Ellens Claim against the Local Council in Relation to the Advice She Received - Article Example

Ellen’s Claim Against the Local Council in Relation to the Advice She Received Student’s Name Instructor’s Name Course Code and Name University Date of Submission Ellen’s Claim Against the Local Council in Relation to the Advice She Received Executive Summary The employee of the local council is an agent of the local council. All his acts and/or omissions, while on duty are the acts and/or omissions of the local authority. In this case, the employee is placed in a position that Ellen could reasonably rely on his judgment and his (employee) ability to make a careful inquiry. She asked several questions, including a question about building work in the area. She went ahead and disclosed that she wanted to start a meditation studio, which requires a calm environment. This clearly shows that Ellen made all the disclosures she deemed necessary to the employee so that she can receive the most appropriate advice. It is implied that Ellen believed that the local council employees are experts in matters concerning business premises (and their suitability for intended businesses) within Paddington and its suburbs. The local council owed Ms Ellen a duty of care, and would be liable for damages if she instituted civil proceedings against it. Introduction Before entering a lease agreement with the owner of the premises, Ellen decided to seek advice from the local council as to whether the premise was suitable for her business. She would rely on the information given by the local council (through council employees) to make a decision on whether or not to sign the lease agreement. Ellen brought to the attention of the council employee regarding the nature of the business she wanted to start. By implication, she was entitled to assume the employee had enough knowledge to advice her on matters concerning her business. This is why she went to the “business enquiries” counter.1 Where a person holds a position in that others would reasonably rely upon his skills, judgment or his ability in making careful decisions, and the person takes upon himself to give advice or information, or allows the advice or information be passed on to other persons who, as he should know, places reliance on the information or advice to make a decision, then, a duty of care arises (Brands 2009, p. 230). The employee of the local council is an agent of the local council. All his acts and/or omissions, while on duty are the acts and/or omissions of the local authority. In this case, the employee is placed in a position that Ellen could reasonably rely on his judgment and his (employee) ability to make a careful inquiry. She asked several questions including a question about building work in the area. She went ahead and disclosed that she wanted to start a meditation studio which requires a calm environment. This clearly shows that Ellen made all the disclosures she deemed necessary to the employee so that she can receive the most appropriate advice. It is implied Ellen believed that the local council employees are experts in matters concerning business premises (and their suitability for intended businesses) within Paddington and its suburbs. This place the advice received from the employee as advice from an expert. The employee advised Ellen to “relax” and he assured her “everything would be fine”. The question concerning expert’s liability arises in case an expert of a given field provides an expert opinion, advice or information to another party in relation to a particular matter based on his special knowledge, which later proves or turns out to be incorrect (De Farias & Megid 2006, p.781). The council officer, though without putting much thought on the consequences that may arise, gave advice to Ellen that proved to be incorrect two weeks later, and within a month, Ellen had already suffered damages in terms of stress to herself and her clients, and also a nervous disorder that threatened her career. If a person legitimately relies on an expert’s opinion or advice, and the expert knows or is supposed to know that the other person would rely on his or her opinion, it is taken as unfair in all legal orders considered, to leave such a person who relied on such misleading opinion or information to assume solely the risk of the incorrectness of such opinion, information or advice (Howard 1991, p. 270). Professional liability cases blur the distinction between statements and acts, for example, a report prepared by a medical specialist on litigation for personal injury, characterized as a statement, but must be prepared on the basis of prior reviewing of medical records and performing a physical examination on the client. Normally, actions based on the case in Hedley Byrne & Company Ltd V Heller & Partners Co. are mostly negligent acts and omissions (Rustad & Koenig 2007, p. 5).2 Negligence misstatement Before the landmark ruling in Hedley Byrne’s case, it was thought that one could not recover damages for negligent misstatement (Derry vs peek 1889). But Hedley Byrne’s case (1964), introduced a jurisprudence that is is being relied upon up to date. The House Of Lords ruled that liability would arise for negligent misstatement where there existed a special relationship and a reasonable reliance (Barnikel 1980, p. 243). Lord Morris had a view that a special relationship requires some special know-how on the part of the party giving the advice or making the statement. Disclaimer In case a party giving advice or making a statement includes a disclaimer, such disclaimer is effective for avoiding any liability that may arise as is seen in the ruling of Hedley Byrne’s (1964). However, disclaimers are subject to relevant acts (Lehnhardt 1981, p. 170). Special relationship It is not a must that the defendant is involved in the business of giving advice, liability can even arise in social situations. During the ruling in the case of Hedley Byrne (1964), Lord Delvin observed that the relationship was akin to a contractual one. The statement or advice must be given for a specific purpose, failure