Lecture 6 – The Law of Torts II
Vicarious Liability, Negligent Misstatement, Disclaimers, Investment Advisor’s & Auditor’s
Liability, Occupier’s Liability – Obvious Risk
Employer liability: Vicarious Liability
• Vicarious liability (definition): One person’s responsibility for the acts or omissions of
another person.
• Employers are liable to pay compensation to the Plaintiff for the acts and omissions
of their employees provided that the plaintiff can prove two things:-
– The parties were in an employer – employee relationship and; and
– The employee was acting in the course of his or her employment.
Vicarious Liability
There are two tests used by the courts to determine whether parties are
in an Employee / Employer Relationship. They are:
1. ‘Control test’:
Does the employer have the right to exercise control over not only what the employee does
but also the manner in which the employee does it? if not, the person is an independent
contractor and an employer is not vicariously liable for their actions.
2. ‘Integration Test’:
An employee acts in the course of employment when performing tasks that he or she was
employed to do or tasks which are related to his or her employment, even if the employee’s
task is being carried out in an unauthorised manner.
Negligent Misstatement & Occupiers’ Liability
What is a Negligent Misstatement?
• Definition: A negligent misstatement (representation) is a statement made
recklessly without knowledge of its truth or falsity
• “If one party gives advice, information or an opinion to another party in
circumstances where the other person reasonably relied upon the advice,
information or opinion, the first person may be liable for any loss or damage
caused if the advice, information or opinion was given carelessly”.
• History: Courts did not wish to extend liability to negligent
misstatement because of the fear it would be bombarded
with legal actions.
• Such loss is now recoverable in certain situations
including negligent misstatement.
Negligent Misstatements
• Duty imposed upon a defendant to avoid making careless statements which cause
harm.
– Hedley Byrne v Heller established that the law will imply a duty of care in
the making of statements.
– Where the representor knew or ought to have known that the statement
would be relied upon the representor owes the representee a duty of care.
, – A duty of care extends not only to professional advisers but also to persons
who provide information.
– This duty of care also extends to advice that is given in ‘serious
circumstances’.
Assumption of Responsibility and Reasonable Reliance
A person giving advice owes a duty of care if:
1. The subject matter of the advice or information is of a business or a serious nature
2. The defendant knows or should know that the plaintiff intends to rely on the advice
(assumption of responsibility)
3. It is reasonable in the circumstances for the plaintiff to rely on the advice
(Reasonable reliance)
• Negligent misstatements cover both positive acts and omissions.
• An inadequate response can amount to a negligent misrepresentation if plaintiff
has relied upon it.
Reasonable Reliance Factors
In determining reasonable reliance the following principles apply:
(1) The context in which the advice or information was given – was it given free of
charge?
(2) Presence of special skill by D and not P
(3) Length of relationship between parties: longer relationship, more likely that reliance
on information or advice is reasonable
(4) Request: More difficult to prove reasonable reliance if the information is provided
without specific request (e.g. general info on the Net)
(5) Alternative sources of information/advice: if D is the only source of the information,
more likely that the Court will find reasonable reliance.
(6) Depending upon the circumstances and the wording a disclaimer may or may not negate
reliance
Negligent Misstatement and Breach of Duty under CLA
• Section 22 CLA:
A professional does not breach a duty of care to P
arising from a professional service, provided that:
(a) the professional has acted in a way that is widely accepted by other members of the
profession,
(b) the practice is not irrational (unreasonable),
(c) It was not against a written law.
• Professional: A “person practising a profession” (s20).
Vicarious Liability, Negligent Misstatement, Disclaimers, Investment Advisor’s & Auditor’s
Liability, Occupier’s Liability – Obvious Risk
Employer liability: Vicarious Liability
• Vicarious liability (definition): One person’s responsibility for the acts or omissions of
another person.
• Employers are liable to pay compensation to the Plaintiff for the acts and omissions
of their employees provided that the plaintiff can prove two things:-
– The parties were in an employer – employee relationship and; and
– The employee was acting in the course of his or her employment.
Vicarious Liability
There are two tests used by the courts to determine whether parties are
in an Employee / Employer Relationship. They are:
1. ‘Control test’:
Does the employer have the right to exercise control over not only what the employee does
but also the manner in which the employee does it? if not, the person is an independent
contractor and an employer is not vicariously liable for their actions.
2. ‘Integration Test’:
An employee acts in the course of employment when performing tasks that he or she was
employed to do or tasks which are related to his or her employment, even if the employee’s
task is being carried out in an unauthorised manner.
Negligent Misstatement & Occupiers’ Liability
What is a Negligent Misstatement?
• Definition: A negligent misstatement (representation) is a statement made
recklessly without knowledge of its truth or falsity
• “If one party gives advice, information or an opinion to another party in
circumstances where the other person reasonably relied upon the advice,
information or opinion, the first person may be liable for any loss or damage
caused if the advice, information or opinion was given carelessly”.
• History: Courts did not wish to extend liability to negligent
misstatement because of the fear it would be bombarded
with legal actions.
• Such loss is now recoverable in certain situations
including negligent misstatement.
Negligent Misstatements
• Duty imposed upon a defendant to avoid making careless statements which cause
harm.
– Hedley Byrne v Heller established that the law will imply a duty of care in
the making of statements.
– Where the representor knew or ought to have known that the statement
would be relied upon the representor owes the representee a duty of care.
, – A duty of care extends not only to professional advisers but also to persons
who provide information.
– This duty of care also extends to advice that is given in ‘serious
circumstances’.
Assumption of Responsibility and Reasonable Reliance
A person giving advice owes a duty of care if:
1. The subject matter of the advice or information is of a business or a serious nature
2. The defendant knows or should know that the plaintiff intends to rely on the advice
(assumption of responsibility)
3. It is reasonable in the circumstances for the plaintiff to rely on the advice
(Reasonable reliance)
• Negligent misstatements cover both positive acts and omissions.
• An inadequate response can amount to a negligent misrepresentation if plaintiff
has relied upon it.
Reasonable Reliance Factors
In determining reasonable reliance the following principles apply:
(1) The context in which the advice or information was given – was it given free of
charge?
(2) Presence of special skill by D and not P
(3) Length of relationship between parties: longer relationship, more likely that reliance
on information or advice is reasonable
(4) Request: More difficult to prove reasonable reliance if the information is provided
without specific request (e.g. general info on the Net)
(5) Alternative sources of information/advice: if D is the only source of the information,
more likely that the Court will find reasonable reliance.
(6) Depending upon the circumstances and the wording a disclaimer may or may not negate
reliance
Negligent Misstatement and Breach of Duty under CLA
• Section 22 CLA:
A professional does not breach a duty of care to P
arising from a professional service, provided that:
(a) the professional has acted in a way that is widely accepted by other members of the
profession,
(b) the practice is not irrational (unreasonable),
(c) It was not against a written law.
• Professional: A “person practising a profession” (s20).
