McCunn v Treasury Solicitor & Ors

Liability for negligent misstatement may arise where the circumstances show that an answer to an enquiry carries sufficient gravity and importance, the maker knows or ought reasonably to know that the recipient will rely on it, and reliance is reasonable. The enquiry need not be formal, provided the surrounding relationship and dealings make its significance clear. On appeal, factual findings supporting reliance and reasonableness will not ordinarily be disturbed where they were open to the trial judge on the evidence.

The claimant and the appellant had been business partners and shareholders in Abacus Tubular Products Ltd. The claimant remained liable as guarantor under a lease after transferring his shares to the appellant, who had agreed to arrange the transfer of the lease and assume the guarantee.

The appellant repeatedly reassured the claimant that the arrangements were being dealt with. The claimant later relied on a further assurance, took no steps to protect himself, and was subsequently required to pay the landlord under the guarantee. The Central London County Court entered judgment for him in negligent misstatement. The appellant appealed, principally challenging the application of the established requirements for negligent misstatement and the reasonableness of reliance.

1. Appeal dismissed. The Court of Appeal upheld the judgment for the claimant in the sum of £20,000, with interest and costs. Permission to appeal to the House of Lords was refused.
2. The court accepted four requirements derived from the authorities, including Candler v Crane, Christmas & Co [1951] 2 KB 164 and Hedley Byrne v Heller [1964] AC 539: liability does not ordinarily arise from a casual or perfunctory enquiry; the circumstances must indicate the gravity and importance of the answer; the maker must know or ought reasonably to realise that the recipient is trusting the answer as a basis for action; and it must be reasonable for the recipient to act upon it.
3. Those requirements were satisfied. The importance of the enquiry was established by the parties’ prior agreement, the appellant’s continuing reassurances, the correspondence explaining the required lease assignment and guarantee arrangements, and the claimant’s impending withdrawal from the premises. The trial judge was entitled to find that the claimant relied on the assurance and was led to act to his detriment.
4. The claimant’s lack of detailed understanding of the mechanics of assigning a lease did not make his reliance unreasonable. The trial judge had assessed the evidence and the claimant’s credibility. There was evidence upon which her findings could properly be based, and the appellate court had no basis for interfering with them.
5. The court observed that the facts also appeared to disclose a partly performed contractual agreement which could have been enforced by specific performance, and that the restitution claim was misconceived. However, the appeal was determined on the pleaded negligent-misstatement claim.

• Court of Appeal (Civil Division): McCunn v Treasury Solicitor & Ors [2001] EWCA Civ 1502. Appeal dismissed with costs.
• Central London County Court: On orders dated 13 March and 25 August 2000, Her Honour Judge Uziell Hamilton entered judgment for the claimant against the third defendant for negligent misstatement, awarding £20,000, interest and costs.