Last year, Julie decided to invest her life savings.

She engaged
Best Investment Sdn bhd (BISB) to invest for her. BISB are
financial and investment advisers. Arman was their Chief
Executive Officer and a licensed investment adviser. During their
first meeting, Julie informed Arman that she was not a stock
market speculator and wanted to invest in something relatively
safe. After Arman had assured that he would personally select
suitable investments, Julie decided to open an investment
account with BIMB. Arman also assured Julie that she could rely
on his skills and vast experience in the financial market.

Sometime late last year, Arman advised Julie that Sunrise Bhd has
been targeted as an up and coming insurance company. Arman
advised Julie that Sunrise Bhd was a viable and sound investment
and that she should not miss the golden chance. Julie then
invested in Sunrise BHD. However, on the day of listing of Sunrise
BHD shares, the shares opened at RM2.00 and closed for the day
at RM1.00. The counter not only did not recover, it nosedived
further. Arman, who was supposed to call Julie on listing day to
inform her of the opening price, was away in NY. Consequently,
Julie suffered financial loss. Julie also claimed that Arman failed to
furnish her with the abridged prospectus. Information contained
in the abridged prospectus was very much different from that
given by Arman to Julie.

Julie seeks your advice on the possibility of bringing an action in

negligence against Best Investment Sdn Bhd. In your advice,
discuss the relevant elements of negligence. Support your answer
with relevant authorities.
 There are four elements which make up the vehicle of negligence in
Tort; these are duty of care, breach of duty of care, causation, and
damage. Each and every particular of the elements must be made
established predominantly before the inquirer can claim for compensation.
Another degree in which the courts have been wary before imposing duty
of care is the damage suffered by the plaintiff is in the form of pure
economic loss. Pure economic loss is monetary misfortune endured as the
upshot of the negligent conduct of another party. It is losses which are
purely financial and not accompanied by any physical damage to a person
or property. Pure economic loss can likewise be brought about either as
consequences of a negligent act or a negligent misstatement, for which
different principles need to be considered.

Consequently, the issue arises in this present case is whether or not Best
Investment Sdn Bhd is liable for negligence misstatement towards Julie.

The liability of negligent misstatement is a person remarking a

statement escorted with reasonable reliance for any certain party to
believe the said statement and has given rises to foreseeable financial
loss for the said grieved party.

In this present case, Julie is the plaintiff whom monetarily affected

as a consequence of the advice given by Arman from Best Investment
SDN BHD. To chiefly examine whether negligent misstatement is present,
there are several test needed to be established.
As has been laid down in the landmark case of Hedley Byrne & Co. Ltd
v Heller & Partners Ltd. (1964), it is that the Plaintiffs had requested
the defendant to give comment regarding a potential customer with whom
the Plaintiffs were intended to do business with. The defendant bank,
complemented with a disclaimer, advised that the customer was
financially sound only to be informed later that the customer went into
liquidation. The House of Lords held that the disclaimer made had
effectively precluded any duty of care for the defendant. Duty of care
could be imposed in such a situation where there is a special relationship
between the parties relying on the defendants advice.
Also in that case, few elements has been laid down and needed to be
fulfilled conjunctively.
The first element is both plaintiff and defendant need to attain a
special relationship. The relationship is said when a party possess a
special skills and knowledge pertaining to a specific matter. It applies to
the proximity test where the defendant has a duty of care towards the
plaintiff who is directly affected towards his act. In the case of Mutual
Life & Citizens Assurance Co Ltd v Evatt (1971) which affirmed the
principle set in Hedley Bryne, where the Privy Council held that a duty of
care would only arise if the defendant is in the business of giving advice or
information, or professes to have expertise in a particular field. It must
also be vivid that the plaintiff truly required such opinion from the advisor.
However, in the case of Esso Petroleum Co Ltd v Mardon (1976), the
defendants were not in the business of giving advice, but the Court of
Appeal still take into consideration that they were experienced and had
special and expert knowledge in estimating the contents of the petrol.
Thus, making the imposable of a duty of care is forwarded to the
defendants.

In this present case, Arman owns duty of care to Julie in accordance

to the proximity test resulting for them to attain a special relationship as
Arman who works as the Chief Executive Officer and earned a licensed
investment adviser is assumed to possess such special skills and
knowledge. Therefore, the first test is fulfilled.

