Balkin and Davis pp. 419-431

N.B – This summary currently only includes pages 419-427 inclusive

A Summary of the B+D Reading for Week 6.

Negligent Misstatement

When does a duty of care arise?

A defendant will be found to be under a duty to take care to prevent economic loss by a misstatement when he or she knows, or ought to realise, that the words are such as to engender in another reasonable reliance thereon, and when the defendant accepts the consequent responsibility for taking care in making the statement.

Hence it has been said in numerous cases that liability will be imposed, in general, only when the statement is made on a serious occasion, in relation to a serious matter. A casual comment in the course of social intercourse is, of its nature, unlikely to give rise to the necessary reliance on the accuracy of the statement. But this does not mean that an oral statement will never attract liability.

The realisation by the defendant that reliance is reasonably being placed on the statement will commonly arise on the fact that the defendant as responded to a request for information or advice. When the request is made the defendant has the option of staying silent, or of qualifying any answer given. Thus, in Tepko Pty Ltd v Water Board, the statement made by the defendant was clearly no more than an initial estimate, or ‘ball park figure’, upon which the plaintiff could not have reasonable relied.

To whom may a duty be owed?

There is no doubt that liability will be established when the defendant makes a statement directly to the plaintiff, or to an agent of the plaintiff. The courts in Australia (and NZ) have been prepared to extend the range of persons to whom a defendant may owe a duty of care to include those whom it can readily be contemplated will reply on a certificate issues by the defendant.

Whether a DOC extends further than that is a matter of considerable doubt. The HCA has suggested that a DOC requires, as a necessary prerequisite, that the defendant knew, or ought to have known, that the relevant statement would be communicated to the plaintiff (or to a class of persons of whom the plaintiff is one).

Conduct which constitutes a misstatement


All that is necessary to find liability is that the statement be of such a character as to engender in the plaintiff reasonable reliance thereon. A speaker may qualify a statement as to make it clear that the words ought not to be relief on; in such a case, no liability can attach.

Failure to speak

The situations in which liability will be imposed depend to large extent on the particular circumstances in which the parties are placed. If the defendant makes a statement which is accurate and reliable at that time, there is a duty to inform the plaintiff of any change of circumstances of which the defendant is, or ought to be, aware which renders the statement inaccurate or unsound.

Disclaimer of liability

A defendant may make it clear, by the use of appropriate words, that a statement is not such as might reasonably be relied on by the plaintiff, and hence disclaim the liability which would otherwise accrue. Whether the words used have this effect is very much a matter of construction, in the light of all the surrounding circumstances, the onus being on the defendant to show that the phraseology employed is appropriate for its purpose.