to that there would be no special relationship. If information is used for a different purpose other than what it was intended for, liability may not arise (Woolley & Costas 2005, p. 3). Reasonable reliance There would be no liability arising if the claimant does not rely on the advice. In circumstances where the existence of a duty of due care is in issue, it is advisable to examine the matter from plaintiff’s point of view. One should consider to what extent the advisee was entitled to rely on the advice, and whether he used or ought to have used his own judgment (McEldowney & McEldowney 2008, p. 60). Case 1: Hedley Byrne & Company Ltd Vs Heller & Partners Ltd. The facts of this case are a follows: Hedley Byrne, an advertising firm, received a large order from Easipower Ltd. Hedley Byrne wanted to confirm the financial status and credit worthiness of the customer, and; therefore, they asked their bank, The National Provincial bank, to get a or statement from the customers bank (Heller & Partners Co. Ltd). Heller & Partners Ltd replied in a letter headed “without any responsibility, this bank”, Easipower Ltd is considered good for ordinary business engagements. The customer’s bank went into liquidation, Hedley Byrne & Company Ltd suffered losses amounting to £17000. Hedley Byrne & Company Ltd sued Heller & Partners (defendant) for negligence, arguing that the information was misleading and was given out of negligence. Heller & Partners, on the other hand, urged that they did not owe the plaintiff duty of care in regard to the statement they had issued, and in any case, any liability was excluded. The court ruled that the relationship between the two parties was sufficiently proximate, and a duty of care was not in any way excluded. Heller & Partners would have reasonably realized that the information they gave could have been relied on when entering into a formal agreement with the party that was in question. The court said that, that could have given rise to a special relationship where Heller & Partners Ltd could have taken sufficient care while giving advice to avoid liability as a result of negligence. However, there was no order for damages. This is because the disclaimer issued by the defendant was sufficient to discharge any duty created by the defendant’s actions (Shapiro & Smith 2011, p. 25). The issues What can be observed in the case of Hedley Byrne is that the relationship necessary between the person making the statement or giving advice and the one receiving the advice, and then acts in reliance to the advice given, may be deemed to exist where: (1) the advice is needed for a purpose, whether generally described or particularly specified, and is made known either inferentially or actually to the one giving advice at the time he is giving the advice. (2) The party giving the advice knows either inferentially or actually that the advice will be received by the advisee, either individually or as a member in a given class in order that such advice should be used for that purpose by the advisee. (3) It is well known, either inferentially or actually that the communicated advice is to be acted upon by the person advised for the purpose intended for without independent inquiry, and it is so acted on by the person receiving advice to his detriment (Darling-Hammond 1989, p. 75). We can relate the Hedley Byrne case with the case of Ellen. This is because, like in Hedley Byrne’s case, Ellen received advice from a person whom she deemed had skills, knowledge and expertise in matters concerning business premises within Paddington and its suburbs, considering his position as an employee of the local council, and he was dealing with “business enquiries”. The employee should have reasonably realized that the information he was giving could have been relied on by his client to enter into a contract, since the client had indicated that her meditation studio required a calm environment. Conclusion During the ruling of Hedley Byrne & Company Ltd Vs. Heller & Partners Ltd case, Lord Morris stated that he considers and it follows, and should be considered as settled that, if a person, possessing special expertise or skill undertakes, irrespective of contract, applying the skill or expertise to assist another party, who relies upon that expertise skill or knowledge, a duty of care arises. It makes no difference whether the service would be given by instrumentality of words or by means. Additionally, if a person has a position or is so placed, other people could reasonably rely on his opinion or judgment, or his ability to make a careful inquiry, a person undertakes upon himself to provide advice or information to be passed on or forwarded to another party, who, as he should know, would rely on it, then duty of due care would arise. In the case of Hedley Byrne, the principle of ratio decidendi was cast on the basis of liability of statement. The house lords decided liability for negligence misstatement would arise where a special relation between the parties involved exists, along with reasonable reliance on the advice given (Neill 1965, p. 208). From this case, it is clear the local council employee owed Ellen a duty of care because he gave advice that he knew, or he should known that such advice could be relied upon when making a decision on whether or not to take up the lease contract; hence the local council should be liable for damages.3 Another case that sheds more light in matters of liabilities arising as a result of negligence is the ruling in the case of Capario Industrie plc. v. Dickman (1990). Case 2: Capario Industrie plc. v Dickman (1990) Facts of the case: Fidelity PLC was an electrical equipment manufacturing company, which Caparo Industries PLC targeted to take over. The target company was not doing well financially, and in march 1984, it had issued warnings on profits, which made its share price drop by half. The director of Fidelity made a preliminary announcement in profit for the year up to march. This showed its financial position was getting worse. Its share price continued to fall, and another company (Caparo Industries PLC) began to buy shares in large quantities. 