Negligent Misstatement – ask our London Solicitors

20th November 2017
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Negligent Misstatement

Today our UK solicitors discuss negligent misstatement.

A claim for negligent misstatement is a type of legal claim used to recover financial losses caused to a person who has relied upon advice or a statement – either written or verbal – that is negligent.

A successful claim for negligent misstatement does not require the claimant to prove that he or she had a contractual relationship with whoever is alleged to have given or made the advice or statement. Parties who have been induced to enter into a contract by a negligent misrepresentation will have separate and distinct statutory claims and remedies under the Misrepresentation Act 1967.

Hedley Byrne v Heller

Prior to the 1964 House of Lords decision in Hedley Byrne v Heller, suing for negligent statements in the absence of a contractual relationship was problematic. Hedley Byrne v Heller established the possibility of and the legal criteria for claims to recover losses flowing from negligent statements.

Essentially the case was about a credit reference given by a bank that was careless and negligent. The claimant relied on the bank’s reference in extending credit terms to a customer. It later transpired that the reference was inaccurate. The customer’s financial position was distinctly worse than the bank had represented and it went into liquidation without paying the claimant’s fees, thus leaving the claimant out of pocket. The court decided that the claimant, in spite of not having a direct contractual relationship with the bank, could in theory recover its losses from the bank because:

  • a relationship of sufficient proximity existed between the claimant and the bank and it was reasonable for the bank to appreciate that the claimant would rely on the advice provided; and
  • the claimant’s reliance on the advice was itself reasonable and caused loss.

In the same vein, claims for negligent misstatement have also been successfully brought against valuers providing negligent valuations to mortgagor banks, and against employees giving negligent references about their former employees.

Caparo Industries PLC v Dickman

Since Hedley Byrne v Heller was handed down in 1964, the legal test for negligent misstatement has been refined somewhat and the test to be applied is set out in the 1990 case of Caparo Industries v Dickman, as follows:

  1. Harm to the claimant must be as a result of the defendant’s conduct and must have been reasonably foreseeable.
  2. The parties must be in a relationship of proximity.
  3. It must be fair, just and reasonable to impose liability

It is to be remembered that, where the party alleged to have made a negligent misstatement also gives a disclaimer, then depending upon the wording of the disclaimer and the overall circumstances of the case, the claimant’s case will become harder to prove.

Our litigation and negligent misstatement solicitors have regularly advised on claims for negligent misstatement. You can contact us for a confidential discussion about any of the content you see on this website.

Litigation & Dispute Resolution