Negligent Misstatement

Question 1

Negligent misstatement plan

Answer 1

Generally, no DoC is owed to avoid a purely economic loss, but where the economic loss is caused by negligent misstatement (rather than negligent act), liability may be imposed and damages can be recovered albeit on a restricted basis, where a special relationship exists (to avoid floodgates opening) - Spartan Steel and Alloys Ltd v Martin

Economic loss:
- Consequential - directly resulting from personal injury or physcial damage to property
- generally recoverable
- Pure - result of the negligent misstatement of another party which is 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 established that a D owes a duty of care 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) the D who made the statement possesses some special skill/expertise related to the statement - Chaudhry v Prabhakar
2) knows it is highly likely that the C will rely on the statement/should have forseen their reliance (voluntary assumption of reliability) - Caparo v Dickman, Patchett v SPATA
3) the C reasonably relies upon it, thereby incurring financial loss

Question 2

Spartan Steel and Alloys Ltd v Martin

Answer 2

General liability/DoC

Recovery of damages for pure economic loss was not permitted as a ‘matter of policy so as to limit the liability of the D’ - Lord Denning

Question 3

Chaudhry v Prabhakar

Answer 3

Special skill/expertise

The C believed the D was knowledgeable any cars, therefore relied on his advice

Question 4

Caparo v Dickman

Answer 4

Reliance

The D had no knowledge of C’s reliance nor existence.

Question 5

Smith v Bush

Answer 5

Third parties

Extended the DoC for negligent misstatement to third parties who are not parties to a contract nor recipients of advice.

Question 6

Patchett v SPATA

Answer 6

Special relationship

There was not sufficient proximity between the parties to give rise to a DoC