1n June of 1984, the target company’s annual accounts were done with the assistance of Mr. Dickman, the accounts were released to shareholders. By then, Caparo was the biggest shareholder, controlling 29.9% of the company. At this point, the company made a general offer of the remaining shares to Caparo Industries PLC as required by the city codes rule on takeovers. After taking over, Caparo realized that Fidelity’s financial position was in a worse state that it had been revealed by the auditors and directors. Caparo industries PLC sued Dickman for negligence while preparing financial statements, and it sought to recover the losses it incurred. The losses were the difference between the company’s value, and what it would have been if the accounts were not misstated. The plaintiff did not succeed at first instance to prove whether a duty of care existed in the circumstances as he alleged, but he appealed, and the court of appeal established a duty of due care might have existed in the circumstances. The appellant court held that as a shareholder, Caparo PLC was entitled to rely on the accounts. But if Caparo was an outside investor without any stake in the company, there would have been no claim. The work of the auditor is primarily intended to be of benefit to stakeholders, and Caparo had a stake when it saw financial statements of the company, its claim was valid. This case was appealed again in the house of Lords. The criteria for duty of due care in giving opinions or advice were expressed in more restricted conditions and terms. In this case, Dickman, an auditor, had approved an overstated income statement of a company with negligence. Caparo, a takeover bidder, relied on the income statement, and he pursued the takeover of the company. The financial statements were misleading on the financial status of the company. After Caparo industries had taken over the company, it realized that the financial status of the acquired company was in a worse financial shape that it was lead to believe. Caparo sued Dickman (the auditor) for negligence. However, the House of Lords ruled that no duty of due care owed by an auditor to a third party in pursuance of a takeover bid. They held that the auditor did not do the audit for the bidder, but he did it for the company (Neill 1965, p. 207).4 The issue Many cases decided on this subject, even though they may not provide an absolute solution to the question whether a duty of care exists or not they indicate that the requirement should be satisfied before a duty is found. Conclusion In regard to the case of Ellen, the terms that were introduced by the ruling in Caparo case do not apply. This is because the local authority employee gave advice to Ellen, and the advice was not meant for anyone else. Therefore, he owed Ellen a duty of care. After the case of Caparo, a ruling was made by the court of appeal in the case of James Mac Naughton Papers p Ltd. v Hicks & Co. The court adopted a more restricted way, focusing more on the adviser’s constructive and actual knowledge of the use or purpose for which the advice or statement was made. The duty of care was to be limited to those transactions that the adviser knew or was supposed to know that the advisee will rely on the advice in connection to that particular transaction without having independent advice (Walsh 1972, p. 10). According to Mc Noughton paper Group Vs Hick, the following factor determines whether a negligent misstatement exists; the purpose of the advice or statement, the purpose of which the advice was given or the statement was made, the knowledge, expertise and experience of the advisee, and trying to determine whether the statement as given could be reasonably relied on (Pandit & Pandit 2009, p. 378). Considering the factors listed above, Ellen has a solid case against the local council, but the burden of proof lies with her to show that she relied on the advice given by the council employee to make a decision, which lead to her incurring losses financially due to lost business because of unfavorable environmental conditions, and also, she suffered losses in terms of a nervous disorder, which threatens her career in alternative medicine.5 List of references Barnikel, W 1980, “Liability for the consequences of a grossly negligent expert opinion (authorʼs transl)”, Zeitschrift fur Rechtsmedizin Journal of legal medicine, Vol. 84, No. 3, pp. 239-247. Brands, WG 2009, “Expert advice in liability cases”, Nederlands Tijdschrift Voor Tandheelkunde, Vol. 116, No. 5, pp. 228-233. Caparo Industries plc v Dickman [1990] 2 AC 605 Darling-Hammond, L 1989, “Accountability for Professional Practice”, Teacher College Record, Vol. 91, No. 1, pp. 60-80. 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Viewed from http://ukcatalogue.oup.com/product/9780199284399.do Pandit, MS & Pandit, S 2009, “Medical negligence: Coverage of the profession, duties, ethics, case law, and enlightened defense - A legal perspective”, Indian journal of urology IJU journal of the Urological Society of India, Vol. 25, No. 3, pp. 372-378. Rustad, ML & Koenig, TH 2007, “Negligent Entrustment Liability for Out Sourced Data”, Journal of Internet Law, Vol. 10, No. 10, pp. 3-6. Viewed from http://ezproxy.library.capella.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24619583&site=ehost-live&scope=site. Shapiro, DL & Smith, SR 2011, “Negligence in Professional Practice”, In DL Shapiro & SR Smith, eds. Malpractice in psychology A practical resource for clinicians2. American Psychological Assn, New York. pp. 25-43. Viewed from http://psycnet.apa.org/books/12320/002.pdf. Walsh, JP 1972, “Principles and professional practice”, The New Zealand dental journal, Vol. 68, No. 311, pp. 9-10. Viewed from http://www.springerlink.com/index/DJ1418T50460264J.pdf. Woolley, C & Costas, T 2005, “Directorsʼ Liability and Environmental Law”, The Quarterly Law Review for People in Business, Vol. 13, No. 1, pp. 1-5. Viewed from http://heinonline.org/HOL/LandingPage?collection=journals&handle=hein.journals/jutbusil13&div=4&id=&page=. Read More