Pure Economic Loss (Negligent Misstatement)

Question 1

What is the first paragraph of the Pure Economic Loss model answer?

Answer 1

A claimant can claim for pure economic loss caused by negligent misstatement provided a duty of care exists (Hedley Byrne v Heller). Here, there is evidence of a negligent misstatement as (state the bad advice D gave to C and what it led to).

Caparo states that four things will need to be established in order for a special relationship to exist:

Question 2

Step one:

Answer 2

Firstly, D must have a special skill or expertise. This can include where the defendant has a recognised qualification, or the defendant acts as if they they have special knowledge or skills in the field in which the advice is being given (Mutual life and Citizens Assurance v Evatt). Here, it could be argued that D has special skill as…

(If relevant, if the advice was given for free and the fact that they are friends may suggest that this a purely social relationship. A social relationship does not normally give rise to a duty of care but does when advice was being sought from a party with some expertise (Chaudhry v Prabhaker). Here, (state how D presented themself as having expertise).

Question 3

Step two:

Answer 3

Secondly, D must voluntarily assume responsibility for giving advice. This means that they have failed to give a disclaimer or promote seeking secondary advice. Where D has accepted the role to provide advice for C, they have voluntarily assumed responsibility.,
Here, D has assumed responsibility for giving advice because…. (state whether D provided a disclaimer or not / accepted a job in which they are required to give advice).

Question 4

Step Three:

Answer 4

Next, D must know C would rely on the advice and it was reasonable to rely on said advice (Caparo). If the reliance is foreseeable it will be reasonable. It won’t be foreseeable if the claimant belongs to an extremely large group of potential claimants (Goodwill). Where a large amount of money is involved, it is more likely that duty is owed. Less likely in social setting, still a possibility though.

Here, D knows that C will rely on the advice because (eg. has C made the reason clear for why they are requesting the advice?). It is also reasonable to rely on the advice because… (state why it would be reasonable),

Question 5

Step Four:

Answer 5

It must be established that C relied on the advice to their detriment.
Here, it can be shown that C has certainly relied on the advice to their detriment because.. (state what C’s loss is).

It appears that the four-part test is satisfied, therefore D owed a duty of care towards C.

Question 6

Now discuss Breach and Damage:

Answer 6

Breach reasonable man - For breach, D would be compared to x. He has fallen below this standard when he (state error in advice given)

Damage does breach cause damage - D’s breach caused the damage (the economic loss) therefore C could claim damages for economic loss.