Negligent Misstatement And Duty Of Care In Business Law

Issue 1: Whether Chloe can be imposed with duty of care against Peter?

Issue 1

Whether Chloe can be imposed with duty of care against Peter?

Law

The law of negligence is a tort law that imposes duty on the defendant to act so that no damage/loss is incurred to the plaintiff because of his acts (Donoghue v. Stevenson [1932]).

Negligent misstatements

A statement is considered to be negligently made when a statement is made by the defendant in good faith but without adequate care. The defendant is in a superior position than from the plaintiff because he possess with skill/knowledge upon which the plaintiff is relying. The defendant being aware of the fact that the plaintiff is relying on his sense of judgment made a statement carelessly. The plaintiff relied on the statement and suffers injury (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]. (Alexendar 2010)

Duty of care – When any defendant is making statement to the plaintiff, then, he must be assure that the statement that is made does not impact the plaintiff negatively. But, to prove duty there must be presence of two elements;

That the defendant and plaintiff must be in a proximate relationship so that the statement made by the defendant will impact the plaintiff directly (Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997). Also, that the plaintiff is resemble foreseeable and is not remotely present (Mutual Life and Citizens Assurance Co Ltd v Evatt (1968).

Application

Issue 1

Chloe is thinking to open a mediation studio. Before signing a 2 year lease she wanted to make sure that there was any structure mechanism scheduled near her intended premises as she wants a silence environment. She thus visited the Burnside Council.

It is submitted that Chloe shares a special relationship with the attendant of the council. The council is aware of the actual position of whether there are chances of any building work or not and Chloe is not aware of the same. Chloe is relying on the information provided by the attendant before entering into any contract.

It is submitted that since the attendants and Chloe are sharing special relationship, thus, the attends owns a duty against Chloe.

Conclusion

Thus, there is duty of care

Issue 2

Whether the duty is violated?

Law

Breach – It is necessary that the defendant must be aware that the plaintiff is relying on his sense of judgment and on the statements made by him before entering into any contractual relationship and the defendant has acted without adequate care resulting in breach. The duty is violated when the standard/level of precaution/care that is expected from the defendant is not met like a normal prudent man in the similar circumstances (Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009]

Application

The duty of care is not met by the attendant as when Chloe shared her concern with the attendant then the attendant checked the computer with superficial glance and submitted that there is no building work scheduled. So, the level of care that is expected from the attendant is not met.

Law

Conclusion

Thus, the level of care is not met by the attendant as expected from him in the given situation like a prudent man in the like situation.

Issue 3

Are there any damages caused because of breach of duty?

Law

Loss – The plaintiff must have suffered some kind of loss because of such reliance. The loss that is sustained by the plaintiff must be because of the misstatements made by the defendant (causation) and the loss so caused must not be remote in nature (remoteness) (Lindeman Ltd V Colvin [1946])

Special relationship – Once the duty is imposed which is breached by the defendant and loss is suffered, it is necessary to prove that both defendant and plaintiff share special relationship, that is: (Hocking 1999, p77)

That the defendant is at a superior position as he is having knowledge and skills;
That the plaintiff is not having the requisite knowledge and skill;
That the plaintiff is relying on the knowledge of the defendant;
That the advice/information that is provided by the defendant is an important matter of concern;
That the defendant is in the knowledge that the plaintiff is seeking his advice;
That the plaintiff has relied on the advice of the defendant.

In Shaddock& Associates Pty Ltd V Parramatta City Council [1981], the plaintiff intends to enter into some kind of property transaction and wants information regarding the road widening plan and thus relied on the advice of the defendant. The agent of the defendant submitted that the property is not covered under the road widening plan and thus he must go ahead with his contract. But, the plaintiff suffers injuries. It is sublimed that the agent and the plaintiff are in special relationship because the agent is aware that the plaintiff is relying on his advice before entering into contract and the advice furnished was made carelessly. Thus, the duty was held to be complying not in adequate manner making the agent negligent in his actions.

Further, San Sebastian Pty Ltd V Minister Adminstering The Enviromental Planning And Assessment Act (1986), when the parties are not sharing special relationship, then the defendant cannot be held liable for making any kind of negligent misstatement.

Application

Based on the advice, a 2 year lease signed is sign by Chloe. But, after 6 months a major construction work started. The noise has caused problem to Chloe to carry out his work. She suffered nervous disorder.

Thus, because of breach of duty of care loss is caused to the Chloe. However, the council is not liable for the nervous disorder of Chloe as the loss is too remote.

Conclusion

Thus, the council is negligent for the negligent miss -statements made by the attendant.

Issue 4

Whether Chloe can sue Burnside Council for his nervous disorder?

Law

When any act of negligence is caused then it is necessary that the acts of the defendant must have caused loss to the plaintiff. It is necessary that there is legal duty of care imposed upon the defendant who is not complying with by him resulting in loss to the plaintiff.

However, there are two elements to be proved:

Remoteness – that the loss should be such that is not unpredictable by the defendant. If the loss is such that no reasonable person could have anticipated that because of his acts some loss is cased to the plaintiff, then, the loss is too remote and the defendant cannot be held liable under the law of negligence and is rightly established in the leading case of South Australia Asset Management Corp v York Montague Ltd, [1997].
Causation – Also, it is necessary that the loss must be because of the acts of the defendant. If the loss is caused because of some other means then there is lack of causation and the defendant is not negligent.

Application

Because of the attendant Chloe has suffered losses and thus Chloe has moved out of the premises.

The loss that is caused to Chloe, mental disorder, is though caused by the acts of the council but the loss is too remote for the council to predict. So, there is remoteness in the loss that is caused to Chloe and council cannot be held liable for such losses.

Conclusion

Chloe can sue the council for negligence as the advice was made negligently. But, Chloe cannot sue for the loss of nervous disorder as the same is too remote.

Reference List

Books/Articles/Journals

Hocking, B. (1999). Liability for negligent words. Sydney: Federation Press.

ALEXANDER, D. (2010). Material Misstatement of What? A Comment on Smieliauskas et Abacus, 46(4). <

Case law

Bank Line Ltd v Arthur Capel & Co [1919].

Donoghue v. Stevenson [1932]).

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 (HCA);

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.

Mutual Life and Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 566.

Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited [2009]

Shaddock& Associates Pty Ltd V Parramatta City Council [1981] HCA 59.