Negligent mistatement, Misrepresentation

Discuss the liability outside that of contract that arises form a scenario involving the publishing of a brochure for a hotel that does not accurately reflect either the complex itself or its placement the resort and entices Maggie and Frank to take a holiday there. The complex was still been renovated in October 2001 when the brochures were published, however they were due to have been completed by April 1999.

It should initially be restated that all liability discussed is that which outsides any contractual liability of the parties. It must be stated at the outset that as matter of policy no liability would lie at the doorstep of the customer, C Retton, who provided a personal recommendation for the brochure. He cannot be said to hold a duty of care to other customers as regards what was only his general opinion to the service and even if he was held to have a duty of care he cannot be said to have been in breach of a duty of care as the acts of others would be treated as a novus actus interveniens.

One cause of action outside contract is under the doctrine of negligent misstatement. Liability here depends on the following factors 1 (a) a duty of care based on a special relationship; (b) Defendant's representation must be untrue, inaccurate or misleading; (c) Defendant must have been negligent in making representation; (d) the Claimant must have relied on the misrepresentation; and (e) reliance must have been detrimental to the Claimant.

Firstly what is the liability outside contract as regards to the brochure which showed an artists impression of the complex? The impression was far removed form the truth and showed the complex in a very different light form the building site that it in fact was. Does any liability lie with the hotel or the travel agent?

Whilst it is not stated whether or not there were statements as regards the hotel made in this case, there are two possibilities of circumventing this problem here. Firstly that the courts may hold the pictures to be statements/representations in there own right and thus apply the doctrine of negligent misstatement to them. Secondly, the courts may hold that the action is based on any of the statements form the travel agreement as regards the pictures. For example had they seen the pictures and then spoken about the holiday - or it could be held that it is an implied fact that the pictures were in the brochure already and those certain statements about the hotel which it are negligent.

It is certain that the statement in the brochure as regards that the room should have a balcony and did not, could be regarded as a negligent misstatement - there was an agreement however with the hotel and who is liable will depend on the facts. So did the hotel inform the travel agents no more room with balconies left? Or could the travel agents have checked if it was the case on their systems? As regards that the statement that the beach was a short stroll from the sea, this may have been true but there was a cliff denying access to it. The next beach was 1 k away, so the court will ask was that a short stroll or not? It is possible that 1k would take about 10 minutes to walk and that tit could be held to be a short stroll.

In Hedley Byrne v Heller2 that , it was stated that the duty of care for negligent misstatement is not as wide as the general duty of care set by Donoghue v Stevenson3 and is confined to those circumstances where the parties are in a "special relationship". The court found that the duty applied only if the maker of the representation possessed special skill and applied that skill, regardless of contract, for the assistance of another person who relied on it. They were not prepared to extend the duty beyond this because "If the mere hearing or reading of words were held to create proximity, there might be no limit to the persons to whom the speaker or writer could be liable."

In Mutual Life & Citizens Assurance Co Ltd v Evatt4 it was held that a special relationship arises only where the party giving the advice carries on the business of giving advice and lets it be known that he or she claims to have skill and competence in the field in question and is thereby prepared to exercise the usual degree of skill and competence exercised by persons carrying on that profession. In my view is it almost certain that the courts will view the travel agent as someone that had a special skill and competence in the field of knowledge as regards there area of expertise - namely the holidays that they were selling. In Shaddock v Paramatta City Council5 the duty was extended to giving information as well as advice and it was held that "the person giving the information to another whom he knows will rely on it in circumstances where it is reasonable for him to do so, is under a duty to exercise reasonable care that the information is correct." It would have certainly have been the reasonable for Maggie and Frank to rely on the representations in this case as regards the complex. In addition the Claimants must belong to a limited class of people to whom the Defendant owed a duty of care. It is also not necessary that the statement was made in response to a specific request for information and is sufficient if the representation is made with the intention of inducing members of the class the claimant, to act in reliance on the representation. This can certainly be said to be the case here as there must be little doubt that Maggie and Frank will have relied on the photos and the two statements as an accurate representation of the hotel that they were booking.

