NEGLIGENT MISSTATEMENT

INTRODUCTION

Prior to Hedley Byrne v Heller (1964 HL) liability for negligent misstatement was not recognised by the courts o Policy issue: words can be spread far and wide o Again the spectre of indeterminate liability o Reasonable foreseeability creates too large a class of potential plaintiffs Hedley Byrne & Co v Heller P approached bank for reference as to financial position. Giving rise to a duty of care which included financial loss through entering a contract with the client on reliance of this information. Described the client as quite good for its engagements But not liable due to disclaimed without responsibility Mutual Life & Citizens Assurance Co v Evatt Life insurance company officers did not owe DoC to policy holder regarding statements about financial affairs of another company, the both companies sharing a parent company. No duty because the advice was not given: o in an exercise of business or professional skill possessed or claimed by the adviser, or possibly o where adviser had financial interest in advice being acted upon. Shaddock & Associates Pty Ltd v Parramatta CC However, what if there was no need for professional skill in provision of information. The city council assured over telephone there was no plans for road-widening scheme and provided a certificate which did not mention the existence of a scheme. In reality there was such a scheme. P suffered an economic loss when it became known to public. Unreasonable to rely on telephone call of unknown person But there was a breach of duty in relation to the certificate. Majority rejected Mutual in requiring an exercise of business or professional skill. However it seems difficult to establish reasonable foreseeability and reasonableness of reliance where an absence fo skill was known to the plaintiff. San Sabastian v The Minister SCC published plans of redevelopment. P relied upon plans which ultimately did not go ahead, there were no feasibility studies undertaken. Question of reasonable reliance which will depend upon the facts. o Request of information neither sufficient nor necessary to create reasonable reliance.

Where gives information intending to induce the representee to act on it the representor is under a DoC to give advice if three conditions are satisfied: Knows or ought to know rntee will trust his especial competence Reasonable for rntee to accept and rely Reasonably foreseeable rntee is likely to suffer a loss if information is incorrect or unsound Was it reasonable in this case? Need for flexibility But what was intent of publishing plans? Developers responsibility to make own judgements. Reasonable foreseeability and reasonable reliance often conflated Butcher v Lachlan Elder Reality The role of the person supplying information is relevant. The agent in this case did not purport to do anything more than pass on information supplied by vendor including a faulty survey diagram, Tepko v Waterboard T wanted to develop rural land outside of Sydney Needed water supply to land W agreed subject to T paying all of the connection costs T was in financial difficulties T sought estimate of costs from W to priovide to its bank, W initially refused W gave a ball park estimate of approx $2.5 million, bank foreclosed, costs actually much less Unreasonable for P to rely on the ball park figure Therefore unreasonable to impose a duty on the waterboard that was hesitant to provide estimate and when clearly provisional. Factors relevant: o Gravity of inquiry o Nature of relationship o Special skill or purported skill o Nature of subject matter o Reliance, reasonable reliance, actual reliance Context of interchange o Professional environment o Social context o Request for information

Other considerations: Gravity of inquiry

NEGLIGENT MISSTATEMENT
Voluntary assumption of responsibility Exclusion of responsibility Relationship based upon reliance Third party reliance BT Austarlia v Raine & Horne negligent valuation of property given to trustees, trustees purchased at overvalued price resulting in economic loss to the beneficiaries. Applied Hedley and Byrne recognizing the role of proximity and hence found a duty of care.

Gravity of the inquiry Howard Marine Co, turned out barges did not have sufficient capacity, person relied on memory in making representation. Couldnt fulfil contract. Voluntary assumption of responsibility and exclusion of responsibility Extent of relationship Nature of relationship is relevant, compare Tepko and San Sebastian Esanda Finance v Peat Marwick Hungerfords Auditors certified Excels accounts and E relied upon them in deciding to enter arrangements with Excel. Excel went into receivership causing economic loss Foreseeability of loss is insufficient. This case was different in that the information was given to one and then passed onto a third party, must prove: o Statement given on basis that would be conveyed o The purpose of conveying was to be relied upon by third party o Third party was likely to act on creating a risk of loss There was: o No request for information o Nor intention to induce Therefore a maker of statement will generally not owe a duty to anyone other than the immediate recipient of the information unless are Aware of the recipient and the use they will make of information.