Second element is reliance of the plaintiff on the skill and

judgment. Meaning to say, the plaintiff solely relied on the advice given
by the defendant. As illustrated in the case of Chaudhry v Prabhakar
(1988), the defendant who held himself out as an expert on motorcars,
was held liable to his friend who had relied on his advice which proved
detrimental. Mutually in the case of KGV & Associate SDN BHD v The
Cooperative Central Bank Ltd (2006) where the defendant has
wrongly valued the value of property. The act of the Plaintiff to rely on the
defendants skills and opinions are reasonable, making the defendant to
be liable for the claim.
 In reference of the present case, it is reasonably foreseeable for Julie
to rely on the skill and judgment by Arman as he possesses such skills.
The second test is fulfilled.

Apart from that, the third element is inclusive of the voluntary

assumption of responsibilities. In White v Jones, the solicitor had
assumed responsibility to provide his services and prepare a will for the
testator. This gave rise to a duty of care for the beneficiaries, who did not
inherit because of the will was not prepared in time before the testator
death. It was because the solicitor was well aware that the beneficiary
would be relying on the solicitor to discharge his or her functions with due
care. Similarly in the case of Smith v Eric Bush where the defendants
had assumed responsibility when they gave a favourable report which was
inaccurate. In the claim from the plaintiff as a result of her reliance to the
advice, the court held that the defendant is not liable for the disclaimer
made as it was unreasonable and thus, invalid under the Unfair Contract
Terms Act 1977 (not applicable in Malaysia).

In this present case, Arman had assumed responsibility when he

assured Julie that he would personally select her with suitable investments
and that she could rely on his skills and vast experience in the financial
market. Therefore, third test is established.
Subsequently, the reasonable reliance that can be seen under the
case of Caparo Industries plc v Dickman where there are 5 tests
derived from the case. The first one would be the defendant must have
duty of care towards the plaintiff. Arman owns duty of care towards
Julie in accordance to the proximity test resulting as Julie is the client of
Arman.
Second test is there must be foreseeability of damage,
proximity of relationship and the reasonableness or otherwise of
imposing a duty. In the present case, it is foreseeable and reasonable for
Julie to suffer from financial loss if the Arman gives her a defective
remark.
The third one is whether or not it is reasonable for the plaintiff
to rely on the statement given. In this case, Arman possess such skill
and position as a Chief Executive Officer, resulting Julie to reasonably rely
on his opinion.
The fourth test is the statement must be communicated by both
parties. The assurance provided by Arman to Julie and as she accepted it,
is the indication of communication took place.
The last test is the plaintiff is highly and likely to rely on the
defendants advice which in the present case, Julie has every reasons
to. She did rely on the defendants advice and opinion.
Hence, all of the test and the additional laid down tests in the case of
Caparo are all made established.

Despite the element of duty of care, there comes the need for other
elements to be established as well in order to constitute to negligence.

As to determine the breach of duty of care in negligent

misstatement, it is pertaining to the professional standard of care as
stated in Bolam principle. The test is the standard of the ordinary skilled
man exercising that special skill. In the case of Kaw Nan Seng v
Nagamah & Ors where the Federal Court held that the duty of a doctor
must adhere to his reasonable standard of care. Applying the Bolam test
in the case, the defendant was liable as all doctors would aware about the
impact of plaster being tightly placed on.

In this present case, Armans failure to act within the standards of

reasonably competent has resulting him to breach the duty of care
towards Julie.

The third element to constitute to negligence is the causation. In

this matter, it applies the single cause of causation in fact. The
damage suffered by Plaintiff would not have taken place but-for the
Defendants breach of duty. In the case of Barnett and Chlesea &
Kensington Hospital Management Committee, it held failed on the
evidence that even if the deceased had been treated by the defendant, he
would still have died due to the poisoned tea.

In this present case, Julie would not suffer from pure economic loss
but for the breach of duty of care by Arman.
 Lastly is the damage. Malaysia would consider the reasonable
foreseeability test to determine whether damage is well present. In the
case of Government of Malaysia & Ors v Jumat b Mahmud & Anor, it
is not reasonably foreseeable that a student being poked by a pencil.
Thus, the court rejected the claim lack of supervision by the plaintiff as
the damage suffered by the plaintiff is not reasonably foreseeable.
In contrast with the present case, it is reasonably foreseeable that
Julie would have suffered from pure economic loss due to the reliance
made upon Armans competent advice.
As to conclude, all of the elements that constitute to negligence are
well established and it is possible for Julie to bring an action against Best
Investment SDN BHD under negligent misstatement.