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Negligent Misstatement - Coggle Diagram
Negligent Misstatement
Basics
- A false statement of fact made honestly, but carelessly
- It is only actionable in tort if there's a breach of DOC in making the statement that caused damage to claimant
Derry v Peek (1889) [pre-Hedley Bryne v Heller]:
- Facts: Claimant (Peek) saw the prospectus that predicted there would be great savings + profitability. After reading the prospectus claimant bought shares. But during that time, the Board of Trade only allowed the company to use steam/mechanical power on certain parts of the track. Due to this, company folded. Claimant brough a suit against Derry (boss of the company) for fraudulent misrepresentation
- Held: No liability in deceit for misstatements because there was no fraud. Nothing short of fraud will enable the claimant to claim damages
- If there is no fiduciary relationship/contractual relationship, there is no DOC to claimant
Hedley Bryne v Heller (1964):
- Facts: Claimant (Hedley) are advertising agents who provide substantial amounts of advertising to Easipower. If Easipower did not pay, they claimant will be responsible for such amounts. Clamant became worried that Easipower will not be able to pay for it, and claimant sought assurances from the Easipower's bank that they are able to pay for it. The defendant (Easipower's bank) assured claimant that Easipower is able to pay for it but said that the report was "Confidential. For your private use and without responsibility on the part of the bank or its officials". Claimant relied on the report but eventually resulted in a loss. Claimant brought action against defendant under tort of negligence.
- Held: HoL held that the defendant had effectively disclaimed any assumption of DOC through their disclaimer letter, thus not liable
1. Special relationship between parties (non-contractual/fiduciary):
- Per Lord Reid - "It is plain that the party seeking information/advice was trusting the other to exercise such a degree of care as the circumstance needed, where it was reasonable for him to that, and where the other gave the information when he ought to have that the enquirer was relying on him
- Lord Reid on "special relationships" requirements that only covers situations in a business context - "There can be no DOC when an opinion is relied upon, without taking care which they would have for a professional opinion
Esso Petroleum v Mardon (1976):
- Facts: Claimant leased a petrol station on strength of Esso's advice that he could be expected to sell at least 200,000 gallons a year. But he only managed to sell 78,000 gallons in 15 months.
- Held: CA held that, in making the prediction, the petrol company assumed responsibility to Mr Mardon, and he had relied on their experience in the petrol market. Defendant (Esso) liable.
2. Voluntary assumption of responsibility:
- Per Lord Reid, a person asked for advice in a business context has 3 choices: give no advice / choose to give advice but warn them it should not be relied on / give advice without such warning
- Someone who chooses the 3rd option has voluntarily assumed responsibility for that advice
Dean v Allin & Watts (2001):
- Facts: Claimant was approached by 2 borrowers seeking funding for their property funding where the claimant agreed to lend them $20,000. The borrowers suggested that their solicitors draw up the necessary documentation and met all the legal costs. Claimant also made it clear that he's not involving his solicitor. The solicitor made advised that the security could be dealt by way of deposit of the deed to the property. He was wrong and the deeds did not give the claimant rights to the property. Eventually the borrowers defaulted on the loan, the mistake was found and now the claimant had no property + his property.
- Held: CA held that the knowing the claimant was not taking independent advice, the defendant knew that the claimant was relying on him and therefore in continuing the act, without recommending the claimant to take independent advice, he is assuming a responsibility for him. Hence, defendant liable.
3. Reliance on the party receiving it:
- The claimant must depend on the defendant using the particular skill/experience required for the task which the defendant had undertaken
4. It must be reasonable for that party to have relied on that advice:
- Per Lord Bridge: A statement that is put into more or less general circulation and may foreseeably be relied upon by strangers to the maker of the statement, for any one of a variety of purposes which the maker of the statement has no specific reason to contemplate
Reeman v Department of Transport (1997):
- Facts: Claimant owned a fishing boat that required annual certificate of seaworthiness from Department of Transport (DoT). The boat was covered by a certificate but later discovered that the surveyor who inspected for the DoT is negligent. The certificate should not have been given the certificate and renewed, making the boat useless
- Held: The provision of information for a specific purposes cannot be used for another purpose. The purpose for the certificate was to promote safety and not establish commercial value. Also, the class of persons likely to rely on the statement has to be able to ascertain the time and reason the statement was made. The claim failed because the claimant only wanted to rely on the statement economically and not for its true purpose
1. Special relationship between parties (non contractual)
2. Assume some responsibility by reason of knowledge/skill
3. Recipient relied on this knowledge and suffered economic loss
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