An action for negligent misstatement arises where Party A has carelessly made a statement to Party B, where the relationship between the parties is such that Party A owes Part B a duty of care. A negligent misstatement claim is brought at common law in tort.
Elements of Negligent Misstatement
- A special relationship exists between the claimant and defendant.
- A voluntary assumption of responsibility by the party giving the advice.
- The claimant relies on the defendant’s skills and judgment.
- It was reasonable for him to rely on the advice.
1. A special relationship exists between the claimant and the defendant
A duty of care will arise when there exists a special relationship between the claimant and the defendant, and this special relationship is determinable through the following three factors:
i. The inquirer or plaintiff believes and relies on the defendant’s information or advice.
ii. The defendant knows or ought reasonably to know that the inquirer or plaintiff believes and relies on his information or advice.
iii. It is reasonable in the circumstances for the inquirer or plaintiff to believe or rely on the defendant’s information or advice.
2. Voluntary assumption of responsibility by the party giving the advice.
In the case of Smith v Eric S Bush [1990] 1 AC 831,
Duty of care arose based on the deemed assumption of responsibility on the part of the surveyors. First, the defendants knew that the survey fee had been paid by the purchaser. Second, the defendants knew that the survey report would be relied on by the purchaser in order to decide whether or not to purchase the house. It is critical to this conclusion that the appellants knew that Mrs Smith would be likely to rely on the valuation without obtaining independent advice.
The claimant relies on the defendant’s skill and judgment.
In KGV & Associates Sdn Bhd v The Co-Operative Central Bank Ltd [2006] 5 MLJ 513,
The ultimate question whether a duty of care should be in a particular case is essentially fact sensitive.
The report was not commissioned by the plaintiff. It was commissioned by Tan, but he was not the true borrower. Kong was the true borrower. There was no evidence to show that the defendant knew the report it gave Tan would be used by Kong. The plaintiff having seen the report did not want it as it was not addressed to Kong. And also, there had been no assumption of responsibility by the defendant.
4. It was reasonable for him to rely on the advice.
In the case of Caparo Industries PLC v Dickman [1990] 1 All ER 568,
The advice is required for a purpose, whether particularly specified or generally described.
The adviser knows his advice will be communicated to the advisee.
It is known either actually or inferentially that the advice communicated is likely to be acted upon by the advisee for that purpose without independent inquiry and it is so acted upon by the advisee to his detriment.
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