The Legality Of Claims In A Case Of Negligent Misstatement: A Case Study

Issue 1: Ellen's Claim Against the Council

Ellen is a graduate of The College of Alternative Medicine and was looking to start her own business in recent past. She decided to open a meditation studio and looked around the inner city suburb of Paddington for suitable premises. She eventually found a terrace house near Oxford Street, Sydney, NSW.

The owner of the premises was willing to enter in a 12-month lease, however, Ellen waited for a week so that she could check with the local council as to the suitability of her business. Followed on, Ellen went to the council office and identified the counter marked as “Business Inquiries”.

She asked several questions to the attended council employee including a question about building work in the area. She asked: “my meditation studio requires a calm environment. Is there anything that could cause noise nearby?”.

The council officer was called away before being able to answer. Upon return the officer had a very quick look at the computer and replied to Ellen that: “relax everything will be fine”. After gathering together the council information, Ellen then signed up the lease on the next day. But, within two weeks of the opening of the meditation studio, she found that some builders’ men were started working next door.

She asked one of the builders as to how long they would be working. The worker replied in that “It’s a big job, a total renovation. It should take at least 6 months”. Although Ellen tried to run her meditation studio, but the noise from the building was too stressful. Clients were not happy. After a month into the lease, Ellen was so stressed by the development of construction noises from next door which resulted in a nervous disorder to her. This gave rise a threat to her career in alternative medicine. Ellen even reduced the operating hours of her meditation studio to avoid the construction noises. This reduction ultimately resulted in financial distress which caused her falling behind in paying rent for the premise.

Based on the above you are required to write a case study report (minimum length is 1,500 words). In your demonstration, not least, you must answer the following questions:

Issue 1: Explain critically as to whether Ellen has a claim against the council in relation to the advice she had received.
Issue 2: Has there been a breach of contract between Ellen and the Landlord for non-payment of rent?
Issue 3: Has there been a negligent misstatement by the Council worker?

The issue is to decide whether Ellen can claim against the Council regarding the advice given to her by the Council.

Negligent Misstatement, a type of tort that refers to the information or statement made by a person that is misleading or inaccurate, and such wrong statement causes injury to another person.

In the case of Derry v Peak, the English Court of Appeal observed that a negligent misstatement is not enough for supporting a matter of deceit as a non-fraudulent misrepresentation without a contract is insufficient to establish a duty of care. However, the House of Lords upheld this order in Hedley Byrne & Co v Heller & Partners where it was held that a liability of tort remains with the offender for negligent misstatement. It was stated by the court that when a person seeks information from another in the official capacity, the person so approached is deemed to have a special knowledge or skill and therefore owes  duty to provide the correct information to the best of his knowledge. The person seeking the advice puts reliance on such information and might face injury if such information turns out to be false. This judgement was later embraced by the Australian High Court in the case of Mutual Life & Citizens’ Assurance Co Ltd v Evatt, where the Chief Justice Barwick held that the person so approached for information may not even possess any special skill or knowledge on the matter; he is only liable for the statements made to the best of his knowledge on which another person’s action or liability depends. It was held that an action can be instituted for negligent misstatement even if there is no contractual relationship.

In the case of Geju Pty Ltd v Central Highlands Regional Council, the Supreme Court of Queensland held that the Regional Council was liable to pay damages to Geju Pty Ltd for describing the zone of a land inaccurately, as such inaccurate description caused injury to the company and it incurred heavy expenses due to it.

In this case, Ellen trusted the Council officer with his statement about the premise she rented for opening a meditation clinic. The council officer’s false information has put Ellen’s career into danger and caused a heavy damage to her business and its clientele.

Conclusion

Therefore, it can be clearly established that Ellen can claim against the Council pertaining to the advice she was given by the Council worker.  Ellen can sue the Council for its employee’s misconduct and negligent misstatement in the official capacity due to which she faced a heavy damage to her career. She can claim damages for the loss incurred from such negligent misstatement.Issue 2

Issue 2: Breach of Contract Between Ellen and the Landlord

The issue is to ascertain whether there is a breach of contract between Ellen and her Landlord for her failure to pay rent.

Under the Common Law of Contract, when a party enters into a contract with another, he is bound by the provision of the contract. It is his utmost duty to perform the contract. Failure to do so would result in breach of contract. When a contract is breached, the party who resulted in such breach is liable to pay damages to the aggrieved party who suffered monetarily or otherwise by such breach (Stone and Devenney 2017).

