Tort of Negligence Between Defendant and Plaintiff

A recent study (Redmond, Stevens & Shears, 1990, p. 250&251) found that negligence defined as a defendant who breach of the duty of cares that recognized by the law and resulting in damage to plaintiffs who are owed the duty of care. Beside that, the resulting in damage is caused by the carelessness for the defendant. The plaintiff must prove three elements before they take action negligent which are

A duty of care owed by the defendant to the plaintiff

Defendant was breach of that duty of cares

That was resulting in damage to the plaintiff caused by breach of that duty of care.

Duty of care

In general rule state that the duty of care will be owed when it had a reasonable foresee ability that a person’s act and omissions might get injured to another.

Donoghue v Stevenson [1932] All ER Rep 1; [1932] AC 562; House of Lords This cases state that, a plaintiff had gone into a café with her friend, who had brought a bottle of ginger beer. Plaintiff poured the ginger beer into a glass and drank it. It was then discovered that there was a decomposed dead snail inside the rest of the bottle of drink. (Dr Peter Jepson, 1991) Plaintiff felt unfeeling well and she failed to sue the defendant in a breach of contract because there not contract between them (Ginger is not brought by plaintiff). Therefore, she sued the manufacturers in tort. (Richard Card & Jennifer James, 1990, pg 309)

In this case, Lord Atkin formulated the general principle known as “Neighbourhood Principle”. Lord Atkin held that:

“You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be — persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as long as so affected when I am directing my mind to the acts or omissions that are called in question. ” (Richard Card & Jennifer James, 1990, pg 309)

Therefore, Donoghue v Stevenson is a seminal case to establish the duty of care in the tort of negligence. In this cases we knowing that, a person may owe a duty of care to another person, although there are not contractual relationships. For example, A is near to B or is near to the property of B, it will automatically exist a duty of care into A not to do something that may injured B or B’s property.

Further definition for “Neighbourhood Principle”

The neighbourhood principle above been criticized that the definition for the principle are too wide. Therefore made it easily to the lawyer argued that someone will liable for breach of the duty of care in a new situation that are totally different for the previous cases law Donoghue v Stevenson and the intention to create this principle.

Home Office v Dorset Yacht Co [1970] AC 1004 the Lord Reid held that, Lord Aktin’s dicta is regarded as a statement of principle and that are not a statute. Beside that, Lord Reid decide that Lord Aktin’s dicta should be apply to everyone unless there had some justification or valid explanation for its exclusion. (Richard Card & Jennifer James, 1990, pg 310)

Therefore, the further definition for the neighbourhood principle had been created in 1970 with the cases above.

Anns v Merton London Borough Council [1978] A.C. 728 in this cases, House of Lord declared more generally on the scope of the duty of care in the law of tort. Beside that, the Lord Wilberforce state that to arise the duty of care to a situation, it is not necessary to compare the preview situation that the duty of care that held to exist. He establish the two-stages test which are

Reasonable Foreseeability

Proximity between the defendant and plaintiff

(Redmond, Stevens & Shears, 1990, p. 256)

Duty of care: Pure economic loss

In the traditional view , the tort of negligence is just arises in the event of someone gets injured or someone’s property been damages only. From the nineteenth century, courts were willing to award injury in a situation of pure economic loss. (Redmond, Stevens & Shears, 1990, p. 253)

While, the negligent words cause pure economic loss are too widely, as a result, the court were restricted the liability for these words to cases where a defendant had breach of duty of care when they are fraudulent statement and had a contractual relationship with the victim who had suffered economic loss in reliance on advise and information given by the defendant. (Redmond, Stevens & Shears, 1990, p. 253)

Fraudulent Statement

Derry v Peek [1889] 14 App Cas 337, HL In this cases, the Lord of Herschell state that a false statement is made without belief in its truth or with a actual knowledge of the statement is falsity or recklessly, careless whether it be true or false.

Statement will not be fraudulent when the statement was made in a situation that had honestly belief it is true. Therefore, House of Lords held that although they made a careless statement however the defendant in this case was not fraudulent because they honestly believed the careless statement is true. (Richard Card & Jennifer James, 1990, pg 232)

In this judgment state that tort for negligent misstatements are not liable. While, this judgment was reformation with the development of liability for negligent misstatement by the cases Hedley Byrne & Co Ltd v Heller & Partners Ltd discuss below.

