Business Law Case Analysis: Shaddock v. Parramatta City Council

This case study analyzes Shaddock (L) & Associates Pty Ltd v. Parramatta City Council, a significant case in business law concerning negligent misstatement. The case revolves around the appellant's purchase of a property and the respondent council's failure to disclose road widening plans, leading to a decrease in property value. The analysis examines the court's decision, which found the council liable for negligent misstatement in writing but not for oral inquiries. It explores the legal principles of duty of care, the application of Hedley Byrne & Co Ltd v Heller & Partners Ltd, and the rejection of arguments based on Mutual Life & Citizens' Assurance Co Ltd v Evatt. The court's reasoning, focusing on the reliance placed on written information and the council's omission, is critically analyzed, highlighting the importance of providing accurate information, especially for public bodies, and the implications for professional negligence in business law. The case underscores the distinction between oral and written communication in establishing a duty of care and the consequences of providing misleading information.

Running head: BUSINESS LAWS
Business Laws
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Author note

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Case introduction
In general a person has no duty to take precautions towards ensuring that there is no financial
loss caused to another person unless such loss has been caused by a physical injury or to a
damage of the persons property as ruled through the case of Spartan Steel & Alloys Ltd v Martin
[1972] 3 WLR 502. However there has been an exception to this general rule which have been
discussed through the provisions of cases like Hedley Byrne & Co Ltd v Heller & Partners Ltd
and Mutual Life & Citizens' Assurance Co Ltd v Evat. In these cases it had been ruled by the
court that where there is a negligent misstatement made by a professional who may be able to
foresee that the other party may rely on such statement to indulge in an act or omission and
suffer a loss there will be a liability for negligence. This paper will deal with the case of
Shaddock (L) & Associates Pty Ltd v Parramatta City Council where a similar issue had been
brought before the court. In this case the court held that there was negligence in the part of the
defendant by providing a negligent misstatement in writing. In this case the defendant was
Parramatta City Council and the plaintiffs (Appellant) were Shaddock (L) & Associates Pty Ltd.
The facts of the case
The appellant company had purchased a property in Jul7 1973 in Parramatta in order to
redevelop such property. The respondent council in February 1974 confirmed a resolution which
respect to 1971 august as per which it determined that two streets in relation to the property of
the appellant were to be broadened which would make decrease the property area by as much as
40%. Thus the property becomes unsuitable for redevelopment. If the resolution of the council
had been known to the plaintiff they would not have purchased the property in context. One of
the representatives of the appellants had stressed to Mr. Carrol the solicitor of the company in

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1973 that it is very important to acquire the whole property for the purpose of the development.
The solicitor based on such instructions took the required steps to find out whether there was any
intention on the part of the local council, to re-align or widen the roads near the property. He had
called the town planning department of the council to inquire about any intention about the
council to enter into such actions. An unidentified employee stated that the council had no plans
to indulge the widening of the roads surrounding the property. Depending upon the advice
various certificates had been applied for by the solicitor with respect to the provisions of Local
Government Act 1919 (NSW). In relation to the application form which had been provided by
the solicitor contained the question that "Is the property affected or proposed to be affected by ....
Road widening or re-aligning proposals ... "?. Under the provisions of section 342AS the
solicitor had been provided with the certificates in context. In general practice the council in
case of proposals like this keep a note of the fact on such certificates. The knowledge about this
practice was available to the solicitor and the certificate which had been received by him had no
mention about any of such proposal. The applicant and the solicitor thereby believed that no such
proposal was present in the mind of the council and thus relied on the information to go forward
with the purchase.
The issues raised by both plaintiff and defendant.
There were two primary issues which had been brought before the court in this case. These were
as follows
1. Who had a duty of care in case of a claim for negligent misstatement? Whether it is the
defendants as raised by the plaintiff or not the defendants as argued by the defendants

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2. Are public bodies to be covered under the principles for liabilities for a negligent
misstatement? Whether the law provided by the case of Mutual Life & Citizens'
Assurance Co Ltd v Evatt would be applied in this case as asked by the defendant or
whether the rules of Hedley Byrne & Co Ltd v Heller & Partners Ltd would be applied as
claimed by the plaintiff.
The arguments presented by both parties.
Four arguments had been raised before the trial judge by the plaintiff in relation to the claim for
damages but the court only took into consideration one substantial argument rejecting the other
three. The primary argument made by the plaintiff which had been considered by the court in this
situation was that the a duty of care had been owed by the defendant to the plaintiff in relation to
ensuring that their responses with respect to the oral and written information which had been
provided was correct. The duty has been breached as the information which had been provided
turned out to be untrue. Reliance had been put by the plaintiff on to the decision provided in the
case of Hedley Byrne & Co Ltd v Heller & Partners Ltd.
On the other had the council in this case had put its reliance on the decision provided in the case
of Mutual Life & Citizens' Assurance Co Ltd v Evatt. In this case it had been stated that the
plaintiff had no right to make a claim in relation to economic loss incurred by the plaintiff
because of a negligent misstatement made by the defendant as the defendant was an insurance
company and the financial advice in context did not fall within their professional expertise.
The judgment of the court

