#2290 - Economic Loss Caused By Negligent Misstatements And Services - Tort Law

Economic Loss caused by negligent misstatements and services

Requirements for Hedley Byrne liability

Actionable Damage

Duty of Care

• Policy: Actionable Misstatement

  • Express Statement of Fact

    • May either be a partial statement which is true in itself but neglects relevant material that changes the accuracy of the whole statement

      • E.g. Used Car Salesman

        • Making a partial statement, true in itself e.g. tires are good

          • But withholding information that changes nature of the disclosure e.g. major engine damage

        • You need full disclosure, not partial disclosure

        • You can’t be economical with the truth

    • OR a statement that purports to be whole but is completely or partially inaccurate

  • OR Opinion impliedly backed up by facts

    • An opinion, underpinned by fact in that the representor believes it to be true and suggests he knows facts that justify this opinion

      • Where in fact, if representor had made proper inquiries into the facts, his opinion would be different.

  • Which is not intended to cause loss

    • This falls under Fraud

• Foreseeability: D ought to have foreseen that C will rely on the advice

  • Lord Morris in Hedley Bryne

    • If in a sphere in which D is placed that others could reasonably rely upon his judgment ... to make careful inquiry,

      • D takes it upon himself to give information or advice to,

      • or allows his information or advice to be passed on to,

        • C who, as he knows or should know, will place reliance upon it,

          • then a duty of care will arise

• Proximity: And there both exists a special relationship between C and D

  • Much tighter than mere foreseeability that Z may rely on your words

    • You don’t need a contractual relationship

      • But you do need a sufficiently “proximate” one

      • Lord Devlin: where the relationship is one akin to contract

        • Or a contract would arise but for the lack of consideration

      • Lord Reid:

        • where it is plain that advisee was trusting advisor to exercise such a degree of care as the circumstances required,

          • and where advisor gave the information or advice when he knew or ought to have known that the inquirer was relying on him

    • Caparo v Dickman [1990]

      • Lord Bridge:

        • D has to be fully aware of the nature of the transaction C had in mind

          • And that the advice will be communicated to C

            • And that C will then act in the specified way on the advice

        • Statements put into general circulation

          • Even if it might be foreseen strangers would rely on it

            • Can’t find liability

              • Otherwise loads of people would have claims for losses from professional advice they had not paid for

Breach of Duty

• D has assumed some responsibility for the advice

  • Lord Reid in Hedley Bryne:

    • Three steps open to a person being asked for advice

      • Could keep silent or decline to give the information or advice sought:

      • Could give an answer with clear qualification that he accepted no responsibility for it/given without reflection that careful answer requires

      • Could simply answer without any such qualification.

        • If the latter, must be held to have accepted some responsibility for his answer being given carefully.

• And a reasonable person in C’s position would have relied on D’s advice, taking into account:

  • A) the skill and position of the advisor to give advice

    • Esso v Mardon

      • M asked Esso to give him some advice – they mistakenly misinterpreted planning permission, and told M that if he leased said land for petrol stations, he’d get 200,000 gallons of oil sold per year. M instead sold 78,000 in 15 months.

      • Esso argued that they weren’t in the business of giving advice like accountants/lawyers

      • Ormrod LJ: if we only confined negligence for PEL to those in the position of professionally giving advice

        • We’d diminish the whole effect of Hedley Bryne

        • Should suffice that business people were giving business advice which C could reasonably expect would be carefully made having looked at the evidence.

  • B) Nature of the occasion

    • Lord Reid in Hedley Byrne: Professional people normally give advice casually even when they might foresee that people might take advice and rely on it

    • Lord Denning: off the cuff, unconsidered advice outside of professional situation excluded from the tort.

Causation

• Advice is relied upon by C at the time the statement was made meaning C suffers loss

  • Calvert v William Hill Credit Ltd [2009]:

    • And C wouldn’t have made a similar investment but for the advice given by D leading to similar losses.

