04. CASES on Negligence.

Question 1

Hedley Byrne v Heller (1963)

Answer 1

A group of merchant bankers were held liable for a negligent misstatement made to a creditor of a third party.

The case established that a professional owes a duty of care to persons who rely upon their work, even where no contractual relationship exists.

Question 2

JEB Fasteners v Marks Bloom (1982)

Answer 2

An accountant negligently prepared accounts overstating stock values and profits.

The claimant’s action for negligence failed since they could not prove causation to the court’s satisfaction.

Question 3

Caparo v Dickman (1990)

Answer 3

An auditor was deemed not to owe a duty of care towards unidentified groups of people, irrespective of whether those people relied upon the report.

An auditor’s duty of care is owed only to the body of shareholders as a whole.

Question 4

RBS v Bannerman (2005)

Answer 4

A duty of care was owed because defendant was aware of the identity of the person relying upon the professional advice and that they would rely on it.

Question 5

ADT v BDO Binder Hamlyn (1996)

Answer 5

The verbal statement of a partner was sufficient to imply that the firm assumed responsibility, that is, acknowledged the existence of a duty of care.

When the audit report was later found to be negligent BDO were held liable for the loss of the third party.

Question 6

Robinson v P E Jones (Contractors) Ltd (2011)

Answer 6

A housebuilder responsible for building a house with defective chimney flues was deemed to have no concurrent duty of care not to cause economic loss in tort.

The householder could only therefore rely upon the [inadequate due to an exclusion clause] remedies under contract.

Question 7

Springwell Navigation Corp v J P Morgan Chase Bank (2010)

Answer 7

Estabished that it is harder to establish a duty of care between a professional and sophisticated investors, who are more likely to be considered responsible for their own actions.

Question 8

Donoghue v Stevenson (1932)

Answer 8

A snail was found in a bottle of ginger beer. The person who drank the ginger beer was in contract neither with the cafe owner nor the manfuacturer.

The case established that a duty of care is owed by a manufacturer to a final consumer, even in the absence of a contract.

Question 9

The Nicholas H (Marc Rich & Co v Bishops Rock Marine) (1995)

Answer 9

Codified the tests of whether a duty of care exists:

-Damage reasonably forseeable?
-Proximity between the parties?
-Fair, just and reasonable?
-In accord with pubilc policy?

Question 10

Blyth v Birmingham Waterworks Co (1856)

Answer 10

Established a ‘baseline’ standard of care: the standard of “a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs.”

Question 11

Roe v Minister of Health (1954)

Answer 11

A doctor gave an injection without knowing that it was contaminated. Since he did not know and had no reason to believe of such contamination it was deemed that there was no breach of a duty of care.

Subsequent developments can not retrospecively establish a breach of duty of care.

Question 12

Paris v Stepney Borough Council (1951)

Answer 12

A worker blind in one eye was not provided with goggles by his employer. Unluckily an accident caused him to lose the sight in his other eye.

The case established that a higher standard of care is required where there is a relevant vulnerability and the defendant knows or should know of it.

Question 13

Spartan Steel Alloys v Martin Co Contractors (1973)

Answer 13

Established that damages too remote are not claimable. The defendant caused the electricity supply to the claimant’s foundry to be interrupted. They were found liable only for the loss resulting from the scrappage of a steel ingot in production, not a more general loss of production.

Question 14

Junior Books v Veitchi & Co. Ltd (1982)

Answer 14

Sufficient proximity was deemed to exist between a sub-contractor and the owner of a building to allow a successful negligence claim.

Question 15

James MacNaughton Papers Group Ltd v Hicks Anderson & Co (1991)

Answer 15

Draft accounts were prepared for a company chairman. A third party inspected the accounts, took over the company and then suffered loss.

Their claim of negligence failed. No duty of care existed between the preparer of the accounts and the third party despite that party’s alleged reliance.

Question 16

Barclays Bank plc v Grant Thornton UK LLP (2015)

Answer 16

Established that an auditor’s disclaimer to the effect that a duty of care is owed only to the addressees (company members) of an audit report and not to any third party is valid in law.

Question 17

Morgan Crucible v Hill Samuel Bank Ltd (1991)

Answer 17

A claimant’s action for negligence succeeded because a duty of care was deemed to exist towards a known takeover bidder who made the claimant aware of their reliance on financial statements.

