Tort Problem and Negligent Misstatements - Case Study Example

Torts problem question-Negligent mis ments A Helen incurs extra cost in acquiring a different house because of the bank appointed surveyor's undervaluation of the originally proposed house by more than 60,000. The owner of the original house Andrew also is forced to lower his price by 20,000 because of the undervaluation. In this case Rashid had no contract with either Helen or Andrew. Bank which appointed surveyor in order to lend money to Helen based on his valuation alone had contract with Helen. And it has charged Helen 150 for valuation purposes. Though Andrew has suffered economic loss, there was no contract with between him and the surveyor nor the bank. Whoever makes a claim due to somebody's negligence besides proving duty of care, breach and damages, must also show extra factors under 'duty' As pure economic loss caused by negligence is not a tort but liability under common law negligence. In Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963]1 UKHL 4 (28 May 1963, it was held by the House of Lords that respondents were not liable as bankers for giving negligently favourable opinion about their client whom the appellants dealt with as a result. The reason was that the bankers had no fiduciary relationship with the appellants nor had any duty of care to them as there was no contract. Besides they had cautioned the appellants that their opinion was without owning any responsibility. Applying the same principle in the above case, it can be argued that though the bankers had been in the process of making a fiduciary relationship subject to the surveyor's opinion, such a relationship had not been established. There was also no negligence on the part of the bankers. Besides they also had relied on Surveyor's opinion and lost business as a result. In fact Helen and the Bank are in the same position. On the other hand whether Helen as well as Andrew can claim compensation from the Surveyor depends on the principles of duty of care, fiduciary relationship, and negligence. Having received his fees, the Surveyor had all the above three ingredients towards the bank. His nature of calling is such that his opinion is capable of being acted upon by nay member of the public, it can be said he had duty care to Helen and Andrew as well though by not receiving any fees directly, no fiduciary relationship had been established. But proximity of relationship could be deemed to exist as two of them have suffered due to his negligent opinion. Therefore both Helen and Andrew can claim damages from him. In fact, valuer was held liable in Can v Wilson2, wherein the valuer was held responsible to the mortgagees for negligent undervaluation and was asked to pay loss incurred by the mortgagees due to mortgagor's default. In this case, the defendant who was the valuer sent his valuation report to the agent of plaintiff (mortgagee) in order to induce him to advance money against the mortgage of the property he valued. As the valuer had knowingly placed himself in that position, he had a duty of care in the preparation of a valuation document. In somewhat identical cases, Smith v. Eric S. Bush and Harris v. Wyre Forest District Council [1989]3, both the plaintiffs purchased houses relying on valuations of the surveyors who acted under the instructions of the defendant mortgagees and their fees were paid by the plaintiff purchasers. The valuations of the surveyors turned out to be defective resulting in serious financial loss to the plaintiffs. Even though the terms of agreement excluded liability for both the mortgagees and the surveyors for any loss due to inaccuracy in valuation, the House of Lords held that surveyors had a duty of care to the plaintiffs and the terms of exclusion of liability was struck down by virtue of section 2(2) and 11 (3) of the Unfair Contract Terms Act 1977. B In the case of B.Pen & Co, Charles lent money to James to buy the business of B.Pen & Co, relying on the Accountant's report which later turned out to be untrue to the detriment of both Charles and John. Although it was held in Caparo v Dickman [1990] 2 AC 6054 that auditors could not be held responsible for any economic loss incurred by the members of the public who had invested money based on his report for the company since it would lead to unlimited libailty for the auditors. Besides, it was stated that auditors only had duty of care to their client company and its hare holders and not to the public. However court laid down an exception to the no duty rule if the company had already indicated to the auditor the purpose for which, the rport was sought for. In the instant case, the Accountants firm gave an icorrrcet report negligently by engaging a novice to the profesion inpsite of being told the purpose of the report. Hence following the exception to the no duty rule, the firm of accoutant will be liable in damages to both Charless and James who incurred economic loss by lending to acquire a losing business and acquring a losing buisness based on the negligently prepared report respectively. In Candler v Crane, Christmas & Co Ltd5, the plaintiff relied on the accounts prepared by the defendants and invested shares in the company the accounts related to. The accounts were not accurate and quite misleading and as result the plaintiff lost his money invested on the company. The accountant had prior knowledge that plaintiff was going to rely on the accounts prepared by him. Denning L.J. held the plaintiff could recover damages from the defendant for his negligence. C. In this case, Mr Bright seeking to avoid inheritance tax payable by his sons, engaged solicitors who in turn referred to counsel for proper advice. The opinion of the counsel was however erroneous having overlooked a change of law. As a result of the counsel's advice, Bright did not make any arrangement and after his death, the tax department took large amount of money which they would have retained if the counsel had properly adviced. The issue is whether the sons can claim damages from Solicitors and/or Counsel. Applying the principle of negligence and duty of care, the Solicitors did exercise duty of care in getting advice from a competent counsel on the matter on which they had no competence and was not negligent. The change in law was not expected to be known by them which was also made known to the Mr.Bright. Hence if at all any one should be liable, it is the Counsel who overlooked the change in law and gave a wrong advice. But unfortunately, Bright is no more. How his sons can claim as his legal heirs is a moot point. This situation gives rise to three party relationships. There was no close proximity between the sons and the counsel. In Parker-Tweedle v Dunbar Bank Plc6, it was held that a person having beneficiary interest in the mortgaged property can not claim duty of care from the mortgagee who in exercise of power of sale, does not realise good price by mistake. It is one thing to hold himself to be liable to te mortgagor for any such lapse and it is another to extend the same protection to the party having beneficiary interest. In the instance case, the solicitors could be held liable to Bright but not to his sons who had only beneficiary interest. However in Ross v Caunters [1979]7, solicitors were held liable to an intended beneficiary by applying the principle established in Donoghue v Stevenson, for breach of contract and negligently failing to warn the testator that spouses of intended beneficiaries should not attest his will as a result of which the will was held to be void. In Clark v Bruce Lance & Co [1988]8 , principle in Ross was not extended and the solicitors were not found to have had a duty of care to a potential beneficiary under a will and to advise the testator that his particular transaction would affect the potential beneficiary's interest. This was based on a decision in Yuen Kun-Yeu v A-G Hong Kong [1988]9 in which it was held that there was no close proximity of relationship and also the defendant could not owe a duty of care to a potential beneficiary under a will because if it was owed it would apply to the "whole indeterminate class of potential donees and beneficiaries'. Besides as the claimant can have a right of remedy under a contract, a remedy under tort would result double damages. Under the circumstances, it will now be clear that Bright's sons can not have any claim against the counsel or solicitors in tort. Read More