A PROJECT

ON
LIABILLITY FOR MIS-STATEMENT UNDER LAW OF TORTS

[Submitted as a partial fulfillment of the requirements for B.A. LL.B (HONS) 5 Year
Integrated Course]
Session: 2019-2020

Submitted On: 11TH SEPTEMBER 2019

Submitted By: Submitted to:

PRATEEK NAHAR
Roll no- 78 Faculty- LAW OF TORTS
Class: I Semester (B)
 CERTIFICATE

Mrs. Veenu Date: - September 11, 2019

Assistant Professor

University Five Year Law College

University of Rajasthan

This is to certify that Prateek Nahar of Ist Semester, Section - B of University Five Year Law
College, University of Rajasthan has carried out the project entitled “liabalities for Mis-
Statements under law of torts” under my supervision and guidance. It is an investigation
report of a minor project. The student has completed research work in my stipulated time and
according to the norms prescribed for the purpose.

Supervisor
 DECLARATION

I PRATEEK NAHAR, hereby declare that this project titled “LIABILITIES FOR MIS-
STATMENTS UNDER LAW OF TORTS” is based on the original research work carried out
by me under the guidance and supervision of MRS. VEENU

The interpretations put forth are based on my reading and understanding of the original texts.
The books, articles and websites etc. which have been relied upon by me have been duly
acknowledged at the respective places in the text.

For the present project which I am submitting to the university, no degree or diploma has been
conferred on me before, either in this or in any other university.

Date: 30th SEPTEMBER, 2019 PRATEEK NAHAR

Roll No. 78

Semester I-B
 ACKNOWLEDGEMENT

I have written this project, “LIABILITIES FOR MIS-STATEMENTS UNDER LAW OF

TORTS” under the supervision of Apoorv Banerjee Faculty, University Five Year Law
College, University of Rajasthan, Jaipur. His valuable suggestions herein have not only helped
me immensely in making this work but also in developing an analytical approach this work.

I found no words to express my sense of gratitude for Director Dr. SanjulaThanvi, and Dr.
Director Mr. Manoj Meena and Mr. Abhishek Tiwari constant encouragement at every step.

I am extremely grateful to librarian and library staff of the college for the support and
cooperation extended by them from time to time.

PRATEEK NAHAR

Roll No.
TABLE OF CONTENT
 INTRODUCTION

A tort can be defined as a wrongful act or omission which gives rise to a civil action in a
court of law against the party that committed the wrongful act.

The tort of negligent misstatement is defined as an “inaccurate statement made honestly but
carelessly usually in the form of advice given by a party with special skill/knowledge to a
party that doesn’t possess this skill or knowledge” (Willesee Bill, Law management 252,
Curtin Handbook 2010),

In today’s society we can observe that there are various forms of tort, some of which have
roots back in medieval times and have been recognised by courts since. In order to prove that
negligent misstatement occurred, we have to prove that the elements of negligence were
breached as most torts have common elements which include;

ELEMENT OF FAULT; There has to be proof presented showing that one party committed
the tortuous act either intentionally or negligently

ELEMENT OF ACTUAL DAMAGE; the plaintiff would have the onus to prove that they
suffered actual damage/injury/loss as a result of the tortuous act by the tortfeasor.

ELEMENT OF OBTAINING REMEDY; as the law of Torts is concerned with

compensating the victim rather than punishing the wrongdoer, the rule applied by the Courts
is to put the plaintiff/victim into a position they enjoyed before the wrongful act took place.

For example; if a person was wrongfully imprisoned, the courts would seek to put the victim
back into the position they previously enjoyed before the imprisonment took place possibly
through monetary compensation.

For the Court to decide whether a tortuous act took place, it would have to take into account
additional factors that make the wrongdoer responsible for the outcome of the tortuous act.
Such factors include;
 DUTY OF CARE

A person/party must initially owe a legal duty of care to the other person/party in order to be
held liable for negligence.

“Duty of care can be defined as a duty to take reasonable care/skill that a normal reasonable
person would” (Latimer Paul; Australian Law Handbook (2009) Chapter 4; Torts)

The onus is therefore on the plaintiff to show that a duty of care was owed to him/her by the
defendant. The plaintiff will have to consider the three state test of proving that the duty of
care did exist between the plaintiff and defendant which considers;

A. FORESEEABILITY; was it reasonably foreseeable to the alleged wrongdoer that his/her

conduct/omission would be likely to cause harm?

