NEGLIGENT MISSTATEMENT

Covers situations were the c has been given negligent advice which has resulted in an economic loss. Judges are reluctant to impose a duty of care and liability in respect of economic loss because it's more commonly associated with contract law

Origninally a claim was only possible if the statement was made fraudulently

FACTS

A representation in a share prospectus that a tram company could use motive power led to loss when the board of trade refused the company a license to use motorised trams.

OUTCOME

Courts did not accept this claim. The company had fully expected to be granted the license, so their misstatement was not considered to be fraudulent?

So claims for loss arising from negligent misstatement were rejected!

FACTS

Accountants negligently prepared a company's accounts and investors then lost money

OUTCOME

Denning felt there should be a DOC to the investor and to any third party to whom they themselves show the accounts to to whom they know their employer is going to show the accounts as to induce them to invest money.

HOL accepted Dennings dissenting judgement about when a DOC is owed and why, although it did take a long time. This was recognition that a claim was possible.

FACTS

An advertising company was approached with a view to kpreparing a campaign for a small company (easipower), with whom they had not previously dealt with. The advertisers approached easipowers bank and asked for a credit reference. The bank gave a satisfactory reference without checking on their current financial status. The advertisers produced the campaign and then lost money as easipower went into liquidation. Sued the bank for negligent advice.

OUTCOME

Claim failed because bank had included a disclaimer of liability in the negligently prepared credit reference.

YOU CAN NOW CLAIM FOR NEGLIGENT MISSTATEMENT AND ECOMONIC LOSS!!

• There must be a SPECIAL RELATIONSHIP between the two parties, based on the skill and judgement of the d and the reliance placed upon it.
• The person giving the advice ,use have a SPECIAL SKILL relating to the type of advice given, so the d ought to have realised the c will have relied on that advice
• The party receiving the advice has ACTED IN RELIANCE ON IT and in the circumstances it was reasonable for the c to do so.

ALL OF THE ABOVE MUST BE PRESENT BEFORE A CLAIM FOR NEGLIGENT MISTATMENT CAN BE SUCCESSFUL

A first a narrow approach was taken by the courts when determining whether parties were in a special relationship. Originally it would only include a relationship where the party giving the advice was IN THE BUSINESS OF GIVING ADVICE OF THAT SORT. However since since it has been suggested that a business or professional relationship might in general give rise to a duty if the c is genuinely seeking professional advice.

HOWARD MARINE V DREDGING

FACTS

Dredging took a lot longer because the hirers of the barges had misstated the payload weight to the party hiring them.

OUTCOME

It was accepted that the relationship while a standard business one could give rise to a special relationship for the purposes of imposing a duty

The fact that the c pays for the advice is insufficient for liability unless there is proximity between the parties

FACTS

Club sent a player with a knee injury to a consultant on the advice of its physiotherapist. Consultant negligently advised on reconstructive surgery which failed and the layer had to retire, other treatment would have been more appropriate. Club sued for economic loss for players premature retirement.

OUTCOME

The person really taking the advice was the player and there was insufficient proximity between the club and doctor to impose a duty.

A Urey social relationship would not normally give rise top a DOC, but has done when it has been established that carefully considered advice was being sought from a party with some expertise

FACTS

Woman asked her friend who wasn't a mechanic but had some experience of cars, to find her a good second hand car that had not been in an accident. It was later discovered the car that she was advised on had in fact been n an accident and was not completely road worthy

OUTCOME

The friend advising on its purchase was successfully sued

THIS WIDENED THE LAW BECAUSE IT INCLUDED A SPECIAL RELATIONSHIP

FACTS

A building society surveyor was held to owe a duty to purchasers of a property valued at £12,000 where it was later discovered that repairs worth £18,000 were required.

OUTCOME

The duty was imposed because it was shown that at the time less than 15% of purchasers would have their own independent survey carried outand therefore it was foreseeable that they would rely on the standard building society survey

MUTUAL LIFE V EVATT

FACTS

A representative of an insurance company gave advice about the products of another company.

OUTCOME

The court held that there could be a breach of duty in such circumstances only if the party giving the advice had held him/herself out as being in the business of giving the advice in question

J.E.B FASTENERS V MARKS BLOOM

FACTS

A negligent statement on the value of a companies stock did not give rise to a duty. Tis was because the party buying the company was doing so only to secure the services of two directors and so placed no reliance on stock

It will not be foreseeable reliance if the c belongs to a group of potential c that is too large

FACTS

A man had not been properly advised of the possibility that his vasectomy could automatically reverse itself

OUTCOME

No duty of care owed to a future girlfriend of the man

When there is foreseeable reliance on advice given then there will be a duty of care owed

FACTS

A building society valuation had identified that chimney breast had been removed but the values had failed to check whether the brick work above was properly secured. It was not and after purchase it collapsed

OUTCOME

As in Yianni even though the contract was between building society and valuer it was reasonably foreseeable that the purchaser would rely on it

Policy obviously plays a part in deciding whether the has been reasonable reliance

FACTS

An army officer made an application for an early release and hen claimed he had lost the opportunity of civilian employment because the army had taken an unreasonable amount of time to reply

OUTCOME

The court would not accept that the army owed any duty in relation to his civilian affairs

In CAPARI V DICKMAN, in addition to setting out a new test for duty of care the HOL also had the opportunity to consider principles in Hedley Byrne and develop them further

Rapid development of property markets led to a greater increase of home owners which led to greater number of claims made for NM, (particularly property surveyors and accountants) therefore the legal position needed clarifying

They decided that the c must rely on the advice for a SPECIFIC PURPOSE WHICH HAS BEEN COMUNICATED TO THE D

FACTS

Accountants who had drew up accounts at very short notice for the chairman of a company had no cut of care to the person who acquired the company in a take over bid, having inspected the accounts.

COA identified factors which should be taken into account when establishing a DOC:

• The PURPOSE for which the statement was MADE
• The PURPOSE for which the statement was COMMUNICATED
• The RELATIONSHIP between the PERSON GIVING the advice, the PERSON RECEIVING the advice and any relevant third party
• The SIZE of any class that the PERSON receiving the advice BELONGED to
• The DEGREE of knowledge of the persons GIVING the advice

However this is a very narrow approach to the duty. Judges in some subsequent cases have tended to take a more relaxed view, not fully applying the criteria

FACTS

Solicitors who negligently failed to draw up a will before the persons death were held to owe a duty to the intended beneficiaries who consequently lost their inheritance. Any contractual relationship was with the individual and the solicitor and since a will can be changed a beneficiary will not necessarily ensure the inheritance. Nevertheless the HOL was prepared to identify a special relationship in the circumstances and reliance.

In some instances the court appears uncertain whether the principle in Hedley Byrne or that in Caparo is the appropriate one to apply. He latter is certainly less restrictive

FACTS

An employee of an insurance company was dismissed and then prevented from gaining a position with another company because of the negligently prepared and unfavourable reference provided by first company. HOL held first employers liable because of the reference but were split on whether Hedley should apply

LAST TWO CASES DO NOT FIT THE PRONCIPLE NEATLY