Negligent Misstatement

Whenever a person gives information or advice to another upon a serious matter in circumstances where the speaker realises or ought to realise, that he is being trusted to give the best of his information and advice as a basis of action on the part of the other party to act on that information and advice he chooses to give, a duty of care may arise6. Negligence has been extended to cover negligence in relation to statements of advice7 and information8 provided that the circumstances met the legal standards. Restrictive circumstances in which liability would attach to advice are:

The advisor must hold him self as possessing some special skill or ability. 2. The circumstances of giving advice must be as such that the advisor reasonably knows it will be relied upon 3. The advice must actually be relied upon and it must be reasonable in all the circumstances to have relied upon it. 4. The advice must concern a serious or business matter: Mutual Life and Citizen's Assurance Co. Ltd v. Evatt HC (1968), PC [1971] If each of these elements is satisfied the plaintiff will receive damages for the harm caused. The following argument will attempt to advice Lucy of any rights she may have in a claim against King.

Identifying the Issues Firstly all elements which give rise to duty of care must be proven to establish if King owes a duty of care to Lucy. The following components will be discussed respectively: Reasonable reliance, special skills, request, reasonable foreseeability and proximity. Reasonable Reliance: No statement can cause loss unless and until it is relied upon9. Factors considered when determining the reasonableness of the acceptance and the reliance of the recipient upon speaker includes the position of parties, occasion of interchange and nature of subject matter: Mohr v Cleaver.

In this case there is no doubt that the situation and the nature of subject matter is on a serious note, the principal based on this came from Mutual Life and Citizen's Assurance Co. Ltd v. Evatt HC (1968), where Barwick CJ expressed, The speaker must realize or the circumstances must be that the recipient intends to act upon the information or advice for some serious consequences such as property or business. Hence it evident that Lucy relied upon the statement given by King. She made her choice of which shutters to buy after receiving advice from King. Special Skills:

It is enough to hold that liability extends to those whose professions or business it is to give advice or information, whether gratuitously or not: L. Shaddock & Associates Pty Ltd v. Parramatta City Council (No 1) (1981). The principals of special skills can be enforced in this case as King a local builder, there are strong grounds for saying that it would be reasonable for Lucy to rely on King's expertise rather then trusting her own judgment. King has more knowledge then an average person in the fields of Lucy's enquire and hence Lucy has every reason to rely on King's expertise.

Request: The existence of an antecedent request for information or advice certainly assists in demonstrating reliance, which is a cornerstone of liability for negligent misstatement: San Sebastian Pty Ltd v Minister Administering Environmental Planning, and Assessment Act 1979 (1986). In order to prove there is a duty of care, there must be a request for information. It is evident that Lucy had discussed her thoughts with the local builder King to install appropriate shutters to her guesthouse.

Reasonable Foreseeability According to Chapman v Hearse it is not necessary that the precise sequence of events be reasonably foreseeable; it is sufficient if it can be showed that there was foreseeable risk as a consequence. In the present case it is reasonable foreseeable that the false statement of King could potentially hazardous to people involved with Lucy's guest house. Because King knew that his advice was relied upon and also knew the consequence hence there is reasonable foreseeability.


In Jaensch v Coffey (1984) 155 CLR 549 proximity is defined as the directness of the relationship between the particular act or the cause of action and the injury sustained. When adopting proximity approach in this current case it is obvious that there is proximity between King and Lucy as King is a professional providing advice and service to which Lucy is his client. Defence Once again, contributory negligence may paly a part, in this case for King. King may be able to claim that he only sold Lucy the shutters but was not involved in installing them. Therefore bringing Malcolm into the picture and shifting part of the blame on him.

He may claim that Malcolm failed to notify Lucy of the disclaimer on the back of the instruction booklet. Hence he is also partly to blame. Result It can be gathered that King owes Lucy a duty of care and can be liable for economic losses incurred on the basis of loss of business in drop in the occupancy rate, cost of replacing the shutters and damages paid to Kim and John. Misleading or deceptive conduct Section 52(1) provides that 'a corporation [which includes a person or organisation] shall not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive.

To succeed in an s 52 action, the plaintiff must satisfy the following three criteria: 1. The defendant's behaviour amounted to 'conduct'. Conduct is defined under the TPA as 'doing or refusing to an act'. Conduct has been found by the courts to cover a very wide field, including: * Concealment of relevant information. This infringement could be committed where the defendant fails to disclose, or only partly discloses, relevant information. As the case Henjo v Collins10 indicates, silence could amount to misleading or deceptive conduct.

It is clearly evident in the current situation that King has failed to fully disclose that the shutters' he was selling was not suitable for high wind areas. 2. The defendant's conduct was connected with trade or commerce. This test has a very broad reach and appears to extend to any business dealing that is involved with a profit motive. King owns and operates a hardware shop which suggests it has profit motiv. 3. The defendant's conduct was misleading or deceptive. Obviously because of King's deceptive conduct Lucy bought the shutters, otherwise she would not have purchased them.

Result King may be liable under s 52 of the Trade Practices Act 1974, or s 42 (NSW) of the Fair Trading Act. He may be liable for a number of remedies but he may also have a defence. Once again he may be able to point to Malcolm to reduce the severity of his own conviction. Table of Cases & Legislation Hedley Byrne and Co. Ltd v. Heller and Partners Ltd [1964] Mutual Life and Citizen's Assurance Co. Ltd v. Evatt HC (1968), PC [1971] L. Shaddock & Associates Pty Ltd v. Parramatta City Council (No 1) (1981) Alexander v. Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310