B. PROXIMITY TEST; was there a physical? Factual or circumstantial link between the
parties involved?

C. VULNERABILITY; is it possible that the plaintiff was vulnerable to harm as a result of

the defendant’s conduct/course of action?

These pre-requisites need to be addressed in order to prove that the element of duty of care
was present when pursuing a case in negligence or negligent misstatement.

(Willesee Bill, Law management 252 Curtin Handbook (2010), Chapter three)

With reference to duty of care, we may observe in

COLE V SOUTH TWEED RUGBY LEAGUE FOOTBALL CLUB LTD [2004] HCA 29

FACTS; Mrs Cole left the club on foot at 5.30pm with a blood alcohol limit of 0.238 and was
hit by a car

RULING; the court held that the club management had fulfilled its duty of care and could not
have legally prevented her from leaving.
 CHAPTER – 1

HACKSHAW V SHAW [1984] HCA 84

FACTS; A farmer shot at a car of a trespasser stealing petrol from the farm following a series
of robberies at his farm. The shooting occurred in darkness when the thief was standing
beside his car and his girlfriend was crouched in the front seat of the car and was eventually
wounded…

RULING; The Court held that the use of firearms was excessive force and the risk of
killing/serious injury was out of proportion to the wrongful acts of the plaintiff.

The second Factor to be considered by the court would be;

STANDARD OF CARE

Once we have ascertained that a duty of care was present between the parties, we need to
address if the standard care was breached by the wrongdoer by observing his/her conduct
towards the plaintiff.

“An appropriate standard of care can be defined as the standard of care that an ordinary,
reasonable and prudent person would follow” (Willesee Bill, Law management 252 Curtin
Handbook 2010)

As there are various cases with varying degrees of the amount of care needed to be present,
basic principals are considered such as;

A. the risks inherent in the conduct

B. the severity of the likely outcome should any of the risks materialise

C. if the defendant’s conduct can be gauged with existing standards

D. And whether the defendant has kept up with changes in professional standards.

The third element to consider is

DAMAGES CAUSED

As the area of Torts is concerned with compensating the victim, it is paramount that the Court
ascertains that the defendant’s actions led to the plaintiff suffering loss/injury.

Once we have ascertained that there was a duty of care present between the parties and that
duty was breached, the Court will look at the resulting loss/injury and its connection to the
standard of care breached by the defendant. This is also referred to as “the remoteness test”.
CASE NO.2

LINDEMAN LTD V COLVIN [1946] HCA 35

FACTS; A Person was hospitalised following a work-related injury to his head. Due to a pre-
existing condition “brittle bones”, he fractured his leg while in hospital adding to his stay in
hospital and medical expenses.

RULING; The Court held that the employer was not liable for the injuries received in
hospital as the broken leg was a separate injury with separate cause independent from the
initial injury to the head.

When we try and tackle the concept of negligent misstatement, we can conclude that this area
of tort has morphed into a branch of its own though the basic fundamentals of negligence
have to be present first such as establishing the presence of a duty of care, standard of care
provided and possible breach and damages caused.

Negligent misstatement also takes into account another aspect; the existence of special
relationship that exists between the parties involved.

This special relationship has been found to be present when one of the parties has special
skills/knowledge of a particular field and the second party (plaintiff/receiver of information)
has sought the services of the defendant in order to make a sound decision. If the provider of
such information put across information that later proves to be detrimental to the plaintiff, the
plaintiff can seek action in a Court of Law for compensation/damages.

The Courts have formulated a four point test which seeks to prove whether there was a
special relationship between the parties and include;

-The defendant realises that the plaintiff has sought the services of the defendant as he/she
possess special knowledge/skill in a chosen profession and that the plaintiff trusts the
advice/information given by the defendant.

A. The information exchanged by the parties involves a serious/business matter

B. The defendant realise that the plaintiff intends to act on the information/advice given
C. It would be reasonable in the circumstances for the plaintiff to seek out and rely on the
information given. (Willesee Bill, Law management 252, Curtin Handbook 2010, Chapter
four; Torts)
SHADDOCK& ASSOCIATES PTY LTD V PARRAMATTA CITY COUNCIL [1981] HCA 59;
150 CLR 225

FACTS; A solicitor acting on behalf of Shaddock contacted the Parramatta city council
to enquire if a property would be affected by road widening proposals. The council
employees issued a form and made other statements, none of which indicated if the
property was under threat.

