Negligent Misstatement

LAW435 – TORT OF NEGLIGENCE

INTRODUCTION
• = when defendant’s misstatement caused plaintiff
who relied on statement to suffer pure economic
loss.

• Economic loss & Pure economic loss

CANDLER v CRANE, CHRISTMAS & CO [1951]
• Held:
HEDLEY BYRNE v HELLER & PARTNERS (1963)
• Facts of case.
• Held:
• House of Lords : (obiter) in appropriate circumstances,
there could be a duty of care to give advice. Failure to do
so would be a breach and give rise to a claim in
negligence. The fact that it was a claim for pure
economic loss was irrelevant.

• Lord Morris : “I consider that…it should now be

regarded as settled that if someone possessed of a special
skill undertakes,.., to apply that skill for the assistance of
another person who relies on such skill, a duty of care
will arise.”
(i) Special Relationship
• Mutual Life and Citizens’ Assurance Co Ltd v Evatt
[1971] AC 793
• when def was in the business of giving advice or
had claimed to possess the necessary skill.

• Esso Petroleum v Mardon [1976]

• Chaudry v Prabakar (1989)

▫ statement made during social occasions.
• Examples of relevant factors:
▫ contract / relationship akin to a contract
▫ formality of transaction
▫ defendant’s skill & expertise
(ii) a voluntary assumption of responsibility by the
party giving the advice

• Hedley Byrne & Co Ltd v Heller & Partners Ltd

[1963] - disclaimer
• Smith v Eric S Bush [1990]
• CIMB Bank Berhad v Anthony Lawrence Bourke
and Anor [2018] 1 LNS 1887
•
• Lord Reid :
• “A reasonable man, knowing that he was being trusted
or that his skill and judgment were being relied on,
would, I think, have three courses open to him. He
could keep silent or decline to give the information or
advice sought: or he could give an answer with a clear
qualification that he accepted no responsibility for it or
that it was given without that reflection or inquiry
which a careful answer would require: or he could
simply answer without any such qualification. If he
chooses to adopt the last course he must, I think, be
held to have accepted some responsibility for his
answer being given carefully, or to have accepted a
relationship with the inquirer which requires him to
exercise such care as the circumstances require.”
(iii) the plaintiff relied on the defendant’s skill
and judgment

• KGV & Associates Sdn Bhd v The Co-Operative

Central Bank Ltd [2006]5 MLJ 513

• Smith v Eric S Bush [1990]

(iv) it was reasonable for the plaintiff to rely on
the defendant’s advice

• Smith v Eric S Bush [1990]

CAPARO INDUSTRIES plc v DICKMAN and OTHERS
[1990] 2 AC 605
• Facts of case:
• Held:
• per Lord Bridge :
“To hold the maker of the statement to be under a
duty of care in respect of the accuracy of the
statement to all and sundry for any purpose for
which they may choose to rely on it is not only to
subject him, in the classic words of Cardozo CJ to
"liability in an indeterminate amount for an
indeterminate time to an indeterminate class:" see
Ultramares Corporation v. Touche (1931); it is also
to confer on the world at large a quite unwarranted
entitlement to appropriate for their own purposes
the benefit of the expert knowledge or professional
expertise attributed to the maker of the statement.”
• per Lord Oliver
• “What can be deduced from the Hedley Byrne case,
therefore, is that the necessary relationship between
the maker of a statement or giver of advice ("the
adviser") and the recipient who acts in reliance upon
it ("the advisee") may typically be held to exist
where

• (1) the advice is required for a purpose, whether

particularly specified or generally described, which
is made known, either actually or inferentially, to
the adviser at the time when the advice is given;
• (2) the adviser knows, either actually or
inferentially, that his advice will be communicated
to the advisee, either specifically or as a member of
an ascertainable class, in order that it should be
used by the advisee for that purpose;
• (3) it is known either actually or inferentially, that the
advice so communicated is likely to be acted upon by
the advisee for that purpose without independent
inquiry, and
• (4) it is so acted upon by the advisee to his
detriment.
• That is not, of course, to suggest that these
conditions are either conclusive or exclusive, but
merely that the actual decision in the case does not
warrant any broader propositions.”
the end