Negligent Statements and Services Flashcards
What case shows pure economic loss can be recovered in at least one situation?
Murphy v Brentwood District Council [1991]
What did Lord Keith say in his speech?
That pure economic loss can be recovered when sustained through reliance on negligent misstatements
What type of damage is recoverable due to negligent misstatements?
Physical damage
What happened in Nunnerley and Another v Warrington Health Authority and Another?
The Authority was liable in respect of negligent advice which had caused the birth of an unwanted disabled child.Such liability extended to the cost of caring for the child beyond the age of 18.
What happened in the case of Candler v Crane Christmas & Co?
In the absence of a contractual and fiduciary relationship between the parties, the D owed no duty of care to the C in preparation of the accounts even though the D knew that C was likely to rely on those accounts.
Where are the major policy considerations regarding negligent misstatements summed up?
The case of Ultramares Corp v Touche
What are the five policy considerations relating to negligent misstatements?
1) Negligently made statements may cause loss to an extremely large class of claimants
2) The causal chain is potentially much longer
3) The concentration of liability for a large number of losses may discourage the provision of socially useful information
4) All the evidence relating to causation will be in Cs control
5) There is a difference between personal injury or damage to the property and the loss of money
What was the judgement in Candler v Crane Christmas & Co?
Lord Denning dissented as precedent was inapplicable in previous years, the courts recognised that a duty of care could exist in relation to negligent misstatements of which caused pure economic loss
What happened in Hedley Byrne v Heller?
The existence of a ‘special relationship’ between C and D involving an ‘assumption of responsibility’ by the D. Reasonable reliance by the C on the statement and such reliance was reasonable in the circumstances.
When will a special relationship arise?
Where the enquirer reasonably expects the other person to exercise a reasonable degree of care and the other is, or ought to be aware that the enquirer is relying on his/her to exercise care.
How does the test for special relationship differ from the Neighbour Principle?
The special relationship test is supposed to be a more restrictive test. The existence of reasonable foreseeability itself will not create liability for pure economic loss arising from negligent statements
What did Lord Devlin state qualify as a category of special relationships?
Contractual relationships
Relationships equivalent to contract where there is an assumption of responsibility in circumstances in which, but for the absence of consideration there would be a contract there is a duty of care
Wha is the importance of reliance?
For duty to exist, the claimant must rely on the statement of the defendant.
What was said in Hedley Byrne v Heller regarding a special relationship?
A special relationship will occur where ‘it is plain that a party seeking information or advice was trusting of the other
What was said in Howard Marine & Dredging Co Ltd v Ogden & Sons Ltd regarding a special relationship?
Advice given in social situations or ‘off the cuff’ does not create a duty of care in law
Where was the Neighbour Principle founded?
Donoghue v Stevenson
Where is the 3 stage test for duty of care set out?
Caparo v Dickman
What is the 3 stage test for duty of care?
- Foreseeability
- Proximity
- Fairness, justice and reasonableness
What was said in Esso Petroleum Co Ltd v Mardon regarding a special relationship?
Required a special relationship to sue for economic loss
What was said in Lennon v Commissioner Police regarding a special relationship?
The person giving advice doesn’t need to be a professional
What was said in James McNaughton Paper Group v Hicks Anderson regarding a special relationship?
Business transactions of equal standing are unlikely to be unreasonable
What case departed from the ‘business connection’ principle?
Chaudhry v Prabhakar
What is the importance of knowledge on the defendants behalf?
The defendant must have knowledge that the claimant will rely on the advice provided
Where was the requirements for knowledge laid out?
Caparo v Dickman
What was said in Commissioners of Customs and Excise v Barclays Bank Plc regarding voluntary assumption of responsibility?
Can be, but not always, a determining factor in establishing whether a duty is owed
What case laid out the factors that should be considered when determining whether a duty of care was owed?
James McNaughton Paper Group Ltd v Hicks Anderson & Co
What are the six factors that should be considered when determining whether a duty of care was owed?
- The purpose for which the statement was made
- The purpose for which the statement as communicated
- The relationship between the adviser, the advisee and any relevant third party
- The size of any class to which the advisee belongs
- The state of knowledge of the adviser
- Reliance by the advisee
What are examples of a ‘statement’?
Advice, references, provision of information, services,
What happened in the case of Hedley Byrne v Heller?
