Transcript Tort Law: Negligent Misstatement

Tort Law:
Negligent Misstatement
Douglas Wilhelm Harder, M.Math. LEL
Department of Electrical and Computer
Engineering
University of Waterloo
Waterloo, Ontario, Canada
ece.uwaterloo.ca
[email protected]
© 2013 by Douglas Wilhelm Harder. Some rights reserved.
Negligent Misstatement
Outline
An introduction to the engineering profession, including:
– Standards and safety
– Law: Charter of Rights and Freedoms, contracts, torts, negligent
malpractice, forms of carrying on business
– Intellectual property (patents, trade marks, copyrights and
industrial designs)
– Professional practice
• Professional Engineers Act
• Professional misconduct and sexual harassment
– Alternative dispute resolution
– Labour Relations and Employment Law
– Environmental Law
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Negligent Misstatement
Misstatements
What happens if an engineer says something that is
incorrect and someone else acts on that information?
– Of course, inside a contract, one might be liable for damages if
another party is affected
– What happens if there is no contract?
– Does a professional have a responsibility to others?
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Negligent Misstatement
Hedley Byrne v Heller
Consider the case of Hedley Byrne & Co. Ltd. v Heller &
Partners, 1964
– Hedley Byrne was an advertising firm and a client, Easipower
Ltd., placed a large order
– Hedley Byrne requested a check of Easipower’s financial
situation and creditworthiness
– Without consideration, Heller replied with a letter indicating that
Easipower was
“considered good for its ordinary business engagements.”
– Heller’s letter included the statement
“without responsibility on the part of this bank”
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Negligent Misstatement
Hedley Byrne v Heller
Consider the case of Hedley Byrne & Co. Ltd. v Heller &
Partners, 1964
– Soon thereafter, Easipower liquidated and Hedley Byrne lost
£17,000 on contracts
– This is the equivalent of half a million Canadian dollars
– Hedley Byrne sued for negligent and misleading information
– Heller & Partners had the position that:
• There was no duty of care
• Liability was excluded
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Negligent Misstatement
Hedley Byrne v Heller
This case went to the House of Lords which found:
– The disclaimer was sufficient to limit any liability
– Also, the relationship was sufficiently proximate so as to
establish a duty of care
However, they also set new precedence:
– It would be possible to sue for tort even if the loss is purely
economic in nature
– Professionals and others would now be liable for statements that
are made
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Negligent Misstatement
Hedley Byrne v Heller
In the ruling, Lord Morris said:
“I consider that it follows and that it should now be regarded as
settled that if someone possessing special skill undertakes, quite
irrespective of contract, to apply that skill for the assistance of
another person who relies upon such skill, a duty of care will
arise. The fact that the service is to be given by means of or by
the instrumentality of words can make no difference.
Furthermore, if in a sphere in which a person is so placed that
others could reasonably rely upon his judgment or his skill or
upon his ability to make careful inquiry, a person takes it upon
himself to give information or advice to, or allows his information
or advice to be passed on to, another person who, as he knows
or should know, will place reliance upon it, then a duty of care
will arise.”
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Negligent Misstatement
Negligent Misstatements
Thus is established the duty of care by professionals to
individuals with whom they have no established contract
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Negligent Misstatement
Limitation Clauses
In Wolverine Tube (Canada) Inc. v Noranda Metal
Industries Ltd. et al., 1994, we have the following:
– An environmental consultant prepared a report with respect to
environmental compliance audits and the possibility of any
environmental liabilities on the lands
– The report was prepared for the owner, Noranda Metal Industries
– When selling the land to Wolverine Tube, Noranda passed on
the report and indicated that Wolverine could rely on the report
– Five years after the report was prepared, Wolverine determined
that the report had errors and those errors detrimentally affected
Wolverine who then sued Noranda and the consultant
– Wolverine claimed the consultant was negligent
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Negligent Misstatement
Limitation Clauses
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In Wolverine Tube (Canada) Inc. v Noranda Metal
Industries Ltd. et al., 1994, the report contained the
disclaimer:
“This report was prepared by Arthur D. Little of Canada, Limited
for the account of Noranda, Inc. The material in it reflects Arthur
D. Little’s best judgment in light of the information available to it
at the time of preparation. Any use which a third party makes of
this report, or any reliance on or decisions to be made based on
it, are the responsibility of such third parties. Arthur D. Little
accepts no responsibility for damages, if any, suffered by any
third party as a result of decisions made or actions based on this
report.”
Negligent Misstatement
Limitation Clauses
In Wolverine Tube (Canada) Inc. v Noranda Metal
Industries Ltd. et al., 1994, the court found that the
limitation clause was more than sufficient when
compared to “without responsibility on the part of this
bank”
Had the report not contained that clause, would the
consultant have been liable?
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Negligent Misstatement
Preparing Tendering Packages
In Brown & Hudson Ltd. v The Corporation of the City of
York et al., 1983, a consulting engineer prepared a
tendering package
– The package omitted information relevant to the soil and groundwater levels
– The contractor assumed that, as no such information was
included in the package, there would be no issues with respect
to water during construction
– The contractor did not specifically ask for such reports in
preparing his tender
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Negligent Misstatement
Preparing Tendering Packages
In Brown & Hudson Ltd. v The Corporation of the City of
York et al., 1983, a consulting engineer prepared a
tendering package
– The court determined the contractor was partially negligent for
not having done so
– The consulting engineer, however, was also found liable
Contractor:
25 %
Consulting engineer:
75 %
– Question: 75 % of what?