Contractual relationship

Candler v Crane Christmas & Co [1951] 2 KB 164 in this case, investor relied on the careless wrong company’ financial statement causes economic loss and failed to claimed the damage from negligence claim. Court of Appeal held that although in this situation, the accountant knew that the financial statement will be relied upon by third party. However, defendant was not imposed any duty of care in the relation to receive a careless advice by the accountants in preparing a company’s financial statement. Because, there don’t have existed into any contractual relationship between them. (Vivienne Harpwood, 2000, pg79)

In this case, Denning LJ argued that the defendant not only owed the duty of care to their employee or client and the defendant also owed a duty of care to any third parties to whom they themselves show the financial statement. As an accountant must consider that someone will relied on the statement and to invest money or take action with the statement. (Vivienne Harpwood, 2000, pg79)

Extent the duty of care: Negligent misstatement

The arguments of Denning LJ in the cases Candler v Crane Christmas & Co are proved correctly when the House of Lord was prepared to extend the duty of care in the Hedley Byrne cases.

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] (HL) in this case, House of Lord held that the plaintiff was failed to claim the economic loss to the defendant, because the advice given by the defendant was prefaced by disclaimer of responsibility for the accuracy of the statement. (Richard Card & Jennifer James, 1990, pg 322)

Beside that, House of Lord held that they are some indication of situation that the duty of care could arise in pure economic loss caused by negligent misstatements which are:

Plaintiff economic loss should be reasonably foreseeable

Have a “special relationship” between the defendant and the plaintiff (Richard Card & Jennifer James, 1990, pg 322)

Therefore, the duty of care owed by the defendant for negligent misstatement is not as broad as the general duty of care (Neighbourhood Principle) created by the case Donoghue v Stevenson. The duty of care was owed in the negligent misstatement when the situation that the parties are in “Special relationship”.

‘Special relationship’ in negligent misstatement

the Major development in ‘special relationship’ came into the case above Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] (HL).

To impose the duty of care into the tort law, there had to be a ‘special relationship’ exists between the plaintiff and defendant. However, create a ‘special relationship’ not necessary is a contractual client relationship. (Denis J. Keenan, 2007, pg)

There is lack of judicial consensus to give an exact meaning of ‘special relationship’ therefore the ‘special relationship’ was treated in a narrow term. The special relationship just can exist into the business relationship. In the Hedley Byrne case, judge decides that there are few condition needed to achieve to constitute a ‘special relationship’ between the person who gives an advice and another person that who sought on the advice.

Plaintiff must rely on the advise given by the defendant

Defendant must aware that his advice will be relied on by the plaintiff.

Plaintiff reliance on defendant’s advice must reasonable in all circumstances. . (Redmond, Stevens & Shears, 1990, p. 254)

Mutual life and citizen’s Assurance Co Ltd V Evatt [1971] AC 793, [1971] All Er 150, PC the Privy Council held the plaintiff can’t claim their economic cost loss cause by the negligent misstatement to the defendant. Because the defendant was Insurance Company although they give an advice but the financial advice they had given was not an expert in their professional. (Barbara Ann Hocking, pg73)

After this case happened, it restricted the “special relationship” principle that establish in the case Hedley Byrne. In this case Privy Council added another condition that needed to constitute the special relationship.

When the defendant who given the advise must expert in the part of their business or professional.

This condition had been proven by the cases Esso Petroleum Co Ltd v Mardon [1976] QB 801, [1976] 2 All ER 5, CA in this cases, Esso give an advise regarded the expert number of annual petrol trade to the Mr. Mardon, however Mr. Mardon’s new filling station are fail to achieve the expert number given by Esso because of the rerouting of a highway. House of lord held that, a duty of care will arise to the Esso Company because the advice they give to the Mardon was in their part of professional and business. Therefore, the Mr. Mardon can claimed the economic loss cause by the negligent misstatement to the Esso Company. (Richard Card & Jennifer James, 1990, pg 323)

Beside that, in the Caparo Industries v Dickman state that the duty of care will arise not only that the statement will be relied on, and the consequence of the person who relied on the statement must suffer in economic loss. Beside that, the defendant must have knowledge that their statement would both be communicated to and be relied on by, the plaintiff. (Vivienne Harpwood, 2000, pg83)

Caparo Industries v Dickman [1990] 1 All ER 568 case, House of Lord held that no duty of care owed by the defendant as an auditor to plaintiff who was actual or potential shareholder. (Richard Card & Jennifer James, 1990, pg 347)

The purpose of the statement made by auditor is to help the company to control all the money transaction and protect the company existing shareholder as a body. Therefore, the individual shareholder cannot use it as information that deciding to purchase more share and make the profit on it. Consequently, the auditor was not owed duty of care to shareholder because the statement was not including in investing purpose. Unless, the auditor are fully aware that the shareholder would relied on his statement. This can be shown in the case below.

