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Candler v Crane - Detailed case brief, including paragraphs and page references Topic: Negligence
The Law of Torts (LAWS212)
Victoria University of Wellington
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Candler v Crane, Christmas and Co Area of law concerned: Negligent Misstatement Court: Court of Appeal (England) Date: 1951 Judge: Denning LJ (dissent), Asquith LJ Counsel: Mr Foster for the defendants Summary of Facts: Plaintiff invested in a company in reliance on accounts produced the defendant, who had been told that he would use them as a basis for his investment. The accounts had overstated the value of the company and after its collapse the plaintiff sued to recover both his original investment and subsequent investment. Relief sought: Issues: Did the accountants owe a duty of care to the plaintiff? Relevant Statute(s): Procedural History: arguments arguments: Although there was no contract between the plaintiff and the accountants, nevertheless the relationship between them was so close and direct that the accountants did owe a duty of care to him within the principles stated in Donoghue v Stevenson. The duty owed was a purely contractual duty owed them to the company, and therefore they were not liable for negligence to a person to whom they were under no contractual duty. Result: reasoning: Donoghue v Stevenson an error of law that existed up till then, deciding that the presence of a contract did not defeat an action for negligence a third person, provided that the circumstances disclosed a duty the contracting party to him An error resolved Donoghue 394 The second error was from Derry which stated that no action ever lies for a negligent statement even though it is intended to be acted on the plaintiff and is in fact acted on him to his loss Existence of negligent misstatement 394 The first submission is that a duty to be careful in making statements arose only out of a contractual duty to the plaintiff or a fiduciary relationship to him. This is a bad argument because the categories to negligence are never closed. Bottom 394 to top 395 The second submission is that a duty to take care only arose where the result of a failure to take care will cause physical damage to persons or property. I must say, I cannot accept this as a valid distinction. I can understand that in some cases of financial loss there may not be sufficient proximity, but, if once the duty exists, I cannot think that liability depends on the nature of the damage. Nature of damage is irrelevant. 395 Let me now suggest the circumstances in which I say that a duty to use care in statement does exist outside of contract: What persons are under such duty? My answer is that persons such as accountants, whose profession is to examine books, accounts, and other things, and to make reports on which other other than their clients, rely in the ordinary course of business. Their duty is not merely a duty to use care in their reports. They also have a duty to use care in their work which results in their reports. Who owes such a duty? 395. Promoters and stuff count bottom 395 To whom do these people owe the duty? They owe their duty to their employer or client, and also I think to any third person to whom they themselves show the accounts, or to whom they know their employer is going to show the accounts, so as to induce him to invest money or take some other action on them. Third parties that they know are going to see it. 396 But I do not think the duty can be extended still further so as to include strangers of whom they have heard nothing and to whom their employer without their knowledge may choose to show their accounts. Once the accountants have handed their accounts to their employer they are not, as a rule, responsible for what he does with them without their knowledge or consent. 396 Proximity: did the accountants know that the accounts were required for submission to the plaintiff and use him? It extends, I think, only to those transactions for which the accountants knew their accounts were required. For instance, in the present case it extends to the original investment of pounds which the plaintiff made in reliance on the accounts, because the accountants knew that the accounts were required for his guidance in making that but it does not extend to the subsequent 200 pounds which he made after two months with the company. Top 397 I can well understand that it would be going too far to make an accountant liable to any person in the land who chooses to rely on the
Candler v Crane - Detailed case brief, including paragraphs and page references Topic: Negligence
Course: The Law of Torts (LAWS212)
University: Victoria University of Wellington
