Pure economic loss
In this case, Brad suffered pure economic loss. Brad completed the course but finally did not become either a CPA or CA on the basis of his Doctor of Accountancy course. Besides, he could have earned $300,000 a year as a management consultant. What is worse, he went to his former job which salary is still $200,000 and spent two years study and obtained no help for increasing the salaries. Overall, he suffered financial loss from the negligent misstatement. To succeed in a negligence action, the plaintiff must prove all of the following: •the defendant owes the plaintiff a duty of care
•the defendant has failed to comply with the required standard of care •there has been material damage to the plaintiff
•damage caused by the defendant is not too remote
Duty of care
As, for the first time, demonstrated in the case of Donoghue v Stevenson , negligence may exist despite there being no direct relationship between two parties. After the Shaddock’s Case , the duty of care was extended to include the giving of information. In general, defendant will owe the plaintiff a duty of care if, at the time of making the statement, the defendant knows that: •the statement will be communicated to the plaintiff; and •the plaintiff will be very likely to rely on the statement in deciding whether to enter into a transaction; and •there is a risk that the plaintiff will suffer financial loss if the statement is incorrect. In this case, The university owed Brad a duty of care.
Firstly, Brad studied for two years in the University of Kew, which proves their close relationship. Secondly, Brad was attracted by the most important statement in the advertisement that he could become a CPA or CA as what the university alleged by entering the two-year accounting course. What he did --- applied the course and took effort to complete the course was based on the statement of the university. Meanwhile, there was a risk of the course being not accredited that would inevitably result in Brad’s financial loss. Breach of duty of care
A person is negligent in failing to take precautions against a risk of harm if ---- a.the risk was foreseeable; and
b.the risk was significant; and
c.in the circumstances, a reasonable person in the person's position would have taken those precautions. This is the general principle for the test of duty of care, which derives from the Lord Oliver’s speech in the case of Caparo Industries plc v Dickman . There exists a material risk of Brad being not able to become CPA or CA and being subject to economic loss, which is reasonably foreseeable due to the following reasons: •In the advertisement, it was indicated that the application of accreditation of the course was pending; and •The rejection to the application of accreditation of the course would undoubtedly lead to the failure of becoming CPA or CA as well as the loss of time and money. Since the material risk is foreseeable, the negligence calculus should come into play and this refers to what precautions the defendant should have taken to prevent the material risk from eventuating. •The probability of the harm occurring: if the course was not accredited by professional bodies, it was likely to cause economic loss. •The likely seriousness of the harm: if Brad could not become CPA or CA through taking the course, the loss would be at least $460,000. •The burden of taking the precautions: reasonable persons would have made the advertisement only if they had got the accreditation. It’s easy for the university to take reasonable care in giving the warning and other necessary information to Brad to avoid the risk while making the advertisement. Although footnote was made, further explanation should be provided because of the...