Economic Loss & Negligent Misstatement

• Pure economic loss


  Financial loss without physical harm (injury or property damage). Usually not claimable unless negligent misstatement is proven
• Consequential economic loss

  Consequential economic loss is when you suffer financial harm because of something bad that physically happened. Possible to claim if physical harm or damage causes financial loss (like losing wages due to injury)
• Negligent misstatement


  When someone gives wrong advice due to negligence; it causes financial loss. This can happen in two ways:

  • Two-party liability: Direct advice causes loss
  • Three-party liability: Advice given to one person, but another suffers loss to it
• Key cases

  • Hedley Bryne v Heller and Partners (1964)
  • Caparo Industries v Dickman (1990)
• Caparo - Special Relationship

  1.Defendant must have special skills: Special skills or knowledge, like an accountant, can be considered to have a special relationship, even if they're not officially called professional advisors
• Caparo - Special relationship

  
  

  2. Claimant must rely on the advice: To prove a special relationship the person must show they relied on the advice reasonably, like in Smith v Bush.

  3. Defendant knows that the claimant relies on them: For a special relationship, the person giving advice must know or reasonably expect that the advice is sought for a specific purpose, Caparo v Dickman
• Caparo - special relationship

  4. Advice was directly communicated to the claimant: The advice must be given directly, so not in a newspaper or through a pub.

  5. No disclaimer given from the defendant: They must clearly say they are not responsible for it, shown in the Hedley Bryne case.
• Chaudhry v Prabhakar (1988) - showed that a special relationship can exist even if advice was given outside of a business setting, like in a social situation or relationship and it was relied upon.