Legal Case Study

Legal Case Study

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Tins must be advised with information that will enlighten her to her options but first we must understand facts and the issues in the case, then information about the legal issues will be presented and then the determination of whether Tina has suffered actual loss or damages and also depict other possible actions that she can take and then a summary describing all of her actions that she can take.

In Tina’s case the relevant information is;
• Tina is looking to buy a house and asks Simon about the safety of the garage, Simon says “don’t worry about that. It’s perfectly safe and sound. I’m a building surveyor and I should know”.
• Tina relies on this and says “Oh well, that’s right then“ and after a further inspection of the house, Tin agrees to buy and tells Simon to draw up the contract.
• A contract is created which contains no warranties in respect of the garage.
• Tina signs he contract after discussing the matter with her solicitors.
• After settlement the garage blows over during a storm.
Now that the information and facts are presented in order or sequence, we can now analyse it and determine if Tina has a chance to sue for a breach in contract and if not, if there are other ways for getting compensation for the damage caused to the garage.

Fraudulent Misrepresentation
Fraudulent Misrepresentation is distinguished from innocent misrepresentation by the intentional deceit of one party by the other (Andy Gibson and Douglas Fraser, 2007, pg 325). The following elements must be established in order to amount to a fraudulent misrepresentation;
• There must be a false statement of fact, not opinion, unless the person making the statement did not hold that opinion,
• The representation must be untrue,
• The person making the representation must know that it is false, or not believe in its truth, or be recklessly careless,
• The representation must be made with the intention that the other party acts in reliance to it,
• The statement must actually deceive the innocent party, i.e. be acted upon, and
• The innocent party must have suffered some loss.

Because a contract induced by fraud is voidable at the opinion of the deceived party, it remains binding until set aside (Andy Gibson and Douglas Fraser, 2007, pg 325). Thus, the position of the deceived party is as follows;
• Since fraud is a tort, in addition to any other remedy available to the deceived party, damages may be recoverable in an action of deceit.

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However, the deceived party must suffer actual damage.
• On discovering the fraud, the deceived party must elect either to affirm or rescind the contract. In the case of rescission, which is an equitable remedy, the deceived party must act promptly on the discovery of the misrepresentation or the right to rescind may be lost. In the case of affirmation, the deceived party can insist that the representation be made good, if that is possible. Once a choice is made, it is irrevocable.
Affirmation does not prevent the deceived party from bringing an action for damages for deceit where the contract has been declared, for the action is one of tort.

Negligent misrepresentation
The law of negligent misrepresentation emerged in the 1960’s with the recognition by the House of Lords, in Hedley Byrne & Co Ltd V’s Heller & Partners Ltd [1964] AC 465, that a person to whom a negligent statement has been made could recover damages in tort if a special relationship existed. Until this time, a person who made a statement carelessly and without fraud was treated as having made an innocent misrepresentation. Consequently, a person could only recover damages for a statement made by another person if fraud was involved, or there was an existing fiduciary relationship. Compared with the earlier development of the law of negligence, the principle of negligent misrepresentation was slow to develop, due in part to the reluctance of the courts to expose parties to liabilities for pure economic loss. Some of these initial doubts about the expansive operation of the principles of negligent misrepresentation were to some extent overcome by limiting recovery to parties in a ‘special relationship’.

As a fraudulent and innocent misrepresentation, negligent misrepresentation requires proof of the elements, such as;
• That the representor owed the representee a duty to take reasonable care that the statement made by the representor was true and reliable,
• That the representor breached such duty, and
• The false representation led to the representee suffering loss or damage.

The existence of a duty to take reasonable care is what distinguishes this type of misrepresentation from fraudulent misrepresentation. In addition, another point of distinction is that if a special relationship is present, a negligent misrepresentation may occur where the representor is providing an opinion. It is not necessary for the statement to be one of fact, only that the representor is providing advice or information. The breach of duty of care through the providing of false information will be enough to allow the representee to recover damages in negligence for any loss suffered. However, to obtain rescission of a contract, the representee must prove that the statement was made prior to entry into the contract, and that the representee relied on the statement when entering the contract.

Since the land mark decision of the House of Lords in Hedley Byrne V’s Heller & Partners [1964] AC 465, the high court has broadened and refined the concept of negligent misrepresentation and the meaning of ‘special relationship’. It is clear that more than reasonable foreseeability of loss or damage to a person is required to found a claim in negligent misrepresentation. There must be a relationship of proximity between the parties, usually shown by the existence of reasonable reliance on the statement as shown in Hawkins V’s Clayton (1988) 164 CLR 539. In MLC Assurance V’s Evatt, Barwick CJ stated that a special relationship arises;

...whenever a person gives information or advice to another... upon a serious matter, in circumstances where the speaker realises ... or ought to realise, that he is being trusted ... to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to act on that information or advice.

Duty of care
A person by law owes a duty of care not to cause harm to other persons in certain circumstances. If he or she breaches the Duty of care and, by reason of the breach, the person to whom the duty is owed suffers loss or damages, then he or she will be liable for that damage if it were reasonably foreseeable as a possible result of the breach of duty. (Mark Boulton, 1995, pg 15)

Before a plaintiff succeeds in a negligence act, he or she must prove;
• That the defendant owed him or her a duty to take care not to cause him or her injury, loss or damage in the circumstances of the case,
• That the defendant breached that duty,
• That, by reason of the breach, he or she suffered injury, loss or damage, and
• That the injury, loss or damage suffered would have been foreseen as a possible result of the breach of the duty by a reasonable person placed in the position of the defendant at the time when he or she breached the duty.
Whether or not a duty to take care is cast upon a person in a particular set of circumstances is a question of law, i.e., a plaintiff must prove to the judge hearing a case that a duty of care exists in the circumstances.

Duty of care in negligent misrepresentation
A professional is defined as a person practicing a profession, the standard to be applied by the court in determining whether a defendant has acted with care is basically determined by reference to;
• What could be reasonably expected of a person professing that skill (and not a greater level of skill), and
• The relevant circumstances as at the date of the alleged negligence and not a later date.
A professional can avoid liability if it is established that the professional acted in a manner that was widely accepted in Australia by peer professional opinion as competent professional practice. However, if the court determines that the opinion is unreasonable or there is a duty to warn of risk, then the professional will not escape liability.

For a plaintiff to recover damages for a negligent misstatement, Tina must establish;
• A duty of care, this is established through a relationship or proximity between the parties. This may be circumstantial, e.g., a professional relationship, or casual. Policy considerations, such as the public interest, may also be important.
• A breach of duty, Tina must establish that;
o Simon made a representation or statement,
o Simon knew, or ought to have known, it was being requested for a serious purpose,
o The representation and statement by Simon would be acted upon,
o If the statement was inaccurate they could suffer loss.
• Damage, Tina must establish that there is a connection between Simon’s omission and the damage they have suffered, the causative element. This means establishing that they have relied to their detriment on Simon’s information or advice.

(Andy Gibson and Douglas Fraser, 2007, Pearson Education Australia, Business Law 3rd Edition, Frenchs Forest, NSW)

(Lindy Willmott, Sharon Christen and Des Butler, 2005, Oxford University Press, Contract Law, 2nd Edition, South Melbourne, Victoria)

(Mark Boulton, 1995, LBC Nutshell, Torts, 3rd Editon, Perth, WA)
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