The Scope Of Negligent Misstatement

Introduction

Negligent misstatement occurs where there is a representation of fact, which is incorrect, which is carelessly made, and is relied on by another party to their disadvantage. As explained in our previous article, for some time, it has been possible to claim for economic loss arising out of a negligent misstatement where no contractual or fiduciary relationship exists between the parties. This is provided, however, that a special relationship of sufficient proximity1 exists between the parties.

The Supreme Court in its recent decision in Walsh v Jones Lang Lasalle Limited [2017] IESC 38 has brought clarification to the interpretation of the law in relation to negligent misstatements in Ireland.

Facts

The plaintiff, David Walsh, a property investor (who had significant experience in the property market), was given a brochure by Jones Lang Lasalle Limited ("JLL"), a well-known firm of estate agents and auctioneers, in respect of a property, which he subsequently purchased. The brochure contained incorrect measurements for the property which resulted in it being described as almost 20% larger than it actually was. Mr. Walsh issued proceedings against JLL claiming that he had suffered a loss of €590,000.00 based on an estimate of the lost rental value into the future.

The High Court, in awarding Mr. Walsh €350,000.00 in damages2 in respect of the negligent misstatement, concluded that there was sufficient proximity between the parties to give rise to a duty of care and that the disclaimer was not effective to relieve JLL of liability for negligence in making such a statement. JLL appealed against the finding of liability (there was no appeal in relation to quantum).

The Supreme Court

The core fact in this case was that the measurement of the premises was incorrect. The legal issue was whether, in light of the disclaimer in the brochure produced by JLL, JLL were liable to Mr. Walsh in respect of that misstatement.

By a three to two majority3 the Supreme Court overruled the High Court's finding that JLL owed a duty of care to Mr. Walsh. The Supreme Court confirmed that, at least at the outset, the approach to any disclaimer in a negligent misstatement case was to view it as a piece of evidence relevant to the question of whether a relationship existed sufficient to give rise to a duty of care and it was not appropriate to approach a disclaimer with the strictness that the courts analyse exemption clauses seeking to exclude liability...