The plaintiff wanted to know about the financial status of Easipower. The agency requested references from their bank from Easipowers bank, Hellers & Partners. They confirmed the creditworthiness of the client in a headed letter. Relying on the reference Hedley Byrne entered into contracts and lost £17,000.
What was held in the case of Hedley Byrne v Heller?
A duty of care should exist in respect of a statement leading to pure economic loss, if the parties were in a ‘special relationship’. In this case the duty had been avoided by the defendants disclaimer.
How could the Hedley Byrne v Heller case be different if it was judged today?
The Unfair Contract Terms Act 1977 could mean that disclaimers (header of letter) may not work.
What is the criteria laid out in Hedley Byrne v Heller for a ‘special relationship’?
Claimant has to relied of the defendants skill and judgement
The defendant has to have known or reasonably should have known that the claimant was relying on them
It was reasonable in the circumstances for the claimant to rely on the defendant
What do the cases of Mutual Life & Citizens’ Assurance Co Ltd v Evatt and Esso Petroleum v Mardon say regarding the defendant’s duty of care?
That professional expertise was not required as long as they talk to a businessman who knows the claimant intends to act upon the advice.
What does the case of Chaudhury v Prabhaker say regarding the defendants duty of care?
A social setting or relationship does not fulfil the requirements for a special relationship. However the defendant asked friend about buying a car was a narrow exception to the rule.
Can silence constitute a special relationship?
Failing to tell the claimant something that will affect their position and causes them loss then a duty can arise.
What case shows loss due to threats are recoverable under a special relationship?
Welton v North Cornwall DC
What does the existence of a special relationship prove?
There was a duty of care
What else, in addition to duty of care, must claimant also prove to claim under negligent misstatements?
Breach and Causation
What case shows causation in negligent misstatements?
Fasteners v Marks Bloom & Co
What happened in the case of Fasteners v Marks Bloom & Co?
The misstatement did not motivate the claimant to takeover a company meaning the defendants breach did not cause the claimants loss.
How far has liability under Hedley Byrne v Heller been extended?
Situations where the statement or supply of of information was not made directly to the claimant or made for purposes other than influencing the claimant.
What is the case of Smith v Eric S Bush?
Negligent surveyor led to plaintiff buying house and finding it needed expensive repair. The report was giving to the building society. The HoL found the relationship between the valuer and purchaser is close ‘akin to contract’. The plaintiff paid for the report and it was foreseeable, reasonable and fair for him to rely on it. It was said that the case could have gone in the defendants favour if it had not been a modest residential property.
What case explains and applies the Hedley Byrne principle?
Caparo v Dickman
What was held in the case of Caparo v Dickman?
The negligence action against the accountants failed. Preparing the annual accounts owed a duty of care to the company and not to the public at large. There had not been sufficient proximity between the plaintiff and defendant.
What two cases provide examples of the Caparo approach?
Morgan Crucible Co plc v Hill Samuel Bank Ltd
James McNaughton Paper Group Ltd v Hicks Anderson & Co
What was held in Morgan Crucible Co plc v Hill Samuel Bank Ltd?
A duty can exist in a factual situation but where the financial accounts had been revealed to an identified bidder
What was held in James McNaughton Paper Group Ltd v Hicks Anderson & Co?
An auditors duty of care was held to not exist when the claimant relied on a company’s draft accounts in his takeover bid as they have not been drafted for that purpose.
What are the 6 pointers to the existence of a Hedley Byrne duty set out in James McNaughton Paper Group Ltd v Hicks Anderson & Co?
- Purpose for which the statement was made
- Purpose for which it was communicated
- State of knowledge of the maker of the statement
- Size of the class to which the recipient belonged
- Relationship between the maker, recipient and any third party
- Reliance by the recipient
What was held in the case of Customs and Excise Commissioners v Barclays Bank plc?
There was an absence of assumption of responsibility causing the case to fail. Combined with the lack of proximity between the parties and the fact it would not be fair, just or reasonable to impose a duty of care
What was held in the case of Spring v Guardian Assurance plc?
A duty of care was based on an assumption of responsibility by the defendant and close relationship between the parties
What was held in White v Jones?
A duty of care was found to exist because there was an assumption of responsibility , the potential loss was foreseeable and it was fair, just and reasonable. There was also no conflict of interest between the parties.
