Liability for Negligent Misstatement - Essay Example

Liability for Negligent Mis ment Introduction In cases of liability for negligent advice or information resulting in economic loss, one party relies on the professional skill of the other.The idea that the professional will conduct himself according to standards generally associated with that profession is implied into the contract. Where the standard expected is not met and entails loss, the question is not so much of who is liable but on what grounds. If the damage is physical an action will lie in tort. But if the loss is not physical but financial, there is reluctance in the law of tort to recognize a claim. It has been said that the critical point regarding liability for negligent misstatement is not the expertise of the adviser, but the dual requirements of assumption of responsibility by the adviser and reasonable reliance upon that advice by the other party. Changes have been happening in the last decade in Australian negligence law, both in respect to negligent advice and negligence causing pure economic loss (Baker and Manderson 2001). These are reflected in the nuances in the decisions arrived at by the High Court of Australia of the following cases. Giving of Advice by Professional Persons Case 1: San Sebastian Pty. Ltd. v. The Minister (1986) 68 ALR 161 (Database HCA/1986/68.html). Appellant companies in the High Court of Australia are business developers who sued respondents in the Supreme Court of New South Wales for their loss from alleged negligence of the State Planning Authority and the Council of the City of Sydney, in the preparation and publication of a plan for the redevelopment of the Woolloomooloo area of Sydney City, and also for failing to warn the appellants of the subsequent abandonment of the plan. In giving advice or information, a representor is said to be under a duty of care if the following are satisfied: 1) The representor realizes or ought to realize that the representee will trust in his especial competence to give that information or advice; 2) If it would be reasonable for the representee to accept and rely on that information or advice; and 3) If it is reasonably foreseeable that the representee is likely to suffer loss should the information turn out to be incorrect or the advice turn out to be unsound. (Database HCA/1986/68.html). The decision of the High Court which ended with a dismissal of the appeal said that the condition of reasonable reliance is unsatisfied and that even both parties believed falsely that the plan was feasible, if there is no fraud, the defendants not liable to compensate the plaintiffs for the losses they incurred in relying on the feasibility of the plan. The representation or that which caused the loss complained of is limited, the court said. The Council and the Authority did not induce any developer to buy property in simply saying "this plan is feasible," the High Court said. In the case at bar, such duty of care did not result between the giver of information and the intended user because it could reasonably be expected that the recipient would seek independent advice before relying on the statement, especially for a serious business purpose. The case is relevant and supports the proposition. The proximity relationship (second requirement) was all the more appreciated because distinctions were made between private and public officials and their functions. Case 2: Tepko Pty Ltd and Others v Water Board, High Court of Australia, 5 April 2001 [2001] HCA 19; (2001) 178 ALR 634 (In Sykes 2001). By a 4 to 3 majority, the High Court upheld the trial judge's finding that there was no duty of care owed in making a particular costs estimate. The three plaintiffs and appellants to this appeal were Tepko Pty Ltd, Mr. Neal's company and Mr, Neal himself, who was one of three shareholders in Tepko, and the defendant was the Water Board. As recorded in Stykes (2001) - In the early to middle 1980s the plaintiffs were involved in a proposal to subdivide for residential development dairy farmland owned either by Tepko or Mr. Neal which was located just beyond the outskirts of Sydney. At all material times, the plaintiffs, in pursuing the proposal, had the professional assistance of solicitors and town planning consultants. .The Board gave Mr. Neal an estimate of 'in the order of $2.5 million' for the cost of making the necessary connections. On the strength of this pre-estimate, the bank foreclosed, because it appeared that the cost was too great for the plaintiffs to bear. However, only some three weeks afterwards, the Board revised the estimate down to $1.7 million. . The plaintiffs sought damages from the Board for the loss which they claimed to have suffered in consequence of the foreclosure, alleging negligent misstatement in the giving of the original estimate. Yes, the case supports the proposition, reaffirming the law of negligent misstatement but it shows the delicate balance in treating issues when operations of government entities are involved. The relevance of the case points to highlighting the care to be exercised in rendering cost estimates, with the need to include relevant qualifications and disclaimers (Stykes 2001). Case 3: 'Cattanach v Melchior [2003] HCA 38 (16 July 2003). This case is about a doctor's liability for the birth of an "unwanted" child. By a majority of 4:3, the High Court decided to