Consequently shaddock purchased the property and the road widening proposals
were effected and Shaddock suffered losses which he sued for under negligent
misstatement.

RULING; The Court held that the council was at fault for not providing the correct
information to a person who relies on that information.

Also it is possible for this special relationship to be non-existent by referring to;

SAN SEBASTIAN PTY LTD V MINISTER ADMINSTERING THE ENVIROMENTAL

PLANNING AND ASSESSMENT ACT (1986) HCA 68

FACTS; The New south Wales’s state planning authority and the Sydney city council
were held not liable to a property developer for their publicly displayed study
documents on the proposed development of Woolloomooloo in inner Sydney. The
developer purchased properties in reliance on the documents but sold them at a loss
when the proposals were drooped due to being unviable.

As the proposal offered no assurance about the ultimate level of development, there
was no specific representation by the planning authorities necessary to establish of a
duty of care. Such proposals were subject to frequent alteration, variation or
revocation.

APPLICATION OF LAW
When examining Ivan’s claim to negligent misstatement, we have to firstly consider
the presence of the elements that exist in an ordinary claim for negligence and lastly
the presence of a special relationship.

DUTY OF CARE; A person/party must owe a legal duty of care to the other
person/party in order to claim for negligence. As the onus of proving that a duty of
care exists between the parties is on the plaintiff, he/she needs to tackle the three
state tests;

Firstly; was it reasonably foreseeable that the actions of the defendant (Catherine)
would cause harm/loss/injury? As Catherine is a financial adviser by profession, it is
reasonably foreseeable that her conduct/omission is likely to impact on Ivan in a
positive and negative manner

Secondly; is there a physical, factual or circumstantial link between Ivan and

Catherine? We can deduce that their relationship was factual as Ivan has contracted
Catherine to be his financial adviser.

Thirdly; how vulnerable was the plaintiff (Ivan)? We can also deduce that the risk
exposure/vulnerability to Ivan was very high as he was relying on her advice in order
to make a sound financial decision.

Another facet to consider is’

STANDARD OF CARE; this standard of care is what we consider would be what an

ordinarily prudent person would observe. How would we gauge such a standard? We
need to consider what a normal prudent financial adviser would do under the
circumstances, which may be a thorough investigation of the proposed scheme after
obtaining clear intentions from the client. In this case, Ivan had asked for an
investigation into the accounts of Midget Widget as he sought to invest some of his
funds in the company. This intention would have been relayed to Catherine during
the course of their dealings.

A prudent financial adviser would have made thorough enquiries before making any
recommendations. A breach of the standard of care provided can be observed as
Catherine misread the accounts of the proposed investment.

The third facet to consider is

ACTUAL DAMAGES CAUSED; what is the likely outcome if Ivan invested his life
savings into the company only for it to become insolvent? There would be disastrous
consequences for Ivan if he was relying on the investment to fund his
lifestyle/retirement.

While we know the company became insolvent soon after investing and Ivan’s funds
were lost, this loss can be taken by the Courts as sign of actual loss suffered by the
plaintiff and form grounds for a claim in negligent misstatement if the duty of care
can be shown to have existed and the standard of care was breached.

The fourth element to prove would be;

EXISTENCE OF SPECIAL RELATIONSHIP

In order to make a claim for negligent misstatement, we have to prove that the basic
elements of negligence existed at the time of the tortuous act in addition to the link
of special relationship.
A person/party would have to seek out the one on one service of a financial adviser
or accountant in order to enjoy exclusive information/knowledge that normally
would not be present to the general public. This special relationship only existed
between Ivan (Client) and Catherine (financial adviser) and did not extend to the
general public.

When we also consider the four point test, it is also possible to conclude that a
special relationship did exist between Ivan and Catherine as

-The defendant realises/should realise that the plaintiff believes the defendant
possess special skill/knowledge/information as a financial adviser and that the
plaintiff trusts the judgement of the defendant.

-The advice sought relates to an investment/business matter

-The defendant realises/should realise that the client intends to act on the
information acquired in this case Ivan intends to invest in the company if it is viable.

-It is highly reasonable in the circumstances for the plaintiff to seek and rely on the
advice/information given by the defendant.

CONCLUSION
In conclusion, it is highly likely that Ivan has suitable grounds to make a claim under
the Tort of negligent misstatement as the criteria for making such a claim currently
exist such as the existence of duty of care, breach of standard of care, actual loss was
incurred and the existence of a special relationship.