Chapter 11 The Tort of Negligence - OED-update - Oxford University ...

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352 Part 3 Tort Law Decision: The solicitors owed a duty of care to the daughters as potential beneficiaries. By agreeing to amend the father’s will, the solicitors had assumed responsibility for ensuring the will was made promptly. Responsibility was to the person making the will and the intended beneficiaries. The financial loss to the claimants was reasonably foreseeable. Pure economic loss as a result of negligent statements In special circumstances it is possible to succeed in a claim for pure economic loss caused through a defendant’s negligent statement. Prior to 1964 the only action available for pure financial loss caused by a false statement was in the tort of deceit, where, in order to succeed, the claimant had to prove the defendant had acted dishonestly. However, in 1964, in Hedley Byrne & Co Ltd v Heller (1964) the House of Lords accepted that, in some special circumstances, there could be a duty owed in the tort of negligence for financial loss caused through a defendant’s negligent statement. For such a claim to succeed, it was not enough to show that the loss suffered by the claimant was ‘reasonably foreseeable’, the test set out in Donoghue v Stevenson (1932), but in addition there had to be a ‘special relationship of proximity’ between the parties. A duty of care would only arise where the defendant, either expressly or impliedly, undertook the responsibility to exercise care in making the statement. The defendant must possess special skill and judgement which the claimant relied on, and it must be reasonable in the circumstances for the claimant to rely on the statement. The defendant must also know, or should reasonably have known, that the claimant would rely on the statement. In Hedley Byrne a financial reference was sent by the defendants and relied on by the claimants. Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) Facts: The defendants, Heller & Partners, were bankers and the claimants, Hedley Byrne, were advertising agents. The claimants were considering running an advertising programme for Easipower Ltd, which involved giving Easipower credit. The claimants asked their bank to find out the financial position of Easipower. The claimant’s bank asked Easipower’s bank, Heller & Partners, which replied that Easipower was ‘. . . a respectably constituted company, considered good for ordinary business engagements’. Easipower went into liquidation and the claimants lost £17,000 and sued Heller for negligent misstatement. Decision: The House of Lords stated that, in certain circumstances where there was a ‘special relationship’ between the parties, there could be a duty of care for financial loss caused by a negligent misstatement. However, in this case there was a valid disclaimer as the advice given by Heller was headed ‘without responsibility’ and, therefore, the defendants were not liable.
Chapter 11 The Tort of Negligence 353 The requirement of a special relationship restricts liability to within reasonable grounds, limiting the number of claims that may be made against a defendant who makes a negligent statement which could potentially affect thousands of people. Key Concept A claim for pure economic loss caused by a negligent statement may be successful if there is proximity between the parties, i.e. a ‘special relationship’ between the parties. To ensure that persons making statements would not be under a duty of care to potentially large numbers of people whom they might foresee would rely on their statements, the House of Lords restricted the principles set out in Hedley Burne in the later case of Caparo Industries v Dickman (1990). The number of potential claimants that fell within the necessary proximity (i.e. a special relationship) was further restricted. The court decided that, in order for there to be a special relationship between the defendant and the claimant, it was essential that: • The defendant knew that the statement would be communicated to the claimant (either a named or unnamed individual or an identifiable group of persons). • The advice was given specifically in connection with an identifiable transaction or transactions of a particular kind. • The defendant reasonably anticipated that the claimant was likely to rely on the statement for the purpose of the transaction without seeking further independent advice. Caparo Industries v Dickman (1990) Facts: The claimants, Caparo, owned shares in Fidelity plc. Caparo read and relied on the statutory audited accounts of Fidelity plc, prepared by the defendants, Dickman, when making their decision to purchase additional shares in Fidelity plc and then to mount a successful takeover bid. However the accounts were inaccurate and showed a profit of £1.3m instead of a loss of £465,000. Caparo sued Dickman for negligent misstatement. Decision: The House of Lords stated that the claimants did not owe a duty of care to the claimants as there was not a sufficient degree of proximity between them. The accounts had not been prepared specifically for the claimant to rely on when deciding to purchase additional shares.
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