award damages to a couple for the cost of rearing a healthy child after a supposed sterilisation failed. The majority agreed that Dr. Cattanach's 'negligence' was the causal and reasonably foreseeable factor in the parents incurring cost to raising Jordan up to the age of 18years. The three minority High Court judges, on the other hand, were of the opinion that the birth of a normal, healthy child is not a legal harm or wrong where damages are to be awarded (Gerber 2004). The issue was that because of medical negligence, an unintended child is born, can a court require the doctor to bear the cost of raising and maintaining the child (HCA 38, 2003). The court's decision granted favour to the parents for loss. At common law, Gerber (2003) says, "the death of a human being is still a damnum sine injuria or a loss for which the law provides no remedy. It required Acts of Parliament in all common law countries to allow specified dependants to sue for damages if death was the result of a negligent act." Gerber then questions why this should be "left to the personal views of common law judges." Quoting Gleeson CJ, who in turn quoted Brennan J in another Australian case, "The accepted approach in this country is that the law should develop novel categories incrementally and by analogy with established categories," but clearly the judges did not heed that 'accepted approach,'"Gerber said. The case refutes the proposition in that there is no advisee's reasonable reliance of that advice. For anything pertaining to medical matters, especially if the couple were bent on not bearing an additional child, they could have secured a second doctor's opinion. Medical implements are also not absolutely correct and so their zeal in not wanting to have another child could have been matched with a zeal for double-checking their supposed sterile condition. The case may or may not be relevant. Before this case, Gerber (2003) said, there was the distinction in the law of torts between conduct leading to pure economic loss and conduct causing damage to person or property which formed the basis of established rules for damages. Now, that distinction has been blurred by the financial value placed on parent-child relationship. In this case, it is not relevant. On the other hand, just like the Melchiors, there may be people where the birth of another child is not. a blessing. There is pain, unnecessary expenses, and life is not what it is supposed to be. In this case, it is relevant. For the courts, views then of human life and family values must now be balanced against the full compensation theory. Case 4: 'RT & YE Falls Investments Pty Ltd v State (NSW) (No 2), [2005] NSWSC 335, 4/14/2005. The case is about compensation for cattle slaughtered along disease eradication policy. The issue is this: did the defendants owe a duty of care to the plaintiff not to cause economic loss The case is as follows (NSWC 2005 database) - The policy of the New South Wales Department of Agriculture to eradicate a particular disease in NSW had involved the plaintiff's successful beef shorthorn stud in Malton. It required the slaughter of all cattle found to contain infected beasts, with compensation for cattle slaughtered payable to owners. The local veterinarian recommended depopulation along its department's policy through the plaintiff's director's son, and that there would have to be a formal application to the department for depopulation. He said the application was highly unlikely not to be approved. Due to the assurances of the veterinarian of compensation, the plaintiff intermingled its stud cattle with the herd on Malton, exposing in the process the entire herd to infection. Judgement was held for the defendants that : (1) The veterinarian's statement necessarily conveyed that there was a risk albeit slight that the proposal would not be approved; and (2) The loss which the plaintiff suffered was caused by its own act, not by the statement actually made by the veterinarian. Accordingly, the causative link between the veterinarian's statement to the director's son and the plaintiff's loss was not established. The case supports the proposition by adhering to the dual requirement of adviser assumption of responsibility and advisee's reasonable reliance upon the advice. It is relevant to the issue as this is about professional advice. It highlights customer care even if government promises compensation. Passed-on communication and its effects however should merit attention from the courts. Journal Articles on Negligent Advice Causing Economic Loss Baker, B and D Manderson (2001), 'Case Comment: Counsel's Immunity: The High court's Decision in Boland v Yates,' Macquarie Law Journal (2001) Vol 1 No 1 135. This article initially underscores changes in negligence law including the lifting of many past restrictions on professionals giving advice, but at the same time giving much immunity to lawyers whose duty to court is given more emphasis than his client's interests. The rationale, the article said, is the court's concern for one's overriding duty to administration of justice. At the end of its discussion, the article poses that immunity for counsels does more harm than good. The changes in the last decade in Australian negligence law are said to see litigants now recovering damages more widely both in respect to negligent advice and negligence causing pure economic loss. As