tort of negligence is very fact specific and the law will go to the inner details of every count that requires compensation (Fillebrown, 2000).This is the major aspect of the law of liability and talking about liability, research limited may be liable for the negligence, but given its weak financial standing, compensating all the 50 victims would leave the company dry financially. Most likely, the research was supposed to improve the services of its sister company, the healthy eating company which means that it was a complimentary service to the sister company, though it backfired. If paying the victims the compensation for the damages because of the tort of negligence that led to their sickness would lead to the death of research limited, then one of the companies that would be affected by the closure of research limited is the healthy eating company. This is because it would no longer get the research services that the research limited has been giving it. Since healthy eating is in a very good financial condition. It would be worthwhile to step in and help its subsidiary, the research limited tom compensate the victims.
Tort of deceit and the breach of escrow agreement
In the case of Healthy Eating Company versus solicitor Brown, two issues emerge that warrant the legal consideration. The first one is the deceit where Brown was paid money after deceiving Robert of Healthy Eating that the money would be invested according to an investment scheme that would have annual returns of 6000 percent. The second one is the breach of the escrow agreement. The tort of deceit is commonly known as fraud. Deceit occurs when one party makes representations that are false while hiding the truth and these results to recklessness (Hazarabedian, 2005). This is because there is no way fraud can be an accident. Fraud or deceit is an intentional tort and the recipient of the tort acts to his own detriment in reliance to the deceit (Walin, 1996). In the case of Healthy eating versus Brown, there is wide evidence that Brown defrauded the healthy eating by acting in a deceitful manner through misrepresentation of facts. This can also be interpreted under contributory negligence where there is no defense for any action of deceit though proving deceit may be difficult that proving negligence (Ryskamp, 2006). However, the case of Healthy Eating in proving the deceit may be made easy by the application of the count of misrepresentation.
Misrepresentation is a concept in contract law that indicates the use of false statements that leads to inducements that make another party to enter into a deceitful contract (Harper, 2007). This is exactly what Brown did. The advice I would give the Healthy Eating Company is that the law in this case allows the remedy of rescission meaning that Brown ought to pay for damages that are tantamount to the financial figures involved in the misrepresentation. Brown also breached the escrow contract that his law company and healthy eating entered into. Breach of agreement is also referred to as breach of contract. Breach of contract in legal terms is a situation where a binding agreement or an agreement that had been bargained for is not honored by either one or more parties that were convolved in the making of the contract through non performance or impediment of the performance of the other party. In the escrow contract, there was a guaranteed security from the bank through Mr. Browns Law Company, but this agreement was not honored meaning that the agreement was breached. Typically, Healthy Eating is entitled to a judicial remedy and this one comes in form of monetary damages (Kanner, 2000).
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