In the case if Yeend v Rainsford, the tenancy agreement was terminated by the court as the tenant was restricted from using the backyard of the rented property, and he was not intimated about the neighbour’s access to the backyard. It was held by the court that a tenant is entitled to enjoy a property fully, unless otherwise agreed before entering into the contract. In addition to, the tenant must be made aware of any legal impediment attached to the property by the landlord. As this matter could not be remedied, the court directed the parties to terminate the contract.

When the landlord has skipped to provide any specific information important to the premise so rented, the landlord, in this matter, may be held liable for suppression of fact that caused material injury to the tenant. The tenant, in such case, may choose not to pay rent and to sue the landlord, instead.

In the given case study, Ellen has breached her contract with the landlord from whom she rented the office for her meditation clinic. She failed to pay rent as she lost clientele due to the noise from the construction work going on beside the clinic. However, she can plead innocence for the fact that the landlord had not intimated her about the construction work if he had any knowledge about it. Provided that, Ellen has to prove the fact that the landlord was aware of the prospective construction work beside his premise. In addition to, Ellen argue that for the negligent misstatement of fact by the Council, that she lost her clientele and therefore failed to pay rent.

Conclusion

Therefore, it can be stated that Ellen has breached the contract with her landlord for non-payment of rent. Nevertheless, she can prove that such non-payment of rent has occurred due to the Council worker’s wrong information. Issue 3

Issue 3: Negligent Misstatement by the Council Employee

The issue is to determine whether there has been a tort of negligent misstatement by the employee of the Council.

A tort of negligent misstatement refers to a wrong advice, inaccurate or misleading statement given by a person who possesses special knowledge, skill or sense of judgement to another who seeks for such advice (Roberts 2017). When such inaccurate statement causes injury to the person who asked for advice, tort of negligent misstatement is said to occur. The three elements that constitute the tort of misstatement are:

1. There must be a duty involved where a person is bound to advise another who seeks so.
2. There must be a breach of such duty by providing wrong information.
3. The plaintiff must have suffered an injury by such false statement or wrong information.

There has to be an element of fault present in the case where it needs to be proven that one has committed tortuous acts out of negligence or on purpose. The plaintiff shall carry the burden of proof to establish damage or injury caused particularly due to such misstatement made by the defendant. When a tort of negligent misstatement is proved, the plaintiff is eligible to claim damages for the loss, monetary or not, incurred for the wrong advice received by the defendant.

In the case of Hedley Byrne & Co v Heller & Partners, it was observed by the House of Lords that the person who gives the advice in the course of an official duty or capacity is trusted by the person so asking, for he has a special sense of judgement on that matter. Thus, it is a wrong on that person’s part who provides wrong information and the other person suffers due to such wrong information (Campbell 2016).

While later In the case of San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act, it was held by the High Court that the person giving advice may not possess a special judgement or knowledge to give advice or information. It is just that the person so advising must provide the correct information to the person who puts his trust and reliance on such advice.

In L Shaddock & Associates Pty Ltd v Parramatta City Council, it was said that a public body whose duty is to provide necessary information to the public must take reasonable care while delivering its duties and responsibilities as people are depending for vital information on such body.  A person who has the reason to rely on such false information must be awarded with damages if he incurs losses for such wrong information so given.

In the given case, the Council worker has provided Ellen with wrong information that has caused severe injury to her career. The Council worker, being a public servant was under the duty to provide the correct information regarding the premise and its surrounding. Such misconduct of the worker has caused damage to Ellen, mentally and monetarily. Therefore, the Council can be held liable for committing the tort of negligent misstatement.

Conclusion

The Council can be sued for its employee’s tort of negligent misstatement as it made Ellen suffer injury.

References:

Campbell, I.D., 2016. The absence of negligence in Hedley Byrne v Heller. Law Quarterly Review, 132(2), pp.266-277.

Derry v Peak (1889) 12 App Cas 337

Geju Pty Ltd v Central Highlands Regional Council (No 2) (2016) QSC 279

Hedley Byrne & Co v Heller & Partners (1964) AC 465

L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59

Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 

Roberts, M., 2017. Negligent Misstatement in the Court of Appeal.

San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (NSW) (1988) 162 CLR 340

Stone, R. and Devenney, J., 2017. The modern law of contract. Routledge.

Yeend v Rainsford (R0533/97)