CONTRACTUAL OBLIGATIONS TO THIRD PARTY

Bryan v Maloney B built a house form first owner which was purchased 7 years later by M. Cracks formed costing $34,000 to repair. Cracks were due to inadequacy of foundations that D was negligent for in laying inadequate footings. Pure economic cost because house was not damaged but always defective Whether a duty of care exists depends upon whether a proximate relationship exists. Relied upon breach of obligations to original owners (contract) Mere non-compliance with the contract would not create a duty in tort Here there was a breach of a fundamental obligation to build a sound house Woolcock Street Investments v CDG Pty Ltd Limited Bryan Commercial building Consulting engineers designed the foundations Recommendations of a geotechnical investigation refused, so building continued without it Building then sold to P without warranty of absence of defects and no assignment of rights to purchasers Damage to building from settling of foundations Held no duty of care owed by respondent: Gave little weight to proximity o Preferred vulnerability reliance and foreseeability Where pure economic loss exists the issue is: o Causation and foreseeability are not sufficient Here no vulnerability as original builders had declined surveys Commercial purchasers could have ordered and paid for their own investigations Salient Factors: Foreseeability Vulnerability Assumption of responsibility Known reliance or dependence.

Caparo Audit report was for the purpose of giving information to company and shareholders not potential investors.

THREE PARTY SITUATION

A makes a statement to B which B acts on to Cs loss Ross v Caunters P was a beneficiary under will but missed out due to solicitors negligence. Found a duty of care and hence solicitor was liable in negligence.

NEGLIGENT MISSTATEMENT
Disclaimers Not determinative May operate to exclude duty of care MLC v Evatt: Barwick CJ (obiter): presence of disclaimer one factor to consider in determining if a duty of care should exist Has the disclaimer been brought to Ps attention? If plaintiff can prove that he would not have entered into the transaction at all the paintiff is entitled to damages for the loss of the use of the money invested: Swingcastle v Gibson.

LEGISLATION IMPOSING LIABILITY

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VOLUNTARY UNDERTAKINGS FAILURE TO WARN

In what circumstances is there a duty to speak? Where a person has offered to give advice about a particular transaction, this must be full enough to enable to plaintiff to understand the effect of any obligations undertaken Cornish v Midland Bank Difference between where they are providing information or advice. There is no duty to warn of all the risks where you are giving information about an investment. Royal Bank Trust Co v Pampellone. Duty to speak where without negligence a statement is made which is later discovered to be incorrect.

S 18 Australian Consumer Law 2010: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive No need to prove that D intended to mislead P No need to establish a duty of care/ breach Not limited by foreseeability issues S52(1) of TPA 1974 (Cth) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or decive. S82(1) Allows for action to be brought for loss or damage suffered. This creates a tort of engaging in misleading or deceptive conduct. Limited to corporations Engaging in trade and commerce. Broader in that: No need for a special relationship Loss suffered only needs to arise by reason of the conduct and does not have to be foreseeable. Neither needs to be intentional or negligently engaged in.

Besides these two cases courts have refused to impose a positive duty to speak., without some assumption of responsibility. In England In Australia: Hawkins v Clayton some judges through a solicitor had a duty to inform executor of his appointment which was vital to validity of will. This has been connected with the contractual relationship between solicity and testatrix, reliance by latter on formers assumption of responsibility.

Misrepresentations Act 1972 (SA) Liability for making misrepresentations inducing the making of a contract between D and P.

DAMAGES

Based on putting plaintiff in position he or she would have been in but for the misstatement, not based on contractual expectations, i.e. had the statement been true: Where person acquires property in reliance on the statement, the measure of damages is the difference between the amount paid and the actual value: Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd Including consequential losses arising from the statement: Shaddock for example the cost of council and water rates based on inflated value.