Negligent Misstatement PDF

Preview

Summary

Negligent Misstatement...

Description

Negligence Misstatement Mini Summary  Duty of care in respect of advice owed: “…whenever a person gives information or advice … upon a serious business matter … and the relationship … arising out of the circumstances is such that on the one hand the speaker realises or ought to realise that he is being trusted … to give the best of his information or advice as a basis of action on the part of another party and it is reasonable in the circumstances for the other party to seek or accept and in either case to act upon that information and advice.”  3 limbs to test negligent misstatement.  Statement made honestly but negligently Candler v Crane Christmas & Co. [1951] 2 KB 164: -

-

An accountant of a company carelessly prepared accounts and, at the company’s request, then showed them to and discussed them with a person whom he knew proposed to invest in the company. Less than a year later the company was wound up and the plaintiff investor lost the whole of his money. Question was whether D either himself showed the P the accounts or knew that they would be shown to him? (KNOWLEDGE)

Hedley Byrne v Heller [1964] AC 465: -

-

-

The P was an advertising agency intending to place TV and newspaper ads on behalf of a company called Easipower. The P was to personally guarantee the payment of the advertising accounts. Before placing ads, the P asked its bank to make inquiries as to the financial standing of Easipower. P’s bank made both written and telephone inquiries of Easipower's bank, the D merchant bank. Both the verbal and written responses to these inquiries said that Easipower was good for "ordinary business arrangements". In both the telephone and written requests, the P's bank offered to receive the information without liability on the part of the D merchant bank. The D merchant bank repeated this disclaimer in its response to their requests for information. The information given was, in fact, inaccurate. Easipower went into liquidation and the P advertising agency lost £17,000. Is there a duty of care owed?

 So if negligent misstatements can result in liability what will be the criteria for this new category? (Lord Reid): - there must be something more than the mere misstatement, namely, that ‘expressly or by implication from the circumstances the speaker or writer has undertaken some responsibility’ (ASSUMPTION OF RESPONSIBILITY & RELIANCE) - When someone offers information or advice when he knew or ought to have known that the inquirer is relying on him he or she has a responsibility to give a careful answer. (KNOWLEDGE OF RELIANCE) - Summary? After Hedley Byrne

 The law will, in certain circumstances, recognise the existence of a duty of care governing the making of statements; and  A negligent, though honest, misstatement may give rise to an action in damages apart from contract and in the absence of a fiduciary relationship.  SPECIAL SKILLS CASE: MLC v Evatt (1968) 122 CLR 556: - The P sought advice from the D insurance company. The company in which the P intended to invest was a co-subsidiary of the company from which he sought advice. The D company negligently advised that its co-subsidiary was a sound investment which it was not. Acting on this advice the P invested money which he lost. The P sued the D insurance company claiming its negligent advice had caused his loss. - Outcome?  PROVISION OF MERE INFORMATION CASE: Shaddock v Parramatta City Council (1981) 150 CLR 225: - The P company intended to purchase land. Its solicitor telephoned the D council and asked if there were any road widening proposals that might affect the land. He was told there weren't. Later he made a written application for a certificate and appended a written inquiry as to whether the land was affected by any road widening proposals. - While the Council was under a statutory obligation to issue the certificate it was under no such obligation to respond to the inquiry. However, over a significant period of time it had followed the practice of answering such inquiries and making an endorsement if it was affected. The Council failed to endorse and the land was affected. - Outcome?  Something published to the world/brochure or development plans Case: San Sebastian v the Minister … (1986) 162 CLR 341: - In the 1960's the SPA NSW prepared some proposals for the redevelopment of Woolloomooloo. They were put on display by the SPA and the Sydney City Council and showed a plan for the redevelopment of the area that involved encouraging developers to buy up land in the area with a view to constructing high density office blocks. The plan had no binding effect on the council and it was abandoned in 1972. - The P companies bought up land in the area with a view to development in accordance with the plan. When they were abandoned the Ps suffered a financial loss. They brought an action against the Minister for Planning and the Sydney City Council. - Outcome? Cases relevant to degree of knowledge defendant possesses or holds himself out as possessing (post MLC v Evatt): -

Presser v Caldwell Estates (1971) 2 NSWLR 471. Richardson v Norris Smith Real Estate (1977) 1 NZLR 152. Esso Petroleum v Mardon (1976) 1 QB 801. Roots v Oentory (1983) 2 Qd R 745.

Esanda Finance Corp Ltd v Peat Marwick Hungerford (1997) 188 CLR 15

 Deals with the liability of auditors to third parties such as investors in, or creditors of, the audited company, as distinct from those to whom an auditor owes a primary responsibility, namely the company and its shareholders.  The High Court held unanimously that mere foreseeability of the plaintiff’s reliance is not a sufficient basis for the imposition of liability;  A majority of the members of the court seemed to accept that the plaintiff would have to show that the defendant auditor had knowledge or constructive knowledge of the particular purpose for which the plaintiff intended to use the accounts (ie, to invest).  The decision dispelled the view that, because there was no antecedent request on the part of the plaintiff, liability could only arise on the basis of the San Sebastian intention test, a view which had been taken in a number of earlier State Supreme court cases.

Tepko Pty Ltd v Water Board (2001) 178 ALR 634  The proposed developer of land sought an estimate of the cost of providing water to the land from the Water Board, only possible source of info.  Board reluctantly gave a ‘ball park’ figure. It was excessively high and development didn’t proceed. High Court held 4-3 that Board owed no duty to provide accurate figure. Court acknowledged if owed they were negligent: at 68. However, court felt here reliance was not reasonable at 87/88.  Outcome?  Lawless v Mackendrick [No.4] [2013] WASC 272. Barwick Test  The speaker realises or ought to realise that the recipient of the information and advice is relying on his or her skill and judgment; (KNOWLEDGE THAT RECIPIENT RELYING on skill/judgment).  The speaker realises or ought to realise that the recipient intends to act upon the information and advice in respect of his or her property or in connection with a matter of serious or business consequence; (KNOWLEDGE OF INTENTION TO ACT in a SERIOUS CONTEXT).  The recipient’s reliance upon the information or advice provided by the speaker was reasonable. (REASONABLE RELIANCE ie the reliance must be reasonable in the circumstances). Negligent Misstatement  What do you think about the effectiveness of disclaimers?  Can the Australian Consumer Law help in this regard (Competition and Consumer Act 2010 (Cth))?  Sec 18 of ACL = silence and misleading and deceptive conduct....