W.L Gore And Associates

NEGLIGENT MISSTATEMENTS; DECEIT

CONTENTS

Negligent misstatements............................................................1

Deceit......................................................................................7

*OBJECTIVES *

By the end of this chapter you should be able to:

*appreciate the evolution of the law regarding liability for

negligent misstatements

*show a particular knowledge of the significance of the

decision in HEDLEY BYRNE v HELLER and of the 'special

relationship' which was established in that case

*consider the current scope of liability for negligent

misstatement in the light of the case of CAPARO (and its

successors) and the line of cases following the precedent of

ROSS v CAUNTERS

*demonstrate a knowledge of the tort of deceit and the main

ingredients of that tort.

Chapter 10

TORT

NEGLIGENT

MISSTATEMENTS; DECEIT

NEGLIGENT MISSTATEMENTS

INTRODUCTION

A negligent misstatement is defined as a statement issued carelessly by the defendant which is relied upon by the claimant to his detriment. For such a statement to be actionable it must usually cause physical damage or personal injury. When it leads to pure economic loss, liability is

restricted. Generally, the law of negligence has developed more slowly and cautiously in respect of liability for negligent statements than it has in respect of negligent acts for two main reasons:

P people are generally less careful in what they say than in what they do, particularly when expressing opinions on social or informal occasions rather than in their business

or professional capacity and P in the words of Lord Pearce in HEDLEY BYRNE (below):

'...words are more volatile than deeds, they travel fast and far a field, they are used without being expended'.

Think Point 1

Can words be easily distinguished from deeds? Is the distinction in terms of effect a valid one?

SEMPLE PIGGOT ROCHEZ 1

Chter 10

THE POSITION BEFORE 1963

In DERRY v PEEK [1889] 14 AC 337 the House of Lords had decided that there was no liability in deceit for misstatements in the absence of dishonesty, but 'no liability in deceit' was

interpreted as 'no liability in tort '. The position up to 1963, then, despite the dissenting

judgment of Denning LJ in CANDLER v CRANE CHRISTMAS 2 KB 164, was that there was no recovery for loss incurred through reliance on a careless misstatement except, for example: P in contract (now much affected by the Misrepresentation Act, 1967) P where there was a fiduciary relationship - for example, solicitor and client: NOCTON v LORD ASHBURTON [1914] AC 932

P where the loss was physical - for example, where someone is injured by a structure which the defendant has said is safe: CLAYTON v WOODMAN & SON (BUILDERS) LTD [1962] 2 QB 533; CLAY v A J CRUMP & SONS LTD [1964] 1 QB 533 P by statute - for example, under the Directors' Liability

Act, 1890, a duty was imposed on company directors to take care in making statements ( now see s.110 Companies Act, 1985).

THE POSITION AFTER 1963

The case which turned the tide of legal history was HEDLEY BYRNE v HELLER [1964] AC 465. In that case the House of Lords asserted that statements which cause damage need not be made dishonestly in order for there to be tortious liability. Rather, such statements could attract liability when made negligently or carelessly, in certain situations where a duty of care is owed. Before a duty is owed, however there must be a special relationship between the parties. Such a relationship exists whenever the defendant should reasonably foresee that the claimant will rely upon his skill and judgement, and it is reasonable for the claimant to do so. The broad effects of HEDLEY BYRNE, are that: P it recognises that careless false statements are actionable... P for which action pure economic loss may be recovered.

SEMPLE PIGGOT ROCHEZ 2

Chapter 10

Think Point 2

In HEDLEY BYRNE v HELLER, their Lordships seemed to decide in favour of the claimants. However, Hedley Byrne still lost their case. Can you think why?

Subsequent case law since HEDLEY BYRNE has gone on to attempt to define the essence and nature of the requirement of a special relationship. In MUTUAL LIFE AND CITIZENS'

ASSURANCE CO LTD v EVATT [1971] AC 793 the Privy Council addressed the question of the sort of capacity in which the defendant in such a case should be acting. The majority took

a restrictive view and held that the predominant purpose of the business must be the giving of the kind of advice in question. Subsequent decisions by the Court of Appeal have consistently favoured the minority view in EVATT which, broadly stated, was that any professed expertise in a

business situation could give rise to a duty of