Economic Loss (Negligent Misstatement)

Question 1

Types of Economic Loss

Answer 1

Consequential Economic Loss:
- Loss of money, direct consequence of physical damage caused by negligent acts.
- The loss IS recoverable (Spartan Steel v Martin).

Pure Economic Loss:
- Loss of money, not consequential of any physical injury or damage to the C.
- You cannot claim this under tort (Spartan Steel v Martin.)

Negligent Misstatement

Question 2

Definition of Negligent Misstatement

Answer 2

D makes a statement, the C relies on this, and loses money as a result.
Hedley Byrne v Heller set out the following conditions, that give rise to a special relationship between the two parties (Caparo v Dickman).

Question 3

Stage 1 of Negligent Misstatement

Answer 3

Does the D possess any special skill relating to the advice given?
- This is based on the D and the reliance placed upon it by the C.

Side Rule Social Situations (Chaudhry v Prabhaker)

Question 4

Stage 2 of Negligent Misstatement

Answer 4

D knows it is highly likely for the C to rely on the advice.

Mutual Life v Evatt stated a duty arises when the D is in the business of giving that advice, or professed to have a special skill in the field the advice was given. The D must know the C will rely on it.

Question 5

Stage 3 of Negligent Misstatement

Answer 5

The C relies on the D’s advice and suffers financial loss.

Question 6

Stage 4 of Negligent Misstatement

Answer 6

It must be reasonable for the C to rely on the advice.

Caparo V Dickman stated if there is proximity between the C and the D, it is more reasonable to rely on the advice.

If the D is in a position of authority, then it is more reasonable to rely on the advice (White v Jones).

Side Rule: Voluntary assumption of a duty (Hedley Byrne v Heller).