Negligent Advice (Reverse)

Question 1

Facts:

1. CLM were advertising agents approached by Easipower LTD, a company wanting advertising work to be done, and proposed arrangement for Easipower to pay on completion. 2. CLM approached easipowers bankers (DEF) to request a credit reference and the DEF wrote that easipower was strong financialy and header their letter with words “without Responsibility” 3. CLM relied on this statement given by bankers and did the job but easipower went into liquidation, and CLM sued for giving negligent advice.

Held:

1. If a professional person, in the course of his business gives advice knowing it is being relied upon, then he owes duty of care to that person to exercise reasonable care and skill when giving advice.
2. If he does not exercise care, then he will be liable for tort of negligence. 3. However in this case the DEF clearly put disclaimer hence it was unreasonable for CLM to rely on it.
3. The DEF was therefore not liable for the CLMs loss.

Answer 1

Headley Byrne v Heller&Partners

Question 2

Facts:

1. CLM owned shares in a company and the DEF were accountants that audited the companies accounts. 2. As a shareholder, CLM received audited financial statements, which indicated company is doing well, when in reality it was highly overvalued.
2. The clm relied on information to make successful takeover bid.
3. As a result, the CLM suffered a major financial loss

Held:
1. Accountants were not liable although they owed a duty of care to the shareholders, the duty was to prepare accurate accounts so shareholders can exercise informed control over the company. 2. They did NOT owe a duty of care to prospective shareholders who wished to buy further shares with a view of the profit. 3. A duty is only owed if accounts were Knowingly prepared for a specific purpose. 4. Such people should obtain further independent financial advice if proposing to invest large sums of money

Answer 2

Caparo v Dickman

Question 3

Facts:
1. CLM were interested in making a takeover bid for a company and requested some financial information and the companies accountant issued a profit forecast to CLM to help them decide whether to pursue the takeover. 2. Relying on that info, the CLM decided to go on with the takeover but later found out that the forecasts were inaccurate and the CLM sued for negligence

Held:
1. Using CAPARO TEST. 2. The DEF were liable for the CLM losses because they knew the info was going to be used by the CLM to asses the takeover. 3. CLM had relied upon DEFs advice when pursuing takeover. 4. It was reasonable for them to do so since the advice was specifically prepared for the purpose without asking for further independent advice.

Answer 3

Morgan v Hill Samuel Bank

Question 4

Facts:
1. CLM was a police officer who was moving to work with the police force in NI.
2. He was entitled to housing allowance, and wanted to ensure this will continue so sought advice from Exec in personnel department.
3. He was advised the allowance wouldn’t be affected if he took time off between two jobs, but it was considered a break in service, so he lost housing allowance permanently.
4. He sued the Met police for negligence for vicarious liability
Defense : Employee was not acting in capacity of professional adviser.

Held:
1. Even though personnel officers was not a profession adviser, she held a managerial post in police, and had access to special knowledge on the effects of transfers on police allowances. 2. So she gave negligent advice in which CLM relied upon and it was reasonable to do so. 3. So DEF Vicariously liable.

Answer 4

Lennon V Metropolis

Question 5

Facts:
1. CLM asked friend (DEF) who had knowledge of cars to help her find good second hand car, emphasised she wanted once which hadn’t been in accident. 2. The DEF reccomended a car, that was not road worthy / been in a accident. 3. CLM sued DEF for negligent advice that she relied upon. 4. DEF was simply a friend giving casual advice in a social context

Held:

1. The Def was liable for the negligent advice 2. He had presented himself as a person with knowledge on cars who could be relied upon 3. The Claimant had made it clear that she was seeking careful, considered advice from an expert
2. The Def knew this and chose to offer her advice so he owed her a Duty of Care

Answer 5

Chaudry v Prabhaker