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The court ruled in favor of the Appellant in this case stating that the council did owe a duty of
care to the Shaddock and Associates. The duty of care had been breached and the damages were
caused to the property owners because of the expansion of the roads. In this case it had been
stated by the court that the oral statement which has been made by the defendant in relation to an
oral enquiry with respect to the restriction of land should not be considered as an act which may
give rise to a liability. On the other hand the written response in relation to the written inquiry
has to be considered as an action which would give rise to the liability. The oral advice would
not be taken into consideration for the negligent as an oral advice would not found satisfactory
on the part of the plaintiff to rely upon. The court allowed the appeal of the plaintiff with cost
under the provisions of s. 37 of the Judiciary Act 1903 and made them entitled to $173,938.
Critical analysis of why the court decided in favor of the plaintiff
There was no doubt which the court had in relation to the fact that the oral inquiry was not
adequate to create a special relationship required under law for a claim of negligence. There was
no duty of care owed by the council in relation to the enquiry. This is because the advice was not
in writing, the person who stated so was also not identified and thus no reasonable person would
rely on such advice. Thus when there was more formal way of getting an advice the seeking of
information in oral form cannot give rise to a special relationship. It had been stated by the court
of appeal that a person cannot be held liable where no statement had been made and the supply
of information is through implications in favor of the council. However such contention had been
evidently and appropriately rejected by the court. It was stated by the court in this case that
where there is expectation of correspondences a failure in relation to the reply is a proof of the
evidence of the authenticity of the statement contained in the reply. The court further suggested
that a failure to provide an answer resulted into an intimation of facts with respect to past actions

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in replying inquiries in relation to certificates under section 342AS. Thus where an omission had
been identified through the facts of the case on the part of the council there must be a claim for
negligence. The question before the court was also that whether the liability of a negligent
misstatement is limited to an advice or it is also present in relation to information. In relation to
this case the alleged misstatement was in relation to information which has been provided rather
than an advice. However because of the nature of the question which has been asked the
difference between the meaning information and advice is negligible. It was stated by the court
that there was no need for differentiating between the two terms. The court took into
consideration the cases of Hedley Byrne and Evatt. In the case of Hedley Byrne the nexus
required to invoke the duty of care had not been defined properly. However it had been provided
that the relationship can only exists if the advice had been relined upon by a person in a
reasonable manner and it must also be clear to the advisor that the other person is relying upon
its judgment and skill. On the other had in the Evatt's case the defendant had put an unnecessary
gloss on the formation of the duty of care as considered by many since the decision. It had been
held by Lord Diplock while providing the judgment on behalf of the majority that a duty of care
will only be present the material aspect of the inquiry must ask for an application of competence
and skill to an extent which is not possessed by a reasonable person and the advisor has to hold
himself having such competence and skill and having the will to exercise it. This situation is
implied as in where people is in the business of providing advice on the kind of the matter or
provide that he is willing to deploy the skill and standard of a individual who has the role of
providing advice in relation to such matter. On the other hand a duty would be present if the
adviser has an interest in the transaction on which an advice has been provided. This formulation
had been entirely rejected by the court which reasserted the provisions provided in the case of

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Hedley Byrne. In addition the court had rejected the arguments provided in the Evatt’s case as
here public body was involved who had the duty of responding to the enquires of the public.
Even if the case is applied in the situation it can be stated that the council will fall within the test
provided by this case as there is no material difference between a public body and a business
providing advice.
The claim of the plaintiff in this case was much stronger than that of the defendant. This is
because the case which the defendant attempted to reply upon had various defects in it. In
addition the facts of the case had been significantly different as compared to the facts of which
took place between the plaintiff and the defendant. The defendant in this case was a public body
whose role is to provide the public with relevant information which they rely upon to make
decision however in the Evatt case the duty of care was not found as the company did not have
the role of providing advice in relation to the matter. In addition there was an omission on the
part of the council in relation to the certificates where they failed to mention about the proposal
to widen the road. Thus in this case through the application of the rules of professional
misstatement in negligence it can be stated that a proper and just decision had been made by the
court in favor of the plaintiff who had relied on the advice of the council and suffered losses in
relation to their property.

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References
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Mutual life and citizen's Assurance Co Ltd V Evatt [1971] AC 793
SHADDOCK V PARRAMATTA CITY COUNCIL (1981) ALR 385
Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502