Protect the person giving information
A person who gives information to others runs the risk of unlimited liability, as information is likely to be spread among a large group of people, even if it was originally only given to one person’ To what extent do the rules relating to negligent mis-statement help to protect the person giving information from unlimited liability? Sarah Freeman. A negligent mis-statement is defined in Law as a statement, which can be written or oral, which was issued carelessly by the defendant and relied upon by the claimant, and as a result of this information or advice the claimant suffered a loss.
The initial position on negligent mis-statement was laid down in the case of Candler v Crane, Christmas and Co (1951). In this case a firm of accountants did some work for a client, they understood that their information would be considered by a third party and as a result of relying on this information the third party suffered financial loss. The Court of Appeal held that the accountant’s responsibility was only to their client.
This judgement protects the person giving information from unlimited liability as only the person with which he entered a contract with can sue him, even though he knows a third party may suffer loss from relying on the information. However, Lord Denning dissented from this decision as he felt the accountants should be liable. This created a persuasive precedent, which influenced the case of Hedley Byrne v Heller (1963. ) Hedley Byrne V Heller is an important case as it established the initial guidelines for determining if a duty of care exists in respect to negligent mis-statement.
In this case the claimants asked their bankers for a reference about a client they were going to go into business with. Heller provided the reference and it stated that the company was ‘good for its ordinary business engagements. ‘ This reference came with a disclaimer and a while later the company went into liquidation which resulted in the claimants loosing i?? 17,000. In this case no duty of care was owed because of the disclaimer, however if the disclaimer had not been added a duty of care the defendant would have certainly been liable. From the judgements of this case three criteria were created to establish if a duty of care is owed.
This protects the person giving information or advice from unlimited liability as all three criteria need to be met before it can be confirmed that the defendant owed the claimant a duty of care. The three criteria that were created from the case of Hedley Byrne v Heller was that a special relationship exists between the two parties, this means that the claimant and the defendant have either signed a contract with each other or have made contact and have made an agreement. This need for a special relationship protects the person giving information or advice from unlimited liability as the claimant cannot simply be anyone.
It was initially felt this relationship would only involve those who are in the business of giving advice, this was showed by the case of Yianni v Edward Evans (1982). In some cases such as Mutual Life and Citizens Assurance Co v Evatt (1971) it is suggested that the relationship will only exist where the defendant is giving the advice that the claimant wanted. In Mutual Life and Citizens Assurance Co v Evatt it was held that there was no duty of care as the claimants asked for investment advice however the defendants were in the business of providing insurance advice.
This protects the person giving information or advice from unlimited liability as it restricts the type of information that was given by the defendant and so the person is protected if the information they give is not on a subject they are in business of. However, a later case Esso Petroleum v Mardon (1976) a broader approach was taken. In this case the claimant brought a garage on the advice of Esso that he could sell 200,000 gallons a year. In fact he only sold 78,000 gallons in 15 months and so suffered financial loss.
It was held that Esso did owe Mr Mardon a duty of care as they were in the course of that business and he relied upon their expertise in this area of business. This approach means that the individual giving the careless advice could be sued if they are in the course of that business even thought they are not specifically familiar with that area of the business. A special relationship can also occur between an employer and an employee when a reference is needed, this is shown by the case of Spring v Guardian Assurance (1994) when the employer was found liable when came to the conclusion that his employee was incompetent negligently.
These guidelines show that the individual giving the advice or information is protected from unlimited liability, as although information is likely to be spread to a large group of people, this large group of people cannot all sue, as they must have had a special relationship with the defendant in which the defendant is in the business of giving advice and if the defendant gave the information the claimant required.
The individual is not always protected though; the case of Henderson and Merrett Syndicates shows that the existence of a contract between the parties doesn’t prevent a special relationship, this means that although many feel that when a disclaimer is added this cancels the claimants right to sue infact the presence of a disclaimer does not prevent a special relationship existing. In Henderson v Merrett Syndicates the House of Lords held that there could be liability whether or not there was contractual relationship between the parties if the claimant shows reliance on the advice.
The case of Chaudry v Prabhaker (1988) is also similar to this as it shows that the defendant can be liable even if there is no contractual agreement. This case was an exemption to the guideline that a social relationship would not normally give rise to a duty of care. The second criteria for establishing if a duty of care exists is a voluntary assumption of responsibility meaning that the defendant has chosen to give advice or information and has allowed it to be passed on to a third party when they had the choice to not give the advice/information or emphasised it should not be relied upon.
Therefore the use of a disclaimer will usually mean the defendant has not assumed responsibility. Under this criterion it must also be shown that the claimant was a member of a class to which the defendant knew the information would be passed on to, this was shown in the case of Goodwill v British Pregnancy Advisory Service. In this case Mrs Goodwill became pregnant by her boyfriend.
However he had a vasectomy 3 years before and was told this was successful, but in fact over the three years the vasectomy had reversed itself. She sued the defendants for the cost of bringing up her daughter, however the Court of Appeal held that it was not foreseeable that she would be in a group which the advice would be applied to, as it wasn’t foreseeable that it would be her specifically that would become pregnant.
This protects the person who gave the information from unlimited liability as again even if the information was passed on to a large group of people the defendant could not be sued by all of the individuals affected as it must be shown that the claimant was a member of an identifiable class to which the defendant knows the information will be conveyed. However the individual is not completely protected as the case of Smith v Bush shows that even if there is a disclaimer they can still be found liable as it was held that they would be aware that buyers of a property would rely on the valuation provided by the defendants.