Question 18

Galoo Ltd v Bright Grahame Murray (1995)

Answer 18

Confirmed that an auditor owes a duty of care to a takeover bidder when they have been expressly informed that the bidder will place reliance upon the audited accounts, in this case to fix a takeover price.

Question 19

Law Society v KPMG (2000)

Answer 19

A duty of care was deemed to exist between a professional body (the Law Society) and a preparer of accounts for one of its members (an individual firm of solicitors).

It was deemed entirely forseeable that an adverse accountant’s report could result in intervention by the Law Society for the protection of the public.

Question 20

Andrew v Kounnis Freeman (1999)

Answer 20

A duty of care was deemed to exist between the CAA and the preparer of accounts of an individual travel agent.

It was entirely forseeable that the preparer knew that the CAA would rely upon their work in determining whether to renew the travel agent’s license.

Question 21

The Wagon Mound (1961)

Answer 21

Damage casued by a fire resulting from the ignition of oil floating on Sydney harbour was not claimable in damages since it was not reasonably forseeable.

Question 22

Lister and ors v Hesley Hall (2001)

Answer 22

Extension of vicarious liability to an employer even when the employee causes loss while employed that is outside their job description.

The ‘close connection’ criterion.

Question 23

Dubai Aluminium Co Ltd v Salaam and ors (2002)

Answer 23

A solicitor’s drafting of bogus agreements was deemed so ‘closely connected’ to his work that his employer was deemed vicariously liable.

Question 24

Attorney General v Hartwell (2004)

Answer 24

A police constable’s employers were not deemed to be vicariously liable when he shot his estranged partner in a bar.

The ‘close connection’ test was not satisfied.

Question 25

Ormrod v Crossville Motor Services (1953)

Answer 25

An agent engaged to transport a car was deemed vicariously liable when causing an accident en route; despite there also being a partial private purpose.

Question 26

Glasgow v Taylor (1922)

Answer 26

A duty of care was deemed to exist between the local authority and members of the public with regard to poisonous plants growing in a botanic garden.

Question 27

Latimer v AEC (1953)

Answer 27

A duty of care between an employer and an employee was NOT deemed to have been breached because the employer took every reasonable precaution to make a factory floor safe.

Question 28

Richley v Fould (1965)

Answer 28

Res ipsa loquitor was successfuly argued in the case of a car being on the wrong side of the road.

Question 29

Mahon v Osborne (1939)

Answer 29

Res ipsa loquitor was deemed only to apply to events in common experience; therefore such a claim in respect of a medical swab left inside a patient was not held to be valid.

Question 30

Barnett v Chelsea & Kensington (1968)

Answer 30

A hospital refusing to treat a patient who had ingested arsenic was deemed NOT to be liable for negligence.

The ‘but for’ test was not satisfied since it was established that he would have died even if immediate treatment had been given.

Question 31

Fairchild v Glenhaven (2002)

Answer 31

Established a less strict than the ‘but for’ test, that of ‘materially increasing risk.’

In this case the defendant had exposed the claimant to asbestos but the claimant could not prove that it was THAT asbestos.

Question 32

McKew v Holland (1969)

Answer 32

A claimant’s reckess act of attempting to use steep stairs despite an earlier injury was a ‘novus actus interveniens’ which limited the amount of damages payable in respect of that injury.

Question 33

Lamb v Camden (1981)

Answer 33

Damage resulting from squatters in a property was deemed too remote from the council’s tort of breaking a water pipe.

Question 34

Carslogie V Norway (1951)

Answer 34

A storm which caused a damaged ship to suffer further damage was deemed a ‘novus actus interveniens’ which limited the amount of damages payable to that resulting from the original collision.

Question 35

Sayers v Harlow (1958)

Answer 35

A woman locked inside a toilet cubicle was deemed responsible for contibutory negligence when she tried to climb out and suffered injury.

Question 36

Ultramares v Touche (1932)

Answer 36

US: declared that to impose a duty of care between auditors and third parties would “open the floodgates” to claims for liability “in an indeterminate amount for an indeterminate time to an indeterminate class”.

Question 37

De Sena v Notaro (2020)

Answer 37

Confirmed that solicitors and accountants acting for limited companies do not owe a duty of care to individual members.

In addition the fact that the professionals involved strongly advised that the claimant sought independent advice and that the claimant was quite able to do so but chose not to demonstrated that those professionals did not accept any responsibility to the claimant and that no reliance could therefore be place on their work by the third party.