2019 ZA Question 5
Anjali is studying to become an accountant. She is presently training with Digby & Co where she performs a
range of basic tasks, for example, assisting self-employed clients with their tax returns. Anjali rents a flat above
a local pub, The Grasshopper. Polly, the wife of the pub landlord, believes that Anjali’s accounting expertise
makes her a good financial advisor and asks Anjali whether a particular time-share venture in Croatia would be
a good investment. Anjali replies enthusiastically that she has heard a lot recently about the holiday market in
Croatia. Polly loses all her savings on the time-share scheme. Nick, the landlord of The Grasshopper and an old
friend of Anjali and a client of Digby & Co, shows her his paperwork a week before the tax deadline of 31 January
and asks her if she can prepare and submit his tax return by that date. She quickly realises that Nick’s accounts
are unusually complicated but undertakes to do the job. ‘You can count on me, no problem!’ she tells Nick. She
does not refer the case to her boss Janet and submits Nick’s incomplete return to the Inland Revenue two weeks
late. Nick is penalised £250 for submitting a late return. Advise Polly and Nick.
P will bring action under negligence against A for the negligent misstatement. N will bring action under
negligence against A for the negligent services.
In order for action to be successful. P and N will first need to establish the tort of negligence against A. According
to Lochgelly Iron v Mc Mullan, P and N will need to prove on a balance of probabilities that there is an existing
duty of care and the A breached it, causing some damage to them and the damage is not to remote.
First issue whether the defendant owes a duty of care to claimants?
Pure economic loss is financial damage suffered as a result the negligent act of the other party which is not
accompanied by any physical damage to a person or his property. This involves a reduction in holdings of non-
tangible wealth. Money is low-down in the list of protected interests so there are restrictive rules on recovery.
A number of policy reasons have been given for treating claim for pure economic loss differently (Derry v Peek)
(Candler v Crane) (Spartan Steel v Martin). Thus, to establish duty of care for pure economic losses, P and N has
to fall outside the general exclusionary rule.
P v A for negligent misstatement
In Customs and Excise Commissioners v Barclays Bank, court states today duty to care for pure economic loss
cause by negligent misstatement or negligence service may be determined either by reference to an establish
precedent, or by satisfying the Hedley Byrne or Caparo test. The fact will be considered in light of both tests.
Hedley Byrne approach (Assumption of Responsibility test)
Firstly, using Hedley Byrne approach, the criteria to satisfied is special relationship, voluntary of responsibility
and reasonable reliance.
SR is said to exist when D (statement maker) possesses the relevant skill or information to advise, knows that
the C (the loss sufferer) is relying in him to exercise care when making his statement and agrees to do so in
connection with an actual business transaction as opposed to informal advice given in a social context (Ld. Reid,
Hedley Byrne)
VAR is usually established where D is aware of the specific purpose for which his advice is sought, and is aware
that the C will be relying on the statement. Usually when a disclaimer is included, this may be an indication that
D does not voluntarily assume responsibility. (Hedley Byrne) (Patchett v Swimming Pool Ass).
RR it has to show that it was reasonable for the C to rely on D’s advice because D was in possession of the
necessary information. (Hedley Bynre) (Sebry v Registrar of Companies) However, where C could be expected
to carry out further checks and not rely fully on D’s statement, reliance mat not be established (Scullion v Bank
of Scotland).
o Based on the fact this was a bi-partite situation. D (the statement maker) made a statement directly to
C (the recipient) which C relied on the statement and now suffered losses.
o There are several factors to be consider here.
o First was the information within the scope of the skill and expertise of D statement-maker to give?
Second did C loss sufferer pay D statement-maker for the information? In Mutual Life Citizen Assurance
Anjali is studying to become an accountant. She is presently training with Digby & Co where she performs a
range of basic tasks, for example, assisting self-employed clients with their tax returns. Anjali rents a flat above
a local pub, The Grasshopper. Polly, the wife of the pub landlord, believes that Anjali’s accounting expertise
makes her a good financial advisor and asks Anjali whether a particular time-share venture in Croatia would be
a good investment. Anjali replies enthusiastically that she has heard a lot recently about the holiday market in
Croatia. Polly loses all her savings on the time-share scheme. Nick, the landlord of The Grasshopper and an old
friend of Anjali and a client of Digby & Co, shows her his paperwork a week before the tax deadline of 31 January
and asks her if she can prepare and submit his tax return by that date. She quickly realises that Nick’s accounts
are unusually complicated but undertakes to do the job. ‘You can count on me, no problem!’ she tells Nick. She
does not refer the case to her boss Janet and submits Nick’s incomplete return to the Inland Revenue two weeks
late. Nick is penalised £250 for submitting a late return. Advise Polly and Nick.
P will bring action under negligence against A for the negligent misstatement. N will bring action under
negligence against A for the negligent services.
In order for action to be successful. P and N will first need to establish the tort of negligence against A. According
to Lochgelly Iron v Mc Mullan, P and N will need to prove on a balance of probabilities that there is an existing
duty of care and the A breached it, causing some damage to them and the damage is not to remote.
First issue whether the defendant owes a duty of care to claimants?
Pure economic loss is financial damage suffered as a result the negligent act of the other party which is not
accompanied by any physical damage to a person or his property. This involves a reduction in holdings of non-
tangible wealth. Money is low-down in the list of protected interests so there are restrictive rules on recovery.
A number of policy reasons have been given for treating claim for pure economic loss differently (Derry v Peek)
(Candler v Crane) (Spartan Steel v Martin). Thus, to establish duty of care for pure economic losses, P and N has
to fall outside the general exclusionary rule.
P v A for negligent misstatement
In Customs and Excise Commissioners v Barclays Bank, court states today duty to care for pure economic loss
cause by negligent misstatement or negligence service may be determined either by reference to an establish
precedent, or by satisfying the Hedley Byrne or Caparo test. The fact will be considered in light of both tests.
Hedley Byrne approach (Assumption of Responsibility test)
Firstly, using Hedley Byrne approach, the criteria to satisfied is special relationship, voluntary of responsibility
and reasonable reliance.
SR is said to exist when D (statement maker) possesses the relevant skill or information to advise, knows that
the C (the loss sufferer) is relying in him to exercise care when making his statement and agrees to do so in
connection with an actual business transaction as opposed to informal advice given in a social context (Ld. Reid,
Hedley Byrne)
VAR is usually established where D is aware of the specific purpose for which his advice is sought, and is aware
that the C will be relying on the statement. Usually when a disclaimer is included, this may be an indication that
D does not voluntarily assume responsibility. (Hedley Byrne) (Patchett v Swimming Pool Ass).
RR it has to show that it was reasonable for the C to rely on D’s advice because D was in possession of the
necessary information. (Hedley Bynre) (Sebry v Registrar of Companies) However, where C could be expected
to carry out further checks and not rely fully on D’s statement, reliance mat not be established (Scullion v Bank
of Scotland).
o Based on the fact this was a bi-partite situation. D (the statement maker) made a statement directly to
C (the recipient) which C relied on the statement and now suffered losses.
o There are several factors to be consider here.
o First was the information within the scope of the skill and expertise of D statement-maker to give?
Second did C loss sufferer pay D statement-maker for the information? In Mutual Life Citizen Assurance
