THE RETREAT FROM THE RETREAT FROM ANNS?

• Published date: 01 December 1996
• Date: 01 December 1996
• Citation: (1996) 8 SAcLJ 384
• Author: PETER GOLDSMITH QC

RECENT DEVELOPMENTS IN THE LAW OF TORTS IN THE UNITED KINGDOM

INTRODUCTION

This article attempts to summarise recent developments in the law of tort in the United Kingdom. The principal area I intend to cover is the development of liability for economic loss. That is a topic of continuing great importance as the highest courts in the Commonwealth grapple with the difficult decisions of responsibility for financial loss in a complex modern business world. It is particularly pertinent to examine the direction the UK courts are taking even though differences with other Commonwealth jurisdictions have emerged. That is true in the area of economic loss where some differences have been seen. The most significant and obvious is the divergence of opinion on the responsibility of those engaged in land development for purely financial loss suffered by subsequent land owners where the House of Lords reversed its own decision in Anns v Merton London Borough Council1 in favour of imposing liability 12 years later2. Other Commonwealth courts have declined to follow the same approach as successively Australia3 New Zealand4 Canada5 and now the Court of Appeal in Singapore itself6 have reached different conclusions imposing liability where apparently in England it would have been denied. However, these differences are in fact minor when seen in context. Overall the development of the common law shows important cross fertilisation of ideas between the several jurisdictions and a strongly common approach. That is plain when examining, for instance, how much the English cases against Anns depended on reliance on Australian decisions.7 The development of the law of tort in the United Kingdom remains therefore highly relevant in Singapore.

I focus in this article, therefore, on how the UK courts have been recently dealing with economic loss cases. There are two relevant strands. In one the courts have been refining and redefining the torts of liability in a way which entitled one to ask if even now there is a switch back towards the apparently discredited tests in Anns; thus the title of this article. In the

other, the courts have been developing an important new approach to the law of damages which by itself is reducing this burden for financial responsibility on third parties. These are not the only interesting developments. Where the English courts have been considering liability in hitherto untouched areas: against referees on the sportsfields8 against homeowners who defend their property against burglars9 or even against family planning clinics for unwanted pregnancies10. Those developments are beyond the scope of this article.

DUTY OF CARE IN ECONOMIC LOSS CASES

The 1980’s in United Kingdom jurisprudence11 in the law of torts were dominated by the sea change in the law of duty of care in the area of economic loss. Recent cases show that the importance of this area has not diminished. But the more recent decisions of the highest Courts show that, like the comment of the American author, Mark Twain, when a newspaper prematurely printed his obituary, that reports of his death were greatly exaggerated, reports of the death of the law of negligence for economic loss have been greatly exaggerated.

It is worth recapping that the late 1980’s saw what it is now clear was a deliberate trend to adopt a more conservative and restrictive approach to the concept of liability in tort for economic loss. The famous trilogy of cases including the decision in 1964 of Hedley Byrne v Heller12 had greatly expanded the area of liability for economic loss. Lord Wilberforce was as a result able to say in Anns v Merton LBC13 that the test of liability could be propounded in a short principle:

“First one has to ask whether as between the alleged wrong-doer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter … Secondly,… it is necessary to consider whether there are any considerations which ought to negative, ought to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise”.

This came increasingly to be interpreted as meaning that the sole test of liability was whether loss was reasonably foreseeable and, if so, whether there were any reasons of public policy why liability should not be imposed. It was the cases which adopted the latter approach — rather than those in which it was appreciated that Lord Wilberforce’s reference to “proximity” was not mere surplusage referring only to the concept of foreseeability — which led the House of Lords and Privy Council increasingly insistently to cut back on the apparent expansion of responsibility14. In doing so, the Courts increasingly referred explicitly to the need to avoid in the area of economic loss imposition of the risk described by the famous US jurist Chief Justice Cardozo in the landmark decision of Ultramares v Touche that

