Negligent Misstatement Flashcards
(6 cards)
Negligent misstatement plan
- Generally, no DoC is owed to avoid a pure economic loss, but where the economic loss is caused by negligent misstatement (rather than negligent act), liability may be imposed - Spartan Steel and Alloys Ltd v Martin
- Here, damages can be recovered albeit on a restricted basis, where a special relationship exists (to avoid floodgates opening)
Economic loss:
- Consequential - directly resulting from personal injury or physical damage to property (generally recoverable)
- Pure - result of the negligent misstatement, not accompanied by any personal injury or physical damage to property
- only recoverable if DoC established - restrictive nature (not automatically assumed and arises in specific circumstances)
Hedley Byrne and Co Ltd v Heller and Partners Ltd - D owes a DoC to the C in the making of a statement (eg advice) only if there’s a ‘special relationship’ with reasonable reliance between them - Smith v Bush
The elements for this are:
1) D who made the statement possesses some special skill/expertise related to the statement - Chaudhry v Prabhakar
2) knows it’s highly likely C will rely on the statement/should’ve forseen their reliance (voluntary assumption of reliability) - Caparo v Dickman, Patchett v SPATA
3) the C reasonably relies upon it, thereby incurring financial loss
Spartan Steel and Alloys Ltd v Martin
General liability/DoC
Pure economic loss (not a consequence of physical damage) isn’t recoverable in negligence
Chaudhry v Prabhakar
Special skill/expertise
C believed the D was knowledgeable any cars, therefore relied on his advice
Caparo v Dickman
Reliance
D had no knowledge of C’s reliance nor existence
Smith v Bush
Third parties
Extended the DoC for negligent misstatement to third parties who aren’t direct recipients of the advice
Patchett v SPATA
Special relationship
No sufficient proximity between the parties to give rise to a special relationship or DoC