such, the scope of liability for most professionals has increased vastly. Doctors and other professionals have to take extra care with their statements but lawyers (counsels) are given immunity. Thus, in Giannarelli, with theme of justice-before-interests behind the court's reasoning, it was held that counsel could not be sued for negligence for failing to raise in defense of their clients distinct provisions which could render crucial evidence. This despite such failure constituting a breach of their duty of care. The decision in Giannarelli has been strongly criticised both from within and without the legal circles yet Giannarelli remains binding authority. A recent decision of the High Court suggests however that change may soon take place. Giannarelli should be reconsidered, a number of members of the High Court have expressed in Boland v Yates. The High Court was said to allow the appeals by the solicitor and counsel from the decision of the Full Federal Court. The court found that there had been no negligence on the part of the solicitor, or of either counsel. In reaching this conclusion, the court considered that the .head start case. (meaning research work and related activities) had .serious problems .both as a matter of principle, and in its application to the particular facts of the case. Although the court's findings on the negligence issue meant that it was not necessary to consider Giannarelli, the High Court Justices still considered the rule concerning the immunity of counsel. If some immunity is to remain, according to Baker and Manderson (2001), the court should carefully consider the grounds for such immunity. Betts, J (2005, 21 April), 'Australia: The Rise of Shareholder Class Actions in Australia,' Freehills. This article is intended as a general guide to shareholders, including the aspect of negligent advice that may cause economic loss. It starts with a description of the Australian financial sector as having undergone changes in the last two decades where shareholders are more alert of their rights in investment ventures. It mentions about Australians where 55% now own shares, the largest proportion in the world, who seek more vigilant processes to assert their rights. The concept of shareholder class action is introduced as described in the 1988 report of the Australian Law Reform Commission (ALCR0 on group proceedings - A group of small shareholders suffer considerable financial loss as a result of misleading advice received from stockbrokers and the directors of the company in which significant amounts of their savings were invested..A grouping procedure could facilitate the recovery of loss by those affected and would offer the advantage of helping to ensure that all concerned were informed of the claim and shared in the result without having to commence individual proceedings. The article goes deeper and mentions the recent Federal court ruling that where shareholders are seeking remedies not dependent on their status as shareholder such as rights in relation to conduct which misleads or deceives, or in relation to negligent misstatements, it is the shareholders who are the proper plaintiffs and not the corporation. It also said it is easier to sue multiple respondents with each lead plaintiff (the applicant) and all group members having a claim against each and every respondent. Class actions are encouraged with the popular view of supplementing the often slow-moving cogs of government enforcement with much speedier private actions. Conclusion The four cases as well as the two journal articles presented mirror the development of Australian law. Changes are inevitable as society and life become more complex. As cases are filed, the courts are faced with new and novel problems that each and every case seems unique. There is where policy comes in to determine possible courses of action. Laws are not templates that remain static; they change over time. This explains why judgments are not uniform for all cases. References 'Cattanach v Melchior [2003] HCA 38 (16 July 2003),' High Court of Australia, viewed 25 September 2005, 'RT & YE Falls Investments Pty Ltd v State (NSW)' (No 2), [2005] NSWSC 335, 4/14/2005, Palmer J.' Daily Digest. Thomson Lawbook Company. Criminal Law Cases. New South Wales, viewed 26 September 2005, 'San Sebastian Pty. Ltd. v. The Minister [1986] HCA 68;' (1986) 162 CLR 341 F.C. 86/068 CA 68; (1986) 162 CLR 341 F.C. 86/068 (25 November 1986). Negligence. AustLII Database. High Court of Australia . [1986] HCA 68, viewed 23 September 2005, Baker, B and D Manderson (2001), 'Case Comment: Counsel's Immunity: The High court's Decision in Boland v Yates,' Macquarie Law Journal (2001) Vol 1 No 1 135, viewed 28 September 2005, Betts, J (2005, 21 April), 'Australia: The Rise of Shareholder Class Actions in Australia,' Mondaq's Article Service. Freehills, viewed 27 September 2005, Gerber, P (2004), 'Failed sterilisations and the unwanted child: a new medicolegal minefield' MJA (Medical Journal of Australia), 180 (3): 123-125, viewed 25 September 2005, Ipp, DA, (2003, 24 September), 'Policy and the Swing of the Negligence Pendulum,' Supreme Court. Publications, New South Wales, viewed 27 September 2005, Sykes, P (2001, 20 May), (Principal Solicitor), 'Duty of Care in Providing Advice or Information,' Australian Government Solicitor Publications. Litigation notes, viewed 27 September 2005, Read More