In addition the Defendant must foresee reliance and the reliance must be reasonable. This depends on relative skills of parties, the context, and whether advice solicited and the nature of the advice given. Reliance will not be found if the Claimant. Has as much or more knowledge or better access to it than Defendant of the Pas v. Porky Packers 6 . It could certainly be said that it would be reasonable for Maggie and Ken to rely on the representations of the travel agents in this case as they were customers, also they certainly did not have knowledge of the circumstances or better access to the travel agents. Also the Defendant must know of the Claimant. and the representation must be used by the Claimant for the purpose for which it was prepared by the Defendant7. This is also satisfied.

It is also an important fact that an omission to disclose may also be founded on as basis for negligence action as well.8 Therefore if the travel agent forgot to mention that the pictures were not an accurate likeness or that the hotel was still begin built then liability can still arise.

Of special relevance is that the doctrine is not precluded from reliance simply by the virtue of there been a contract.9 As a side point it is also possible to sue in the alternative in contract or tort for negligent statements.10 And this could be of help to Maggie and Ken as the rules relating to limitation of actions may be different and in some circumstances a tort action remains unbarred; (and the method of calculating damages may be different with tort law through reliance damages providing more than contract law through expectancy damages.

We shall now move to the next possible action. So far we have only covered the negligence of the travel agent/hotel. There may also be an action for fraud if the travel agent knew perfectly well of the problems and made representations o the contrary. Also an action could be brought against the hotel if the hotel had misled them as to the true state of affairs. The elements of fraud were first clearly defined in the landmark decision of Derry v Peek 11 Herschell LJ held that fraud constitutes a "false representation made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false". In other words, the representor must have lacked an honest belief in the truth of his statement. However, motive is immaterial, so a party can be liable of fraud, even though no harm was intended. Recklessly was enunciated to mean "consciously indifferent to the truth" and not merely "gross negligence". Where the representor deliberately shuts his eyes to the facts, purposely abstains from investigation, or consciously lacks sufficient information to support an assertion couched in positive and unqualified terms, the conclusion is open that his belief is not really honest.

As a general rule mere silence or passive failure to disclose the truth are not actionable, even if they are deceptive. However, since Peek v Gurney12 the courts have recognised that a half truth may be just as much a false representation as a complete lie.

The claimant must also have been induced to act to his detriment in reliance on the misrepresentation, and as we have said this is very likely here. A representee's knowledge of the falsity will not necessarily defeat the claim. It is no defence that the plaintiff was able to check the accuracy of the representation but failed to do so.

There must be damage as a direct and foreseeable consequence of the misrepresentation. The quantum of damages is the loss suffered, including consequential loss. The plaintiff has an obligation to mitigate his loss.

Whether it is held that there is a fraudulent misrepresentation or a negligent misstatement, Maggie and Ken will be able to press for damages in relation to three of the issues- the pictures, the distance of the hotel form the breach and finally the issue of having no balcony.

1. Queen v. Cognos (1993), 99 DLR (4th) 626 (SCC)[^ Return]
2. [1964] AC 465[^ Return]
3. [1932] AC 562[^ Return]
   
4. 122 CLR 556[^ Return]
5. (1981) 150 CLR 225[^ Return]
6. (1976), 65 D.L.R.[^ Return]
7. Hercules Management v. Ernst & Young. [1997] 2 SCR 165, 146 DLR (4th) 577[^ Return]
8. Spinks v. Canada 1996] 2 FC 563 [^ Return]
9. Esso v. Mardon [1976] QB 801.[^ Return]
10. B.C. Checo International Ltd v. B.C. Hydro [1993] 1 SCR 12[^ Return]
11. (1889) 14 App Cas 337,[^ Return]
12. (1873) LR 6 HL 377[^ Return]
    

BIBLIOGAPHY

Bermingham, V Nutcases Tort (Nutcases) Sweet & Maxwell

Hepple, R Tort Cases and Materials: Cases and Materials Butterworths Law

Jones , M Textbook on Torts7th ed. Blackstones

Tiernan, R Nutshells - Tort (Nutshells) Sweet & Maxwell

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