Negligent Misstatement Case Study
ISSUE:
Did Terry commit the tort of negligent misstatement while giving advice to Kevin?
RULES:
The following elements must be analysed:
1. There is a special relationship between Terry and Kevin where a duty of care is owed by Terry to Kevin (Hedley Byrne v Heller ):
a. Terry advised Kevin;
b. The advice is of a business or serious nature;
c. Terry should know that Kevin intends to rely on his advice;
d. It is reasonable in the circumstances for Kevin to rely on Terry’s advice;
2. Terry breached the duty of care with regard to the following principles:
a. Probability of causing harm (Bolton v Stone );
b. Likely seriousness of the harm (Paris v Stepney Borough Council );
c. The burden of taking precautions (Latimer v AEC );
d. The social utility …show more content…
Since Terry made a substantial amount of money on the cryptocurrency exchange, it can be argued that he has a keen interest in technology. He is recognised as an experienced financial adviser. In Terry’s position, it is reasonably foreseeable that the shares in a new technology company could drastically drop due to an insider trading scandal. ‘But for’ Terry providing the advice, Kevin would not have invested and lost $150,000 (Rogers v Whitaker ; Yates v Jones ).
4. Kevin’s investment loss of $150,000 resulted directly from the breach of duty of care. It is reasonably foreseeable that an individual receiving investment advice from a well-known financial adviser would act on that advice (Rowe v McCartney ). The damage was not too remote.
5. It could be argued that Kevin contributed to his negligence. Kevin may have detected Terry’s symptoms of intoxication such as his slurred speech, odour, and body language, yet he chose to act on Terry’s advice (Ingram v Britten ; Manley v Alexander ; March v Stramare ). However, given Terry’s reputation as an exceptional financial adviser, it seems reasonable for him to limit his alcohol consumption in a social setting, enabling more fruitful interactions with …show more content…
However, it is uncertain whether Kevin had specific knowledge regarding a technology company’s predisposition towards fraudulent insider trading. Thus, Terry would be liable in this case due to his experience.
Kevin’s comments “What do you reckon? Early retirement?” may have been spontaneous musings, implying that he may not have intended to seriously invest, however, given the serious consequences resulting from Terry’s advice, Terry is liable for Kevin’s economic loss.
CONCLUSION:
Based on the analysis above, Kevin would be successful in his claim for negligent misstatement against Terry. Kevin may receive compensation from Terry for economic loss. Since Terry made a substantial amount of money on the cryptocurrency exchange to be able to afford 100 gold bars for $450,000, it would not be unreasonable to expect him to compensate Kevin for his $150,000
Did Terry commit the tort of negligent misstatement while giving advice to Kevin?
RULES:
The following elements must be analysed:
1. There is a special relationship between Terry and Kevin where a duty of care is owed by Terry to Kevin (Hedley Byrne v Heller ):
a. Terry advised Kevin;
b. The advice is of a business or serious nature;
c. Terry should know that Kevin intends to rely on his advice;
d. It is reasonable in the circumstances for Kevin to rely on Terry’s advice;
2. Terry breached the duty of care with regard to the following principles:
a. Probability of causing harm (Bolton v Stone );
b. Likely seriousness of the harm (Paris v Stepney Borough Council );
c. The burden of taking precautions (Latimer v AEC );
d. The social utility …show more content…
Since Terry made a substantial amount of money on the cryptocurrency exchange, it can be argued that he has a keen interest in technology. He is recognised as an experienced financial adviser. In Terry’s position, it is reasonably foreseeable that the shares in a new technology company could drastically drop due to an insider trading scandal. ‘But for’ Terry providing the advice, Kevin would not have invested and lost $150,000 (Rogers v Whitaker ; Yates v Jones ).
4. Kevin’s investment loss of $150,000 resulted directly from the breach of duty of care. It is reasonably foreseeable that an individual receiving investment advice from a well-known financial adviser would act on that advice (Rowe v McCartney ). The damage was not too remote.
5. It could be argued that Kevin contributed to his negligence. Kevin may have detected Terry’s symptoms of intoxication such as his slurred speech, odour, and body language, yet he chose to act on Terry’s advice (Ingram v Britten ; Manley v Alexander ; March v Stramare ). However, given Terry’s reputation as an exceptional financial adviser, it seems reasonable for him to limit his alcohol consumption in a social setting, enabling more fruitful interactions with …show more content…
However, it is uncertain whether Kevin had specific knowledge regarding a technology company’s predisposition towards fraudulent insider trading. Thus, Terry would be liable in this case due to his experience.
Kevin’s comments “What do you reckon? Early retirement?” may have been spontaneous musings, implying that he may not have intended to seriously invest, however, given the serious consequences resulting from Terry’s advice, Terry is liable for Kevin’s economic loss.
CONCLUSION:
Based on the analysis above, Kevin would be successful in his claim for negligent misstatement against Terry. Kevin may receive compensation from Terry for economic loss. Since Terry made a substantial amount of money on the cryptocurrency exchange to be able to afford 100 gold bars for $450,000, it would not be unreasonable to expect him to compensate Kevin for his $150,000