Commercial and Corporation Law: Chloe vs. Burnside Council Case Study

This case study examines a commercial law scenario where Chloe seeks to sue Burnside Council for negligent misstatement. Chloe, relying on the Council's information that no construction would occur near her leased premises, signed a two-year lease. However, within six months, construction began, causing noise and disruption, which led to Chloe suffering a nervous disorder and financial loss. The case analyzes whether the Council breached its duty of care by providing incorrect information. The study references key legal precedents, including Shaddock V Parramatta City Council and Hedley Byrne & Co Ltd v. Heller & Partners, to establish the principles of negligent misstatement and the responsibilities of public authorities when providing information. The application section details how the principles apply to the Chloe's case. The conclusion affirms that Chloe can sue the Council for the damages incurred due to their negligent misstatement and breach of duty. The assignment also includes relevant references to legal literature.

Running head: COMMERCIAL AND CORPORATION LAW
Commercial and Corporation Law
Name of the Student
Name of the University
Author Note

1
COMMERCIAL AND CORPORATION LAW
Issue: The issue in the present case is whether local Government can be held liable for giving
negligent misstatement to the public. Therefore, the issue in the present fact case, the issue is
whether Chloe can sue Burnside Council for giving incorrect information. Having relied on the
information by the Council, Chloe signed the 2 year lease and thereafter saw the machineries, as
a result of which Chloe suffered from nervous disorder due to the noise. The pertinent issue to be
resolved is whether Chloe is legally empowered to file a suit against Burnside Council for giving
her wrong information after Chloe made an enquiry regarding the construction of buildings in the
premises.
Rule: The government bodies owe a duty of care towards the general public and those who are
in the position of giving advice should exercise proper duty of care so that people relying on
those instruction are not mislead and they do not incur any loss. Any person who holds a
government position and gives out information and advice to the general public, has to exercise
proper caution so that the person relying on his information does not suffer any loss. Therefore,
in light of the advice or information he gives, he has to exercise proper skill and judgment and
should be competent to give such advice. Whenever the person giving out the information does
so, being fully aware that the person shall be relying on his skill and judgment is ought to
exercise more skill and judgment. Therefore, in tort negligent misstatement is a when a person of
authority makes a careless statement causing harm to someone who has relied on that judgment.
In the case of Shaddock V Parramatta City Council (1981) Alr 3815 the court dealt with the case
if negligent misstatement and was involved in the decision making of fixing liability on the
Government agency. In the case of Shaddock V Parramatta City Council (1981) Alr 385,
Shaddock had purchased a property and had made an enquiry to the Council regarding the
1 Shaddock V Parramatta City Council (1981) Alr 385

2
COMMERCIAL AND CORPORATION LAW
chances of the roads widening. The Council did not make a detailed enquiry and made a very
careless statement that there was no possibility of the roads widening which was not the truth
because there was a proposal regarding the widening of the road. As a result of which, the value
of the property reduced and the applicant faced severe loss. The appellants made a claim that
they had suffered loss due to their reliance on erroneous information obtained from the
respondent. The respondent had not acted in the best interest of the general public and given out
incorrect information.
Duty of care: the case also dealt with duty of care and associated with that the liability of
providing negligent misstatement. Therefore, the court first checked if there was a duty of care or
not and to satisfy that, the court applied the test to check if the Government body had the duty of
care towards the applicant2. If the defendant gives out an advice of a serious nature or related to
business undertaking, the defendant needs to be aware that the plaintiff intended to rely on that
information. The court refereed to the judgment passed in the case of Mutual Life & Citizens’
Assurance Co. Ltd, where the duty of care only subsists in cases where the person who is
carrying on a business or trade and in such cases giving advice that calls for skill. If cases when
the defendant possesses skill and competence and makes the plaintiff believe that the information
is correct, he owes a duty of care towards the person acting on that advice. Liability is not limited
to those who have a special skill and competence but it includes those professionals who are in
the position of giving information3.
Mason J said that in cases of advices pertaining to serious matters, which have an effect on the
inquirer, the person giving the information has a duty to act cautiously4. In cases of government
2 Bohlen, Francis H. "Misrepresentation as Deceit, Negligence, or Warranty." Harvard Law Review 42.6 (1929):
733-747.
3 Smith, Jeremiah. "Liability for Negligent Language." Harvard Law Review (1900): 184-199.
4 Witting, Christian A. Liability for negligent misstatements. Oxford University Press, 2004.

