#6925 - Torts B Summary Pure Economic Loss (Negligent Statements) - Torts Law

Pure Economic Loss Cause by Negligent Statements – Particular Duty Scenario

• The treatment of the duty of care in the context of misstatements is but an instance of the application of the principles governing the duty of care in negligence generally San Sebastian

• Has the P suffered pure economic loss due to reliance on information or advice and was the advice a negligent misstatement?

• Is the P an immediate or non-immediate recipient?

  • Immediate Recipient: Is when there is a contractually equivalent relationship between the parties and the information was communicated directly to the P

    • Was the economic loss reasonably foreseeable? (make a broad statement)

      • The risk must be ‘likely to occur’ or ‘not unlikely to occur’ and not ‘Caterson v Commission of Railways

      • ‘not far-fetched or fanciful’ Sullivan v Moody

    • Is there a ‘special relationship’ between the parties? The parties must be in a ‘special relationship’ eg. equivalent to contract. THREE PART TEST: Hedley v Byrne

1. Did P rely on D to exercise reasonable care?

2. Was P’s reliance reasonable? The person has to be so placed that others could reasonably rely upon his judgment. If it is unreasonable reliance, it is less likely that the D owes a duty of care to the P

   • Special skills: does D have or claim to have them?

     • If the D has special skills it is more likely they owe a duty of care to the P

     • It does not matter if the D was not in the business of giving advice of the kind provided

     • Special skills may be relevant MLC v Evatt but not determinative Hill v Van Erp

     • Question: was there a Voluntary undertaking by the D of responsibility for the statements giving rise to the claim in negligence? Hedley Byrne v Heller

       • The assumption of responsibility on the part of the person making the statement can be express or implied

       • If they take responsibility for their statements they are more likely to owe a duty of care to the P

   • What was the Context in which the advice was given? Hedley

     • If the advice was given in a professional context it is more likely they owe a duty of care to the P

     • Words expressed on a social or informal occasion will not attract a duty

     • It would normally involve a business or professional transaction whose natures makes clear the gravity of the inquiry

   • Was the P vulnerable?

   • Disclaimer

     • A disclaimer can defeat the relationship Hedley

     • However courts tend to construe them narrowly MLC v Evatt

3. Did D know that T was relying on the information?

   • Subject-matter: What does the advice concern?

   • Was there a request for information?

     • This is not determinative of whether or not a duty of care exists San Sebastian

   • Did the D intend to induce the recipient to act in a certain way San Sebastian

   • Did D actually may have a financial interest in the recipient acting in a particular way San Sebastian

     • Was the P more likely to invest/buy etc? If yes, more likely that D owes P a duty of care

     • This has generally been unsuccessful in courts

4. Other potential salient features

   • What will be the effect on the coherence of the law

   • Try and avoid indeterminate liability
     

   • Non-Immediate Recipients: when it was not a contractual relationship and the information was not directly communicated to PAgency might be relevant

     • Was the economic loss reasonably foreseeable? Was it reasonably foreseeable that by providing a negligent statement to a third party that a certain class of persons to which P belongs would suffer pure economic loss

       • Consider the intended audience

     • A duty is owed to a non-immediate recipient where: Esanda

       • the information or advice would be communicated to the plaintiff (either as an individual or as a member of an identified class),

       • the information or advice would be communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind the plaintiff did enter into, and

       • it was very likely that the plaintiff would enter into the transaction in reliance on the information or advice and so risk incurring economic loss if the statement is untrue or the advice unsound.

     • What are the relevant policy considerations? McHugh J in Esanda

       • Floodgates: indeterminate liability

       • Coherence of the law

       • Dawson: Intention to induce

     • Did the P’s reasonable reliance on that information or advice cause their loss?

• Statutory Alternatives (do not talk about in a purely DOC question)

  • Fair Trading Act 1999 (Vic), s 9(1): a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

  • ACL S 18: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

  • Also...