“To hold the maker of the statement to be under a duty of care in respect of the accuracy of the statement to all and sundry for any purpose for which they may choose to rely on it is to subject him to “liability in an indeterminate amount for an indeterminate time to an indeterminate class”.15

This policy found its clearest and most definitive statement in Caparo v Dickman16 (where it was held that auditors did not owe a duty of care to those who foreseeably relied on the audited financial statements other than where they were shareholders relying on them for the purpose of exercising their rights as members of the company)17 and Murphy v Brentwood18which in effect overruled Anns. Caparo in particular proposed an abandonment of a search for universal principle on which to found liability in novel fact-situations in favour of what appeared to be a narrow “incremental” approach in which extension of liability to new areas would have to be justified on a step by step basis from existing precedent, in each case asking a three stage question: (a) whether damage was foreseeable (b) whether a relationship of “proximity” existed and (c) whether it was “fair just and reasonable that the law should impose a duty of a given scope on the one party for the benefit of the other”.19

However, the more recent pronouncements of the House of Lords show yet a further period of change in this difficult and important area. In particular the three decisions, Spring v Guardian Assurance20Henderson v Merrett Syndicates21 and White v Jones22 show an emphasis on principle rather than pragmatism and a definite shift in approach to the policy arguments. In Spring the House of Lords held by a majority23 that the plaintiffs’ former employers could be liable in negligence for giving a reference that prevented the plaintiff from obtaining employment; the case differed from Hedley Byrne as Lord Keith powerfully argued in his dissent because there was no reliance by the plaintiff on the reference which was not of course addressed to him. In Henderson the House held that the managing agents who had undertaken, pursuant to a contract with a third party (member’s agent) the management of the underwriting affairs of the Plaintiffs, who were names at Lloyd’s, owed a tortious duty to take care in the management of the Names’ business. In White v Jones the House held by a majority24 that disappointed beneficiaries could sue a solicitor who had failed to carry out a testator’s instructions: the plaintiffs were the two daughters of the testator who had quarrelled with him and been cut out of his will; he was then reconciled to them and instructed the defendant solicitors to prepare a fresh will leaving bequests to his daughters; the solicitors delayed in carrying out his instructions and he died before the new will could be executed.

There are undoubted differences between the approach even of the members who made up the majority in each case. For example, in Spring Lord Goff based his decision on Hedley Byrne principles whilst the three other judges in the majority (Lords Lowry, Slynn and Woolf) based liability on wider principles. But it is the approach of Lord Goff and the return to the concept of voluntary assumption of responsibility in Hedley Byrne, resuscitated from what had appeared to be its demise in earlier cases notably Smith v Bush25 that characterise these three cases. Lord Goff’s own views on the importance of this are repeated and expanded in later cases, notably in White v Jones. In essence the test of liability coming through these cases is to ask whether the defendant voluntarily assumed responsibility towards the plaintiff. This enquiry would obviate the need for any further inquiry such as whether the imposition is fair, reasonable or just. Lord Browne-Wilkinson in White v Jones gave the most extensive explanation of the concept, tracing it back to cases on fiduciary duty predating Hedley Byrne. He emphasised that the assumption of responsibility in question was not

the assumption of legal responsibility but the assumption of responsibility for the task by undertaking that task.

HOW THE NEW APPROACH HAS BEEN APPLIED SINCE

The House of Lords has considered duty of care cases twice more since Spring, White and Henderson. Both of these cases appear to recognise the conflict between the new line of cases and earlier law.

In X (Minors) v Bedfordshire CC26 the extent of the duty of care of local authorities was considered in 5 conjoined appeals. These cases were of two different kinds:—

“the child abuse cases”, of children who had suffered parental abuse and were claiming damages against the council for failing to prevent it or of a child and mother claiming for damages arising from the wrongful removal of the child from the family home; and

“the education cases”, which were based on a failure to diagnose a learning...