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Chapter 3

The meaning of special relationship

For an action in negligent misstatement to succeed there must be a
special relationship. The considerations outlined in the NICHOLAS H
case will still be relevant.

To identify if there is a special relationship between the parties three
elements must be considered:

 Was the defendant in the business of giving professional advice?

 Was the advice given in a business context rather than a social
context?

 Did the defendant know (or should they have known) that the
claimant in particular would rely on the advice? This requires the
court to consider the purpose for which the statement was made.

Where there is no special relationship

If there is no special relationship between the parties there is no duty of care.

This concept has been particularly considered when looking at the audit of a
company. As a general rule, however, unless the defendant had prior knowledge
that a certain bidder would rely on the statement made, no duty of care would exist.
The duty is owed to the shareholders as whole and not individual bidders.

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