Remoteness

Usual considerations

Defences

See below per Exclusion Clauses.

Negligent Provision of Services

Duty of Care

• Policy: Provision of Services

  • Spring v Guardian Assurance [1995]:

    • S = former employee of GA. Was dismissed when GA took over and needed a reference from his previous employer to get another insurance job

      • GA gave S a rubbish (and inaccurate) reference making serious aspersions on his character.

        • Case concerned not words negligently spoken to C by D

          • BUT words negligently spoken about C to X by D

  • Lord Goff: Hedley Byrne only concerned with advice

    • But principle not limited

    • Could extend to professional services where C trusts conduct of affairs to D

• Foreseeability: Reasonably foreseeable that acting in such a way will lead to people suffering loss

• Proximity: D assumes responsibility for C’s affairs

  • D must know/ought to know that he has assumed responsibility for affairs

  • Henderson v Merrett Syndicates Ltd [1995]:

    • Lloyd’s of London – gets people to by underwrite risks of giving insurance by having “The Names invest in insurance markets around the world

      • Indirect names had only contract with underwriting agents and not managing agents, so sued managing agents in tort for losses.

    • Lord Goff:

      • Stresses need for reliance

      • And for evidence to support that D is running C’s affairs

        • Before there is a duty to take care

  • Williams and Reid v Natural Health Foods Ltd and Mistlin [1998]:

    • Lord Steyn: Not enough just to show could have been a special relationship between C and D

      • Also have to show that D has actually assumed responsibility to conduct C’s affairs.

        • Test is whether C could reasonably believe that D had been made responsible for the advice and projections.

          • And to support this belief, need contact and exchanges that imply this responsibility

  • And that this assumption is towards C

    • West Bromwich Albion FC Ltd v El-Safty [2006]:

      • E advised player X: have operation on knee instead of physio. Advice communicated to club and physios. As a result of advice + operation, X’s career brought to an end and WBA sued for PEL.

        • Held CoA: Assumption of Responsibility was not to WBA but to the player, as the surgeon’s concern was only with the patient’s best interests.

          • Therefore no assumption to the Club so not liable for PEL.

          • Although player could sue for consequential personal losses from the personal injury from the negligent advice.

Breach of Duty

Normal considerations apply per Lord Reid in Bolton v Stone

• E.g. Likelihood of loss

  • Foreseeability of loss to C

  • Burden on D of taking any precautions/taking remedial action

Causation

• But for D’s conduct, C would not have suffered loss

  • Calvert v William Hill Credit Ltd [2009]:

    • Unless C would have made similar losses despite the negligent provision of services by D

      • E.g cos C is a compulsive gambler, and despite not shutting down one of his accounts leading to his losses, he would have opened different ones elsewhere and made the same losses.

Remoteness

• No personal assumption of responsibility over corporate w/o evidence

  • Williams and Reid v Natural Health Foods Ltd and Mistlin [1998]: W and R entered deal to fund Health Shop as part of franchise on advice of HFs -> given report -> led to economic loss. HFs went bust, so W and R tried to sue manager, as it had been his experience and opinion that he led to the report being compiled.

    • Lord Steyn: A one man company, which derives all its experience from its one-man managing director

      • Does not necessarily imply that the managing director will become personally liable for any loss derived from the negligent advice the “company” gives from his experience.

        • In absence of other strong evidence, should not presume managing director wishes to become personally liable for any negligent advice given.

Defences?

• Exemption Clauses and disclaimers waiving liability

  • Smith v Bush [1990]:

  • Lord Griffths:

    • In general, disclaimer of liability at common law protects the person who issues it. Absence of contract probably protects V.

    • BUT UCTA s.2(2)

      • You can’t have an exemption clause against damage caused by negligence causing death full stop

        • And neither can to do so for property damage unless it is fair and reasonable for the person proposing the clause to have it

Exception to the Rule

• Whites v Jones [1995]: Dying client makes a will, but Solicitor is...