3
COMMERCIAL AND CORPORATION LAW
bodies, the authority possesses special responsibilities and in exercise of those public functions
pertaining to serious matters, the authority has special responsibilities. In matters related to
specialized information, the public officers need to act with proper care. Therefore, in this case,
it was held that the government authority was liable for giving negligent mis-statement knowing
that the person who was looking for the information was relying on it. Another important acse of
negligent mis-statement is Hedley Byrne & Co Ltd v. Heller & Partners & Esso Petroleum Co
Ltd v. Mardon5, where the same principle was held.
Application:
Applying the judgment of the case to the factual scenario, it can be said that the public
authorities owe a duty of care towards the public. In cases when the public authority is asked to
give information on a matter of serious concern, he has to exercise proper skill and judgment in
doing so. If the authority is aware that the information is being found out for a business
undertaking and in case if the information is wrong, the enquirer will suffer loss, he needs to act
more cautiously. In the present case, Chloe relied on the advice of the Council that there will be
no construction of building in the premises where she was signing the lease with the landlord.
Relying on the advice of the Council, Chloe signed the lease and within 6 months, she saw big
machineries that had come to renovate the next door wall and it also broke down a few walls.
The resultant noise and the failure of the business gave Chloe a very hard time and she started
suffering from nervous disorder. Chloe was very disappointed that she had relied on the advice
of the Council because had she not followed, she would not have signed the lease. Chloe’s
decision to lease the premises was contingent on whether there was any construction in the
premises. Due to the nervous disorder she faced, she moved out of the premises and also stopped
5 Hedley Byrne & Co Ltd v. Heller & Partners & Esso Petroleum Co Ltd v. Mardon,

4
COMMERCIAL AND CORPORATION LAW
paying rent as result of which she suffered huge loss. Chloe had clearly relied on the skill and
judgment of the Council and had taken the decision to lease the premises. Therefore, applying
the same principles as was held in the case of Shaddock V Parramatta City Council (1981) Alr
385 that a public authority owes duty of care to the public and if he knew that the enquirer was
relying on that advice, he ought to have exercised more precaution and care. The Court had held
that the public authority shall be held liable if the person seeking the information relies on that
and suffers loss. Therefore, in this case, Chloe had relied on the advice of the Councilor and had
subsequently suffered the loss. The Council was in the position to give out reliable information
and he is duty bound to act with proper care and diligence.
Conclusion: Chloe can sue Burnside Council for giving out negligent mis-statement and for
breaching his duty to act with care and diligence. The Councilor owes a duty of care to the
public and he is responsible for exercising his power with proper skill and judgment. In this case,
as a result of the breach of the Councilor’s duty, Chloe suffered loss and therefore she can sue
him for causing Chloe harm and acting in breach of his duty to exercise skill and judgment.

5
COMMERCIAL AND CORPORATION LAW
References
Bohlen, Francis H. "Misrepresentation as Deceit, Negligence, or Warranty." Harvard Law
Review 42.6 (1929): 733-747.
Hedley Byrne & Co Ltd v. Heller & Partners & Esso Petroleum Co Ltd v. Mardon,
Shaddock V Parramatta City Council (1981) Alr 385
Smith, Jeremiah. "Liability for Negligent Language." Harvard Law Review (1900): 184-199.
Witting, Christian A. Liability for negligent misstatements. Oxford University Press, 2004.