8/14/2019 UNSW Foundation Year '08 - Legal submission question

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 Negligent misstatement is false statement or misleading advice given by one person to another that

leads to an unexpected financial loss when acted upon. In other words, there is an extension of 

general duty of care to areas involving professional advice.

The case of Connie v Napier City Council falls into the category of negligent misstatement, in

which all four elements of negligence and the existence of reasonable reliance must be established.

The first element is that there must be a duty of care owed by Napier City Council (the

defendant)to Connie (plaintiff); it means Connie has to prove that the Council has a responsibility

to take care not to cause any losses of money to her. The Council may argue that in case negligent

misstatement occurs, Dick would be the only one owed Connie a duty of care. However, even

though Dick is the one who gives the wrong information to Connie, Napier City Council is also

liable for Dick’s action in accordance with the vicarious liability as Dick is an employee employed

 by Napier City Council. According to the precedent set in the case of Shaddock v Parramatta City

Council, public body has a duty of care to give correct information if a number of requirements is

satisfied. First, advice was given in response to a particular request of information. In this case,Connie asked Dick for a specific information about whether or not McDonalds has applied to the

Council for permission to open a restaurant in Brown Street. Second, it appears that Dick would

have known that advice would be relied on and used for a particular purpose. There is evidence

that Connie also told Dick about her consideration of purchasing the takeaway food shop, therefore

if the advice given that no approval obtained by McDonalds from the City Council, Connie would

then purchase it. In addition, the advisee – Connie – may suffer from financial loss if advice is

wrong or inaccurate, that means if McDonalds did, in fact, ask for permission to open a restaurant

next to her food shop, there would be a competition and she might lose money from the reducing

sales. Thus the risk of harm from carelessness is foreseeable in this case. Due to the application of 

neighbour test established in the precedent case of Donoghue v Stevenson, the duty of care

relationship is established and Napier City Council under the role of the advisor owed a duty of 

care to provide accurate information to its neighbour (the client seeking information) – Connie.

The second element in proving negligence is that there is a breach of duty. In order to prove the

duty of care has been breached, there first must be a breach of the standard of care. Standard of 

care is the required care that must be taken and that of a reasonable person. The reasonable person

test is applied. It is held in this case that any reasonable person would foresee the loss from sales of 

Connie’s food shop if McDonalds restaurant opens next door and would take some precautions, for 

example checking through written documents rather than relying on memory for such important

information. Dick failed to act what a reasonable person in this situation would, therefore thestandard of care is breached.

The third element that needs to be examined is causation, that is the financial loss directly results

from the Council’s breach of duty. According to the “but for” test, but for the inaccurate advice

given by the Council, would Connie purchase the takeaway foodshop and suffer from pure

economic loss? The answer is no. Connie would have not put money in that food shop if it had

 been given that McDonalds was opening due to the possible loss of sales she might experience.

Thus causation is established.

Finally, the remoteness of damage must be considered. The Council can only recover compensation if the actual loss suffered by Connie is not too remote. The test of foreseeability of 

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