Candler v Crane - Detailed case brief, including paragraphs and page references Topic: Negligence PDF

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Detailed case brief, including paragraphs and page references
Topic: Negligence...

Description

Candler v Crane, Christmas and Co Area of law concerned:

Negligent Misstatement

Court:

Court of Appeal (England)

Date:

1951

Judge:

Denning LJ (dissent), Asquith LJ

Counsel:

Mr Foster for the defendants

Summary of Facts:

Plaintiff invested in a company in reliance on accounts produced by the defendant, who had been told that he would use them as a basis for his investment. The accounts had overstated the value of the company and after its collapse the plaintiff sued to recover both his original investment and subsequent investment.

Relief sought: Issues:

Did the accountants owe a duty of care to the plaintiff?

Relevant Statute(s): Procedural History: Plaintiff/Appellant’s arguments

Defendant/Respondent’s arguments:

Although there was no contract between the plaintiff and the accountants, nevertheless the relationship between them was so close and direct that the accountants did owe a duty of care to him within the principles stated in Donoghue v Stevenson. The duty owed was a purely contractual duty owed by them to the company, and therefore they were not liable for negligence to a person to whom they were under no contractual duty.

Result: Judge’s reasoning:

Donoghue v Stevenson ‘exploded’ an error of law that existed up till then, deciding that the presence of a contract did not defeat an action for negligence by a third person, provided that the circumstances disclosed a duty by the contracting party to him An error resolved by Donoghue 394

The second error was from Derry which stated that no action ever lies for a negligent statement even though it is intended to be acted on by the plaintiff and is in fact acted on by him to his loss Existence of negligent misstatement 394

The defendant’s first submission is that a duty to be careful in making statements arose only out of a contractual duty to the plaintiff or a fiduciary relationship to him. This is a bad argument because the categories to negligence are never closed. Bottom 394 to top 395

The second submission is that a duty to take care only arose where the result of a failure to take care will cause physical damage to persons or

property. I must say, I cannot accept this as a valid distinction. I can understand that in some cases of financial loss there may not be sufficient proximity, but, if once the duty exists, I cannot think that liability depends on the nature of the damage. Nature of damage is irrelevant.

395

Let me now suggest the circumstances in which I say that a duty to use care in statement does exist outside of contract: What persons are under such duty? My answer is that persons such as accountants, whose profession is to examine books, accounts, and other things, and to make reports on which other people- other than their clients, rely in the ordinary course of business. Their duty is not merely a duty to use care in their reports. They also have a duty to use care in their work which results in their reports. Who owes such a duty? 395.

Promoters and stuff don’t count bottom 395

To whom do these people owe the duty? They owe their duty to their employer or client, and also I think to any third person to whom they themselves show the accounts, or to whom they know their employer is going to show the accounts, so as to induce him to invest money or take some other action on them. Clients/employers. Third parties that they know are going to see it. 396

But I do not think the duty can be extended still further so as to include strangers of whom they have heard nothing and to whom their employer without their knowledge may choose to show their accounts. Once the accountants have handed their accounts to their employer they are not, as a rule, responsible for what he does with them without their knowledge or consent. 396

Proximity: did the accountants know that the accounts were required for submission to the plaintiff and use by him? It extends, I think, only to those transactions for which the accountants knew their accounts were required. For instance, in the present case it extends to the original investment of 2000 pounds which the plaintiff made in reliance on the accounts, because the accountants knew that the accounts were required for his guidance in making that investment; but it does not extend to the subsequent 200 pounds which he made after two months with the company. Top 397

I can well understand that it would be going too far to make an accountant liable to any person in the land who chooses to rely on the

accounts in matters of business, for that would expose him to ‘liability in an indeterminate amount for an indeterminate time to an indeterminate class’ Can’t be liable to the world 397

My conclusion is that a duty to use care in statement is recognised by English law, and that its recognition does not create any dangerous precedent when it is remembered that it is limited in respect of the persons by whom and to whom it is owed and the transactions to which it applies. Existence of negligent statement

Lord Asquith (majority)

I would therefore be in favour of allowing the appeal and entering judgment for the plaintiff for 2000 pounds of damages. Must find in support of the defendants. Authority in Le Lievre v Gould is binding on this court, unless it can be shown to have been overruled or distinguishable. Professor Winfield: a marine hydrographer carelessly omits to indicate on his map the existence of a reef. The captain of the Queen Mary, in reliance on the map and having no opportunity of checking it by reference to any other map, steers her onto the unsuspected rocks, and she becomes a total loss. Is the unfortunate cartographer to be liable to her owners in negligence for some millions of pounds damages? If so, people will, in future, think twice before making maps. Cartography would become an ultra-hazardous occupation. Yet what line can be drawn between map maker and the defendants in the present case? The big problem with this case. (My argument- map maker commissioned by QM’s owners?) 398

In the present state of our law different rules still seem to apply to the negligent misstatement on the one hand and to the negligent circulation or repair of chattels on the other; and Donoghue’s case does not seem to me to have abolished these differences. 399 top

If this relegates me to the company of ‘timorous souls’, I must face that consequence with such fortitude as I can command. Appeal dismissed. LOL...