JEB Fasteners Ltd v Marks, Bloom & Co [1981] 3 All ER 289 in this case, a firm of accountant, who carelessly made a financial statement of Y company, and the plaintiff relied on it. The court held that, the firm of accountant imposes the duty of care to plaintiff because the defendant fully aware that the plaintiff will investing in or taking over Y company thus, defendant will knew that the plaintiff will rely on the published accounts. (Richard Card & Jennifer James, 1990, pg 323)

In the case Caparo Industries v Dickman the House of Lord establish the modern three stage of duty of care. It state that, the duty of care would arise they are three factors:

Reasonable Foreseeability

Proximity between the defendant and plaintiff

Is it fair, just and reasonable to impose a duty of care to defendant

(Zoe Kirk-Robinson, 2010)

Exception ‘Special relationship’ in negligent misstatement

After the two cases Esso Petroleum Co Ltd v Mardon and Mutual life and citizen’s Assurance Co Ltd V Evatt, the special relationship no longer just exists into a business relationship and existed into professional relationship too. While social relationship still excluded, unless the parties can be clearly prove that carefully considered advice for being sought. (Vivienne Harpwood, 2000, pg80)

Chaudhry v Prabhakar [1988] 3 All ER 718 the court of appeal held that the duty of care will arise on the defendant who are the friend of plaintiff that give a negligent advice to the plaintiff to selection of a second car. The defendant will liable on it, although defendant not as a professional in the mechanic area. (Richard Card & Jennifer James, 1990, pg 323)

This is an exception existed the duty of care in a social relationship. Because the Court of Appeal clearly measure that the case above was an unusual case, the judgment in this case was made in a special facts. Consequently, this judgment not consists into general rule of liability in all cases. (Vivienne Harpwood, 2000, pg80)

Exception ‘Special relationship’ in tort

In the general rule of “special relationship” in tort, there is no duty to control the act or conduct of third person for prevents their conduct resulting injury to another. While, there had two exceptions state that the person (actor) has a duty to control the act of third person which are state in the Section 315 of the Restatement.

First exception, when special relationship exists into actor and third person. Second exception, when actor has a special relationship with the other that the actor has owed a duty of care to protect gets injured by the act of Third person. (James F. 2007, pg100 )

Misstatement Negligent

–Esso petroleum Co Ltd V Mardon

http://faculty.law.ubc.ca/biukovic/supplements/Esso.htm

http://www.lawiki.org/lawwiki/Esso_Petroleum_Co_Ltd_v_Mardon_(1976)

–Mutual life and citizen’s Assurance Co Ltd V Evatt

http://www.findlaw.com.au/articles/134/fraud-and-negligence.aspx

http://www.studentatlaw.com/articles /46/1/Tort-Law—Topic8-Particular-Duty-Areas-i n-Negligence-2/Page1.html

http://books.google.com.my/books?id=Is1YRgD BY60C&pg =PA73&dq= Mutual+life+and+citizens+Assurance+Co +Ltd+V+Evatt&hl=en&ei=u0DOTNC2A4SkcaXklMIO&sa=X&oi=book_ result&ct=result&res num=9&ved=0CFYQ6AEwCA#v=onepage&q=Mutual%20life%20and%20citizens%20Assurance% 20Co%20Ltd%20V%20Evatt&f =false

http://books.google.com .my/books?id=ppjrRCLXodcC&pg=PA143&dq =n egl igent+misstateme nt+Mutual+life+and+citizens+Assurance+Co+Ltd+V+Evatt&hl=en&ei=5EDOTM fKEoamcKL_pZoO&sa=X& ;oi=book_result&ct=res ult&resnum=2&ved=0CCwQ6AEwAQ#v=onepage&q=negligent%20misstatement%20Mutual%20lif e%20and%20citizens%20 Assurance%20Co%20Ltd%20V%20Evatt&f=false

–Caparo Industries plc v Dickman.

http://books.google.com.my/books? id=q_HXBDy55T8C&pg=PA275& ;lpg=PA275&dq= negligent+miss tatement+cases+:JEB+Fasteners+ Ltd+v+Marks,+Bloom+%26+CO&source=bl&ots=8ndt-01sfy&a mp;sig=w5qs8kaI66R1PyLXrcVKL63VlfE&hl=en&ei=MEfOTNSAB8a ecYGGmcEO&sa=X&oi=book_result& ;ct=result&resnum=4&ved=0CCMQ6AEwAw#v=onepa ge&q=negligent%20missta temen t%20cases%20%3AJEB%20Fasteners%20Ltd%20v%20Marks %2C%20Bloom%20%26%20CO&f=false

http://en.academic.ru/dic.nsf/enwiki/1355807

–JEB Fasteners Ltd v Marks, Bloom & CO

http://www.swarb.co.uk/lisc/ProNe19301959.php

http://flywu.com/index.php?title=JEB_Fasteners_v_Marks_Bloom

–Clarke v Bruce Lance & Co

http://swarb.co.uk/lisc/ProNe19851989.php

http://www.donoghuev.info/?p=15

http://www.law-essays-uk.com/sample-essays/contract/negligent.php

http://www.lawiki.org/lawwiki/Negligent_misstatement