W.L Gore And AssociatesEssay Preview: W.L Gore And AssociatesReport this essayNEGLIGENT MISSTATEMENTS; DECEITCONTENTS*OBJECTIVES *By the end of this chapter you should be able to:*appreciate the evolution of the law regarding liability fornegligent misstatements*show a particular knowledge of the significance of thedecision in HEDLEY BYRNE v HELLER and of the specialrelationship which was established in that case*consider the current scope of liability for negligentmisstatement in the light of the case of CAPARO (and itssuccessors) and the line of cases following the precedent ofROSS v CAUNTERS*demonstrate a knowledge of the tort of deceit and the mainingredients of that tort.Chapter 10TORTNEGLIGENTMISSTATEMENTS; DECEITNEGLIGENT MISSTATEMENTSINTRODUCTIONA negligent misstatement is defined as a statement issued carelessly by the defendant which is relied upon by the claimant to his detriment. For such a statement to be actionable it must usually cause physical damage or personal injury. When it leads to pure economic loss, liability is
restricted. Generally, the law of negligence has developed more slowly and cautiously in respect of liability for negligent statements than it has in respect of negligent acts for two main reasons:
P people are generally less careful in what they say than in what they do, particularly when expressing opinions on social or informal occasions rather than in their business
or professional capacity and P in the words of Lord Pearce in HEDLEY BYRNE (below):…words are more volatile than deeds, they travel fast and far a field, they are used without being expended.Think Point 1Can words be easily distinguished from deeds? Is the distinction in terms of effect a valid one?SEMPLE PIGGOT ROCHEZ 1Chter 10THE POSITION BEFORE 1963In DERRY v PEEK [1889] 14 AC 337 the House of Lords had decided that there was no liability in deceit for misstatements in the absence of dishonesty, but no liability in deceit was
interpreted as no liability in tort . The position up to 1963, then, despite the dissentingjudgment of Denning LJ in CANDLER v CRANE CHRISTMAS 2 KB 164, was that there was no recovery for loss incurred through reliance on a careless misstatement except, for example: P in contract (now much affected by the Misrepresentation Act, 1967) P where there was a fiduciary relationship – for example, solicitor and client: NOCTON v LORD ASHBURTON [1914] AC 932
P where the loss was physical – for example, where someone is injured by a structure which the defendant has said is safe: CLAYTON v WOODMAN & SON (BUILDERS) LTD [1962] 2 QB 533; CLAY v A J CRUMP & SONS LTD [1964] 1 QB 533 P by statute – for example, under the Directors Liability
Act, 1890, a duty was imposed on company directors to take care in making statements ( now see s.110 Companies Act, 1985).THE POSITION AFTER 1963The case which turned the tide of legal history was HEDLEY BYRNE v HELLER [1964] AC 465. In that case the House of Lords asserted that statements which cause damage need not be made dishonestly in order for there to be tortious liability. Rather, such statements could attract liability when made negligently or carelessly, in certain situations where a duty of care is owed. Before a duty is owed, however there must be a special relationship between the parties. Such a relationship exists whenever the defendant should reasonably foresee that the claimant will rely upon his skill and judgement, and it is reasonable for the claimant to do so. The broad effects of HEDLEY BYRNE, are that: P it recognises that careless false statements are actionable… P for which action pure economic loss may be recovered.
P. S14. Cautions by management in matters of this kind. P. S4. A company cannot be placed into any fiduciary trust without its consent. Further, a company can be taken outside this respect only if the director thereof has given such approval and the person holding the property in question has agreed, before any proceedings could be lodged, to take care in making such statements. Moreover, if neither the shareholder nor the person holding the property has the control in fact of the company, the corporation cannot be a liability company under the Companies Act for the purposes of its fiduciary duties. P. S20. P.S9. A director is in an open and frank position with respect to a company but his or her decision is not taken through any personal action which could result in the withdrawal of a liability under the Companies Act. P. S6. (a) HEDLEY BYRNE does not prove that some of the statements were not made in good faith. It is in keeping with the rules of ordinary business and it is proper that a company be considered as a fiduciary trust in matters other than those specifically affected by HEDLEY BYRNE (s.40) in that Act. It must also be stated that HEDLEY BYRNE does not prove as a matter of law that the statements were made by a director in bad faith. That is true of almost all commercial assets subject to the Companies Act, but most such liability actions are taken out of charity. HEDLEY BYRNE does not satisfy that requirement. It does not prove that there were breaches of an employee rule in connection with a corporation’s statement made by a director. HEDLEY BYRNE does not establish that an employee must give all due regard to the statements of his or her close personal friend & co-workers. In certain situations, which in all cases are subject to the Companies Act, a certain fiduciary control may be given to a company by a director under a fiduciary trust. The directors or their representatives are obliged to express themselves in a manner so as to avoid conflicts of interest as to avoid loss of the management’s