Liability for Negligent Misstatement and Omission in Giving Advice

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Issue 1
To establish is one can be liable for giving negligent misstatement or making an omission when
giving advice and consequently economic loss is suffered.
Rule 1
It is a cardinal rule as was espoused in the case of Hedley Byrne & Co Ltd v Heller and Partners
Ltd (1964) that negligence is may arise if one omits or recklessly gives negligent misstatements
to another individual without care about the truth leading to economic loss. This implies that
economic loss arising out of negligent misstatement is recoverable pursuant to the law of torts. It
is prudent to note that there are certain conditions that must be satisfied for an economic loss
arising out of negligent misstatements to be recoverable.
Application 1
Dandenong Council could be liable for giving negligent advice to Jack Smith. This stems from
the fact that Dandenong Council omitted to inform Jack Smith that the land on which he seeks to
develop his properties has been marked for road widening.
Conclusion 1
It can be conceded that Jack Smith has suffered economic loss since he bought the land yet it has
been marked for road widening. As a result Dandenong Council could be liable for negligence if
Jack Smith proves all conditions have been satisfied.
Issue 2
To establish if Dandenong Council owes Jack Smith a duty of care
Rule 2
The claimant must prove that the defendant had a duty of care. In the celebrated case of
Donoghue v Stevenson (1932) it was held that duty of care arises if one is likely to be injured or
suffer loss due to the actions and omissions of another individual. It is imperative to note that the
claimant in the case of negligence must not be the person who directly commissioned the advice.
The court in Smith v Eric S Bush (1990) stated that at the time the expert is giving the advice the
claimant must be in his contemplation. This implies that the defendant must have contemplated
that his actions or omissions are likely to injure or cause harm to the claimant. To prove duty of
care it must be evinced that there is a relationship of proximity. Ideally, it must be clear that one
party in the transaction is an expert in a certain knowledge domain and the other part seek to rely
on that knowledge and expertise. In the case of Cornish v Midland Bank plc (1985) a mortgage
expert omitted to explicate to a claimant that she would be liable for all her husband’s debts. Due