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The facts of the case

Discuss about the Case of Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502.

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 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 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
  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.

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 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.

The arguments presented by both parties.

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 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 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

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

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