Can Jack Smith sue Dandenong Council for pure economic loss caused due to negligence?

Issue: In this case the issue is if Jack Smith can take legal action against Dandenong Council for
its negligence which has resulted in economic loss.
Rule: In order to deal with such cases, the tort related with negligent misstatement needs to be
applied. In this regard, it can be described as an 'an accurate statement to that has been made
honestly, but carelessly'. Generally such statement is made in the form of advice that is given by
one party having a special knowledge to the other party, which does not have such knowledge.
Generally, liability does not arise in case of negligence, unless the respondent had a duty of care
in favor of the claimant. Therefore it is required that first of all the harm that has been suffered
by the plaintiff should be characterized for the purpose of applying the correct test that needs to
be used for establishing that indeed there respondent had a duty of care owed to the claimant,
which requires the exercise of reasonable care. As a result of the expansion of this duty that took
place during the 1960s now it is possible that compensation can be claimed even if pure
economic loss has been suffered by the claimant (Hoggard, 2016). Therefore in Sutherland Shire
Council v Heyman, it was determined by the court that pure economic loss was caused to the
claimant on account of the financial losses suffered by them when they found that the building
work that has been done on their house was found to be defective. At the same time, it was
mentioned in Perre v Apand that the claimant had underwent pure economic loss. This loss was
caused on account of the opportunity that was lost to sell the potatoes in a particular market,
which was especially profitable.
Another leading case in this regard is that of Hedley Byrne v Heller [1964]. In this case, it was
held by the court that the liability is present for negligent misstatement when an individual who

has a special skill/knowledge has given such information being well aware of the fact that the
other person is likely to depend on the material. In the same way, the court had adopted the
ruling given in Hedley Byrne case in Mutual Life v Evatt (1968). However in this case the court
had departed from the English doctrine. Therefore, it was decided that it is not necessary for a
special relationship that the speaker should have certain special knowledge regarding the issue.
The position adopted by the court in Australia in Mutual Life case has been reaffirmed and it had
been further relied upon in Shaddock V Parramatta Council (1981).
Application: The facts of this case are somewhat similar to the effects that are given in the
present case. Therefore here the applicant was going to purchase some property, which fell under
the authority of the Council. Therefore the solicitor of the plaintiff made inquiries orally as well
as in writing from the council and asked if there was any proposal related with road widening
present concerning the property. However, the council negligently gave information that
indicates property there was no road widening plan. The reality was that there was indeed a
proposal regarding road widening. Under the circumstances, it was held by the court that in the
same way as any individual who is involved in business is going to be responsible for negligent
misstatements, any person who is performing the government or administrative duties also going
to be responsible. Therefore the opinion was expressed by the court that their duty of care is
going to arise when the information provided by the person is of specialized nature, and it was
very significant for the intended purchases and it fell within the ambit of the functions of the
authority while discharging its public responsibilities. Therefore, it was held that when
information has been requested regarding a grave issue and the conditions were of the nature that
the council is aware of or should have. The fact that the person who is asking for information is
going to rely on the same, there is a duty of care.