The three criteria that were created from the case of Hedley Byrne v Heller was that a special relationship exists between the two parties, this means that the claimant and the defendant have either signed a contract with each other or have made contact and have made an agreement. This need for a special relationship protects the person giving information or advice from unlimited liability as the claimant cannot simply be anyone. It was initially felt this relationship would only involve those who are in the business of giving advice, this was showed by the case of Yianni v Edward Evans (1982). In some cases such as Mutual Life and Citizens Assurance Co v Evatt (1971) it is suggested that the relationship will only exist where the defendant is giving the advice that the claimant wanted. In Mutual Life and Citizens Assurance Co v Evatt it was held that there was no duty of care as the claimants asked for investment advice however the defendants were in the business of providing insurance advice. This protects the person giving information or advice from unlimited liability as it restricts the type of information that was given by the defendant and so the person is protected if the information they give is not on a subject they are in business of. However, a later case Esso Petroleum v Mardon (1976) a broader approach was taken. In this case the claimant brought a garage on the advice of Esso that he could sell 200,000 gallons a year. In fact he only sold 78,000 gallons in 15 months and so suffered financial loss. It was held that Esso did owe Mr Mardon a duty of care as they were in the course of that business and he relied upon their expertise in this area of business. This approach means that the individual giving the careless advice could be sued if they are in the course of that business even thought they are not specifically familiar with that area of the business. A special relationship can also occur between an employer and an employee when a reference is needed, this is shown by the case of Spring v Guardian Assurance (1994) when the employer was found liable when came to the conclusion that his employee was incompetent negligently.
These guidelines show that the individual giving the advice or information is protected from unlimited liability, as although information is likely to be spread to a large group of people, this large group of people cannot all sue, as they must have had a special relationship with the defendant in which the defendant is in the business of giving advice and if the defendant gave the information the claimant required.
The individual is not always protected though; the case of Henderson and Merrett Syndicates shows that the existence of a contract between the parties doesn’t prevent a special relationship, this means that although many feel that when a disclaimer is added this cancels the claimants right to sue infact the presence of a disclaimer does not prevent a special relationship existing. In Henderson v Merrett Syndicates the House of Lords held that there could be liability whether or not there was contractual relationship between the parties if the claimant shows reliance on the advice. The case of Chaudry v Prabhaker (1988) is also similar to this as it shows that the defendant can be liable even if there is no contractual agreement. This case was an exemption to the guideline that a social relationship would not normally give rise to a duty of care.
The second criteria for establishing if a duty of care exists is a voluntary assumption of responsibility meaning that the defendant has chosen to give advice or information and has allowed it to be passed on to a third party when they had the choice to not give the advice/information or emphasised it should not be relied upon. Therefore the use of a disclaimer will usually mean the defendant has not assumed responsibility. Under this criterion it must also be shown that the claimant was a member of a class to which the defendant knew the information would be passed on to, this was shown in the case of Goodwill v British Pregnancy Advisory Service. In this case Mrs Goodwill became pregnant by her boyfriend. However he had a vasectomy 3 years before and was told this was successful, but in fact over the three years the vasectomy had reversed itself. She sued the defendants for the cost of bringing up her daughter, however the Court of Appeal held that it was not foreseeable that she would be in a group which the advice would be applied to, as it wasn’t foreseeable that it would be her specifically that would become pregnant.
This protects the person who gave the information from unlimited liability as again even if the information was passed on to a large group of people the defendant could not be sued by all of the individuals affected as it must be shown that the claimant was a member of an identifiable class to which the defendant knows the information will be conveyed. However the individual is not completely protected as the case of Smith v Bush shows that even if there is a disclaimer they can still be found liable as it was held that they would be aware that buyers of a property would rely on the valuation provided by the defendants.
Finally it must be established that the claimant relied upon the information provided by the defendant. It must be shown that the claimant relied upon the defendant’s specific skill or experience for the task, however the claimant cannot have relied upon the defendants advice unless they knew that the defendant provided that advice, this was shown in the case of Abbott v Strong (1998) where a shareholders had been persuaded to buy shares in a company by a circular which was found to have inaccurate profit forecasts on it. They tried to sue the accountants who had helped prepare the profit forecasts, however it was held that the shareholders could not rely on the statements provided by the accountants as they thought it came from the directors.
The claimant must also prove that it was reasonable to rely on the defendant’s advice, this will not occur where the claimant relies on advice or information for one reason when it was given for a different reason. This was shown in Caparo Industries v Dickman (1990). In this case Caparo made a takeover bid, however when the takeover was almost complete it was found that the company was almost worthless. Caparo claimed to have relied upon figures provided by the company annual audit. The House of Lords held that the accountants couldn’t be sued as they were employed to ensure existing shareholders could have responsibility over the company, not to advise new investors. This protects the individual who gave the advice as it must be shown that the advice the defendant gave was specific to the claimant and it had to be used for a specific purpose. This again protects the defendant being sued by a large body of people, as they are most likely to use the advice passed on to them for different purposes. However the case of Law Society v KPMG (1999) showed that information or advice given for one purpose can simultaneously be given for another purpose.
The claimant must also show that due to relying on this negligent advice they suffered loss, in the case of Bristol and West Building Society v Mothew (1996) Mothew (a solicitor) failed to tell the building society that the borrower had two mortgages on the property, as a result the borrower defaulted on his payments and the house had to be resold at a loss to the building society. However Mothew held that even if he had informed them of this they still would have continued and made the same loss and the Court of Appeal held there wasn’t a causal link between the negligent advice and the loss.
In the case of Caparo v Dickman more guidelines were taken into account, these considered the circumstances in which a duty of care would be owed. These circumstances were that the defendant must know the purpose for which the advice is being given at the time it is given, the defendant must know if the advice will be passed on to a third party who will rely on it and they must show that they knew the advice would be relied upon without the benefit of independent advice. Finally the claimant must show actual reliance and detriment suffered. These guidelines protect the individual who gave the negligent advice or information from unlimited liability as it cuts down the class of people who can sue the defendant for negligent mis-statement and so if the information is spread among a large group of people this does not mean that they can all sue. However, several cases have broadened the approach, for example Esso Petroleum v Mardon showed that it was sufficient for the person who gave the advice to be in the course of that business and Henderson v Merrett Syndicates Ltd demonstrated that the existence of a contract, such as a disclaimer doesn’t prevent a special relationship existing. The case of Law Society V KPMG showed that although the advice cannot be used for one purpose if it was given for another it could simultaneously be given for another purpose. It is also shown that a duty of care can exist where there is no reliance of the claimant on the defendant’s advice or information when concerning wills, and this was shown in the case of White V Jones.
In conclusion a person who gives information is protected from unlimited liability as even if the information is conveyed to a large group of people the rules relating to negligent mis-statement prevents a large body of people being able to claim as it restricts those who can claim to a certain group of people.