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Negligent Misstatement
Preparing Tendering Packages
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In the judgment, the court indicated that
“The engineer must have known that tenderers would rely on the
tender package; particularly when the contract documents did
not require the contractor to satisfy itself about the subsurface
conditions.
“Was the lack of reference to the soil reports and the change of a
sketch and plan a negligent omission to convey necessary
information? Information concerning the water and sub-surface
conditions was of great significance to any tenderer. I can think
of no good reason why the engineers did not refer to the soils
reports in the tender package and no reason for this omission
was advanced at trial.”
Negligent Misstatement
Negligent Comments
In Canama Contracting Ltd. v Huffman et al., 1983, we
see the following:
– An engineer is employed by the Dept. of Agriculture of Ontario
– A contractor had occasionally relied on his advice
– The contractor passed on its design of a barn to be built over a
manure pit
– The only communications were by phone, but the engineer
looked at the plans and sent the message:
“Good set of plans. I like the detail. Wish I could spend that
amount of time on each project. Keep up the good work.”
– The engineer, however, failed to note deficiencies in the plan
with respect to the placement of rebar
– Part of the walls failed as a result
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Negligent Misstatement
Negligent Comments
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In Canama Contracting Ltd. v Huffman et al., 1983, we
see the following:
– The engineer claimed that he was not under the impression he
was being consulted by the contractor
– The court, however, found that the engineer did refer to the plans
as “good”, which would consequently “lull the plaintiff into
thinking the plans were adequate.”
– With regard to the impression of the consultant, to be
“held to account for negligence, it is not what we subjectively feel
or think but what our conduct objectively makes the other person
believe we feel or think”
Negligent Misstatement
Negligent Comments
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In Canama Contracting Ltd. v Huffman et al., 1983, we
see the following:
– The engineer claimed that he was not under the impression he
was being consulted by the contractor
– The court, however, found that the engineer did refer to the plans
as “good”, which would consequently “lull the plaintiff into
thinking the plans were adequate.”
– With regard to the impression of the consultant, to be
“held to account for negligence, it is not what we subjectively feel
or think but what our conduct objectively makes the other person
believe we feel or think”
Negligent Misstatement
Negligent Comments
In Canama Contracting Ltd. v Huffman et al., 1983, we
see the following:
– The consulting engineer, however, was also found liable
Contractor:
25 %
Engineer:
75 %
– Question: 75 % of what?
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Negligent Misstatement
Negligent Design
In SEDCO and Hospital Laundry Services of Regina v
William Kelly Holdings Ltd. et al., 1988, we see the
following:
– The owner hired an architect to design a building
– The architect subcontracted with mechanical engineers to design
the ventilation system
– The cooling system was deficient and this resulted in workers
having to take “heat breaks” throughout the day
– This resulted in financial losses for the owner who sued the
engineers for negligence
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Negligent Misstatement
Negligent Design
In SEDCO and Hospital Laundry Services of Regina v
William Kelly Holdings Ltd. et al., 1988, we see the
following:
– The courts found that the engineers:
• Were aware of the working conditions
• Were or should have been aware that such a defect would have
been detrimental to the working environment
– Consequently, the there was a breach in a duty of care that
resulted in a pure economic loss of the owner
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Negligent Misstatement
Negligent Design
In Edgeworth Construction Ltd. v N.D. Lea & Associates
Ltd., 1993, we see the following:
– There were errors in specifications and construction drawings
prepared by the engineering firm for an owner
– A contractor who made a tender based on the erroneous
documents lost money because of the errors
– The tendering package specifically stated that the documents
were “furnished merely for the general information of bidders and
is not in anyway warranted or guaranteed by or on behalf of the
Minister.”
– There was no contract between the contractor and the
engineering firm
– Is there a duty of care?
That is, is there the possibility for liability in tort?
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Negligent Misstatement
Negligent Design
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In Edgeworth Construction Ltd. v N.D. Lea & Associates
Ltd., 1993, the court found:
“Liability for negligent misrepresentation arises where a person
makes a representation knowing that another may rely on it, and
the plaintiff in fact relies on the representation to its detriment.
“The facts alleged in this case meet this test, leaving the contract
between the contractor and the province to one side. The
engineers undertook to provide information (the tender package)
for use by a definable group of persons with whom it did not
have any contractual relationship. The purpose of supplying the
information was to allow tenderers to prepare a price to be
submitted. The engineers knew this.”
Negligent Misstatement
References
[1]
[2]
[3]
D.L. Marston, Law for Professional Engineers, 4th Ed., McGraw Hill, 2008.
Julie Vale, ECE 290 Course Notes, 2011.
Wikipedia, http://www.wikipedia.org/
These course slides are provided for the ECE 290 class. The material in it reflects
Douglas Harder’s best judgment in light of the information available to him at the
time of preparation. Any reliance on these course slides by any party for any other
purpose are the responsibility of such parties. Douglas W. Harder accepts no
responsibility for damages, if any, suffered by any party as a result of decisions
made or actions based on these course slides for any other purpose than that for
which it was intended.
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