Negligent Statements and Services

Question 1

What case shows pure economic loss can be recovered in at least one situation?

Answer 1

Murphy v Brentwood District Council [1991]

Question 2

What did Lord Keith say in his speech?

Answer 2

That pure economic loss can be recovered when sustained through reliance on negligent misstatements

Question 3

What type of damage is recoverable due to negligent misstatements?

Answer 3

Physical damage

Question 4

What happened in Nunnerley and Another v Warrington Health Authority and Another?

Answer 4

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.

Question 5

What happened in the case of Candler v Crane Christmas & Co?

Answer 5

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.

Question 6

Where are the major policy considerations regarding negligent misstatements summed up?

Answer 6

The case of Ultramares Corp v Touche

Question 7

What are the five policy considerations relating to negligent misstatements?

Answer 7

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

Question 8

What was the judgement in Candler v Crane Christmas & Co?

Answer 8

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

Question 9

What happened in Hedley Byrne v Heller?

Answer 9

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.

Question 10

When will a special relationship arise?

Answer 10

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.

Question 11

How does the test for special relationship differ from the Neighbour Principle?

Answer 11

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

Question 12

What did Lord Devlin state qualify as a category of special relationships?

Answer 12

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

Question 13

Wha is the importance of reliance?

Answer 13

For duty to exist, the claimant must rely on the statement of the defendant.

Question 14

What was said in Hedley Byrne v Heller regarding a special relationship?

Answer 14

A special relationship will occur where ‘it is plain that a party seeking information or advice was trusting of the other

Question 15

What was said in Howard Marine & Dredging Co Ltd v Ogden & Sons Ltd regarding a special relationship?

Answer 15

Advice given in social situations or ‘off the cuff’ does not create a duty of care in law

Question 16

Where was the Neighbour Principle founded?

Answer 16

Donoghue v Stevenson

Question 17

Where is the 3 stage test for duty of care set out?

Answer 17

Caparo v Dickman

Question 18

What is the 3 stage test for duty of care?

Answer 18

1. Foreseeability
2. Proximity
3. Fairness, justice and reasonableness

Question 19

What was said in Esso Petroleum Co Ltd v Mardon regarding a special relationship?

Answer 19

Required a special relationship to sue for economic loss

Question 20

What was said in Lennon v Commissioner Police regarding a special relationship?

Answer 20

The person giving advice doesn’t need to be a professional

Question 21

What was said in James McNaughton Paper Group v Hicks Anderson regarding a special relationship?

Answer 21

Business transactions of equal standing are unlikely to be unreasonable

Question 22

What case departed from the ‘business connection’ principle?

Answer 22

Chaudhry v Prabhakar

Question 23

What is the importance of knowledge on the defendants behalf?

Answer 23

The defendant must have knowledge that the claimant will rely on the advice provided

Question 24

Where was the requirements for knowledge laid out?

Answer 24

Caparo v Dickman

Question 25

What was said in Commissioners of Customs and Excise v Barclays Bank Plc regarding voluntary assumption of responsibility?

Answer 25

Can be, but not always, a determining factor in establishing whether a duty is owed

Question 26

What case laid out the factors that should be considered when determining whether a duty of care was owed?

Answer 26

James McNaughton Paper Group Ltd v Hicks Anderson & Co

Question 27

What are the six factors that should be considered when determining whether a duty of care was owed?

Answer 27

1. The purpose for which the statement was made
2. The purpose for which the statement as communicated
3. The relationship between the adviser, the advisee and any relevant third party
4. The size of any class to which the advisee belongs
5. The state of knowledge of the adviser
6. Reliance by the advisee

Question 28

What are examples of a ‘statement’?

Answer 28

Advice, references, provision of information, services,

Question 29

What happened in the case of Hedley Byrne v Heller?

Answer 29

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.

Question 30

What was held in the case of Hedley Byrne v Heller?

Answer 30

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.

Question 31

How could the Hedley Byrne v Heller case be different if it was judged today?

Answer 31

The Unfair Contract Terms Act 1977 could mean that disclaimers (header of letter) may not work.

Question 32

What is the criteria laid out in Hedley Byrne v Heller for a ‘special relationship’?

Answer 32

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

Question 33

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?

Answer 33

That professional expertise was not required as long as they talk to a businessman who knows the claimant intends to act upon the advice.

Question 34

What does the case of Chaudhury v Prabhaker say regarding the defendants duty of care?

Answer 34

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.

Question 35

Can silence constitute a special relationship?

Answer 35

Failing to tell the claimant something that will affect their position and causes them loss then a duty can arise.

Question 36

What case shows loss due to threats are recoverable under a special relationship?

Answer 36

Welton v North Cornwall DC

Question 37

What does the existence of a special relationship prove?

Answer 37

There was a duty of care

Question 38

What else, in addition to duty of care, must claimant also prove to claim under negligent misstatements?

Answer 38

Breach and Causation

Question 39

What case shows causation in negligent misstatements?

Answer 39

Fasteners v Marks Bloom & Co

Question 40

What happened in the case of Fasteners v Marks Bloom & Co?

Answer 40

The misstatement did not motivate the claimant to takeover a company meaning the defendants breach did not cause the claimants loss.

Question 41

How far has liability under Hedley Byrne v Heller been extended?

Answer 41

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.

Question 42

What is the case of Smith v Eric S Bush?

Answer 42

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.

Question 43

What case explains and applies the Hedley Byrne principle?

Answer 43

Caparo v Dickman

Question 44

What was held in the case of Caparo v Dickman?

Answer 44

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.

Question 45

What two cases provide examples of the Caparo approach?

Answer 45

Morgan Crucible Co plc v Hill Samuel Bank Ltd

James McNaughton Paper Group Ltd v Hicks Anderson & Co

Question 46

What was held in Morgan Crucible Co plc v Hill Samuel Bank Ltd?

Answer 46

A duty can exist in a factual situation but where the financial accounts had been revealed to an identified bidder

Question 47

What was held in James McNaughton Paper Group Ltd v Hicks Anderson & Co?

Answer 47

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.

Question 48

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?

Answer 48

1. Purpose for which the statement was made
2. Purpose for which it was communicated
3. State of knowledge of the maker of the statement
4. Size of the class to which the recipient belonged
5. Relationship between the maker, recipient and any third party
6. Reliance by the recipient

Question 49

What was held in the case of Customs and Excise Commissioners v Barclays Bank plc?

Answer 49

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

Question 50

What was held in the case of Spring v Guardian Assurance plc?

Answer 50

A duty of care was based on an assumption of responsibility by the defendant and close relationship between the parties

Question 51

What was held in White v Jones?

Answer 51

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.