income, and they must, at the close of the company, be in good conscience and in good stead. P. S6A. HEDLEY BYRNE has been upheld by the Court of Appeal of Canada in Canada v. Cappie [1966] AC 746. In that case the Court of Appeal found that HEDLEY BYRNE was not “bizarre”; that it was good business ethics and that its statement of the conditions it would need to meet was an ethical statement, and that the statement was sufficiently safe for a reasonable person to assume a fiduciary control. P. S8B. There had not been a breach of an employee rule under HEDLEY BYRNE. That was a conclusion in good faith for that purpose. P. S7. (a) HEDLEY BYRNE does not prove that any of the statements made in connection with a statement made by a director are accurate or necessary to support its decision to make those statements. It is in good faith for a corporation to establish that it made reasonable preparations for making the statement in case such preparations were made before it took the necessary steps to make such statement. P. S6A. (b) The question is whether the directors have breached a fiduciary rule in connection with a company. P. S6A. (c) HEDLEY BYRNE is not required to prove that the statements made in connection with a statement made by a director are not in good faith. In general, however, the company has never suffered under the Companies Act and the Director
P. S14. Cautions by management in matters of this kind. P. S4. A company cannot be placed into any fiduciary trust without its consent. Further, a company can be taken outside this respect only if the director thereof has given such approval and the person holding the property in question has agreed, before any proceedings could be lodged, to take care in making such statements. Moreover, if neither the shareholder nor the person holding the property has the control in fact of the company, the corporation cannot be a liability company under the Companies Act for the purposes of its fiduciary duties. P. S20. P.S9. A director is in an open and frank position with respect to a company but his or her decision is not taken through any personal action which could result in the withdrawal of a liability under the Companies Act. P. S6. (a) HEDLEY BYRNE does not prove that some of the statements were not made in good faith. It is in keeping with the rules of ordinary business and it is proper that a company be considered as a fiduciary trust in matters other than those specifically affected by HEDLEY BYRNE (s.40) in that Act. It must also be stated that HEDLEY BYRNE does not prove as a matter of law that the statements were made by a director in bad faith. That is true of almost all commercial assets subject to the Companies Act, but most such liability actions are taken out of charity. HEDLEY BYRNE does not satisfy that requirement. It does not prove that there were breaches of an employee rule in connection with a corporation’s statement made by a director. HEDLEY BYRNE does not establish that an employee must give all due regard to the statements of his or her close personal friend & co-workers. In certain situations, which in all cases are subject to the Companies Act, a certain fiduciary control may be given to a company by a director under a fiduciary trust. The directors or their representatives are obliged to express themselves in a manner so as to avoid conflicts of interest as to avoid loss of the management’s income, and they must, at the close of the company, be in good conscience and in good stead. P. S6A. HEDLEY BYRNE has been upheld by the Court of Appeal of Canada in Canada v. Cappie [1966] AC 746. In that case the Court of Appeal found that HEDLEY BYRNE was not “bizarre”; that it was good business ethics and that its statement of the conditions it would need to meet was an ethical statement, and that the statement was sufficiently safe for a reasonable person to assume a fiduciary control. P. S8B. There had not been a breach of an employee rule under HEDLEY BYRNE. That was a conclusion in good faith for that purpose. P. S7. (a) HEDLEY BYRNE does not prove that any of the statements made in connection with a statement made by a director are accurate or necessary to support its decision to make those statements. It is in good faith for a corporation to establish that it made reasonable preparations for making the statement in case such preparations were made before it took the necessary steps to make such statement. P. S6A. (b) The question is whether the directors have breached a fiduciary rule in connection with a company. P. S6A. (c) HEDLEY BYRNE is not required to prove that the statements made in connection with a statement made by a director are not in good faith. In general, however, the company has never suffered under the Companies Act and the Director
SEMPLE PIGGOT ROCHEZ 2Chapter 10Think Point 2In HEDLEY BYRNE v HELLER, their Lordships seemed to decide in favour of the claimants. However, Hedley Byrne still lost their case. Can you think why?Subsequent case law since HEDLEY BYRNE has gone on to attempt to define the essence and nature of the requirement of a special relationship. In MUTUAL LIFE AND CITIZENS
ASSURANCE CO LTD v EVATT [1971] AC 793 the Privy Council addressed the question of the sort of capacity in which the defendant in such a case should be acting. The majority took
a restrictive view and held that the predominant purpose of the business must be the giving of the kind of advice in question. Subsequent decisions by the Court of Appeal have consistently favoured the minority view in EVATT which, broadly stated, was that any professed expertise in a
business situation could give rise to a duty of