Negligence is the most important modern law
Negligence essentially concerned with compensating people who have suffered damage as a result of carelessness of others, but the law does not provide a remedy for everyone who suffers in this way. The development of the law on the duty of care in the main case which is the original neighbor principle as established in the case of Donoghue v Stevenson. According to this case, the Lord Atkin said that “You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbor." This is known as the neighbor principle. By neighbor, Lord Atkin did not mean the person who lives next door, but “persons who are so closely and directly affected by my act and that I ought to have then in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question".
The importance of the neighbor principle, test can be seen in the extension of the duty of care to cover negligent misstatements which result in economic loss. Besides that, these extended Hedley Byrne case beyond liability for negligent statements or advice, and established that it can also cover negligent provision of service. This expansion of the duty arose out of the case of Hedley Byrne v Heller & Partners Ltd 1964. Prior to this case, there was only liability for negligent misstatements causing physical damage, intentionally dishonest or fraudulent statements, or where there was a fiduciary or contractual relationship between the parties. The House of Lord laid down a number of requirements which claimants would need to satisfy in order to establish a duty of care under Hedley Byrne. There must be a ‘special relationship’ between the parties, a voluntary assumption of responsibility by the party giving the advice, reliance on that advice by the party receiving it and it must be reasonable for that party to have relied on the advice.
The ‘special relationship’ was described by Lord Reid in Hedley Byrne v Heller & Parties Ltd as arising where ‘it is plain that the party looking for information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or must to have known that the enquirer was relying on him".
Lord Reid made it plain that the ‘special relationship’ requirement meant that Hedley Byrne only cover the situation where advice is given in a business context. However, advice given off-the-cuff in a social setting will therefore not but as a rule to give rise to a duty of care. Some cases have suggested that even in the business context, the required relationship will only exist where the defendants are in the business of providing the actual type of advice that the claimants required. A fairly typical application can be seen in Esso Petroleum Co Ltd v Mardon 1976. It was held that there was a special relationship giving increase to a duty of care and it did not matter that the defendant was not I the business of giving advice of that type. In view of the fact that Esso v Mardon, it is proposed the best formulation of when a ‘special relationship’ will come up with these requirements. These are the defendant must be a person who has special knowledge or expert on his own field, the advise must not have been given in a casual way or in circumstances where it is clear it was not meant to be taken seriously and there must have been no disclaimer of responsibilities.
In addition, Henderson v Merrett Syndicates Ltd 1994 was held that an assumption of responsibility by a person providing professional services, coupled with reliance by the person for whom the services were provided, could give rise to indirect liability, irrespective of whether there was a contractual relationship between the parties. Moreover, negligence misstatements often take place in a pre-contractual situation, where one party is trying to persuade the other to enter a contract. Hedley Byrne case can apply in such situations, but in practice it has been made less important in this area by Misrepresentation Act 1967, which imposes its own liability for false statements made during contractual situation. On the other hand, the special relationship can possibly happen where the relationship is purely unjustified. The case of Chaudry v Prabhakar 1988 was a duty of care under Hedley Byrne case was found in a purely friendly setting. The claimant was successfully sued for negligence the case however been heavily criticized, and it is unlikely ever to be followed but it certainly appears wrong in the light of Lord Reid’s statement. Silence or inaction can rarely amount to misstatement, unless there was a duty on the defendant to disclose or take action.
A special relationship will only arises where the defendant gives a response to an inquiry made by the claimant, it will not arise where advice is volunteered. In Caparo Industries plc v Dickman 1990, the House of Lords held that a very proximate relationship must exist between claimant and defendant before liability in negligent misstatement will arise. The House of Lords also held that the defendants owed no duty of care to the claimants as their relationship was not sufficiently proximate. The Law Lords as well highlighted that the tort of negligent should be developed incrementally and not by means of one broad general principle. The incremental approach is adopted more in cases of pure economic loss and psychiatric injury, damage to property and important economic loss.