What is Negligent Misstatement?

Negligent misstatement occurs when an inaccurate, careless statement is made negligently (honestly, but carelessly) and where the relationship between the parties is such that the representor (the person who made the statement) has a duty of care to the representee (the person relying on the statement) (e.g. where the representor is a professional advisor). 

The cause of action in negligent misstatement can crystallise if the negligent statement has caused a loss, irrespective of whether or not there was a contract in place between the parties. It suffices that the representor, in dealing with, or by way of its nature, owes a duty of care to the representee.

Purely Economic Loss and the Requirement for a Special Relationship

In most cases, the representee’s loss is purely economic, and in those circumstances, the representee must demonstrate the existence of a special relationship between them and the representor (i.e. the duty of care). 

It is an established principle that, if successful, a claimant can recover purely economic loss where the existence of a special relationship between the claimant and the defendant makes it appropriate.

Establishing a Claim for Negligent Misstatement

In the event that you wish to pursue a claim for negligent misstatement, the onus of proof rests on you as the claimant to demonstrate that the other party, the representor, was negligent in their dealings with you. 

As the claimant, it must be demonstrable that you relied on a representation made by the representor to your detriment, and as a direct consequence of this reliance, you incurred losses.

Where the representor possesses a degree of special skill or knowledge, when making a claim, the claimant’s position is significantly strengthened. This also applies in cases where the representor had knowledge of a third person’s character and their respective professional skills, or of a matter related to the contractual position in question.

Where the representor had a commercial interest in their statement being acted on by the claimant, it is also possible to establish that reliance on the representation was reasonable in circumstances where the representor did not possess any particular knowledge or skill in the matter. For example, where the representor received commission as a consequence of advocating for a third party, who in turn had dealings with the claimant.

However, for reliance on the statement to be deemed reasonable by the courts, reliance must be aligned with the purpose for which the statement was made.

Key Defences to a Negligent Misstatement Claim

Where the representor had a commercial interest in their statement being acted on by the claimant, it is also possible to establish that reliance on the representation was reasonable in circumstances where the representor did not possess any particular knowledge or skill in the matter. For example, where the representor received commission as a consequence of advocating for a third party, who in turn had dealings with the claimant.

However, for reliance on the statement to be deemed reasonable by the courts, reliance must be aligned with the purpose for which the statement was made.

In terms of defending a claim for misstatement, the following points, which remain relevant to the claimant, should be considered:

1. The courts are reluctant to impose liability for negligent misstatement upon those who express opinions casually, on social, or other informal occasions.
2. Professional advice, which requires a degree of judgement, evaluation, and knowledge, if inaccurate, may not necessarily be negligent.
3. Negligent misstatement can be defended on the basis of a disclaimer of liability if an appropriate disclaimer was included when the statement was given (subject to Unfair Contract Terms Act 1977 Reasonableness and Consumer Rights Act 2015).
4. Reliance can be negated if the defendant’s statement itself recommends that the reader (representee or third-party) undertake further enquiries.
5. It may be applicable, depending on the facts, to raise a defence of contributory negligence if it can be demonstrated that the claimant is blameworthy for failing to seek appropriate further advice.
6. Absent the defendant’s particular knowledge or skill, reliance on the representation may be held not to have been reasonable.

For advice regarding negligent misstatements, contact us at Griffin Law, where one of our lawyers will be pleased to assist you.

Griffin Law is a dispute resolution firm comprising innovative, proactive, tenacious and commercially-minded lawyers. We pride ourselves on our close client relationships, which are uniquely enhanced by our transparent fee guarantee and a commitment to share the risks of litigation. For more details of our services, please email justice@griffin.law or call 01732 52 59 23.

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