5 Loss caused by the breach
A claimant has to prove that he has suffered loss as a direct result of the breach. Causal link must be established by the claimant between the defendant’s conduct and the loss occurred by the defendant’ conduct loss
There will be no liability on defendant, if damage caused by somebody and something else.
Loss has been caused by regardless of defendant’s conduct, then he has not caused the loss above two points can be descried in the case of Jeb Fasteners Ltd V Mark Bloom& Co 1982. In Jeb v marks case the defendant prepared audit report negligently, but claimant cannot claim to defendant’s auditor even auditors have obligation to take care during audit because defendant company taking the services of their directors not of accountant or auditor
Something happened after the defendant‘s breach that contributed to the loss, then defendant is not liable for the damage.
Following damages are normally recoverable
- Damage as a result of personal injury
- Damage to property
- Financial losses linked with personal injury. Pure financial loss is rarely recoverable
If the loss was too remote and claimant is able to show that loss suffered by the defendant, s breach court will not recover the loss.
5.1 The Effect of Hedley Byrne
Hedley Byrne case created new duty situation of a special relationship between parties by recognizing liability for negligent misstatement causing economic loss cases usually concerned with whether or not duty arises and it is difficult to established clear principal to apply as law established on case by case basis
5.2 The meaning of special Relationship
There must be a special relationship for action against negligent misstatement to be successful, Nicholas case consideration is still relevant for special relationship. Liability on defendant arises in situation when he gives his professional advice on business and statement is made especially for business occasion not for social occasion or publicly. The context of loss occurred should be considered in the relationship of parties for example account prepared for shareholders or potential takeover
5.3 Where there is no special relationship
In Jeb Fastener claimant claim for damages cannot be successful because claimant was taking services of directors not of auditors or accountants but court express that accountants have duty of care to prepare accounts properly as it can be foreseeable easily that potential bidder relies on accounts.
Accountants have duty of care to all shareholders not on some bidders. The example of this is case of Caparo Industries Plc V Dickman and others court set following criteria in order to give rise a duty of care for special relationship.
- The standard of foreseeability
- The proximity concept whether statement made for individuals or group and kind of
- Transaction and degree of relying of claimant on transaction
- Look for the purpose of statement and knowledge of statement at that time
- Imposing duty of care should not be public policy
These criteria can be seen in the case of James paper group V Anderson 1991 In the case JMP was entering in the negotiation with MK Paper .The MK chairman asked his accountant HA to prepare draft accounts quickly for the negotiation .After the negotiation was made JMP found some errors in the accounts .JMP sued MK, s accountant for negligence but JMP claim failed as account were prepared for MK not for JMP and draft accounts cannot be relied if they were final accounts
5.4 Where is a special relationship
Duty of care exists only to those for whom statement was made special relationship example can be seen in Morgan V Hill Samuel Bank
5.5 Factors to consider the duty of care
Following factors should be considered whether duty of care exists or not
- Purpose for making of statement
- Relevant professional skills
- Knowledge at the time of statement
- Responsibility of defendant to claimant
- Class of claimant
- Degree of reliance on advice
- Is fair to impose duty of care
- Is it foreseeable that advice given is acted by claimant
- Causing auditor, s report to contain any false matters which is material , then offence can be punished by a fine