That Law in Claims of Negligence: Court Positions

This essays calls attention to the law surrounding a claim in negligence. This involves four elements, all of which the claimant/s must prove on balance of probabilities. The first is proving that the defendant owed the claimant a duty of care in respect of the damage or loss that he had suffered. Secondly, the claimant must show that the defendant breached the standard of this duty of care. Thirdly, the claimant must show that the defendant’s breach of the duty of care caused the damage or loss being complained of. Finally, the claimant must show that the damage suffered is not too remote from the breach.

When it comes to proving that a duty of care existed, however, the claimant must show that the defendant owed him/her a duty of care is respect of the type of damage which he has suffered. This is because the law is more reluctant to offer its protection to the claimant in respect of certain types of losses than for others. In the present situation, for example, both Bertram and Ruth have suffered purely economic loss.

To properly answer this question, then, it is first necessary to explore what is meant when one refers to economic loss. Many losses resulting from negligence could be regarded as economic. A case which usefully illustrates the difference between damage, economic loss arising from personal injury and/or damage to property and pure economic loss is Spartan Steele v Martin^[1]. Here, the defendants negligently cut an electric cable, causing a power cut that lasted for 14 hours. Without electricity to heat the claimant’s furnace, the metal in the furnace solidified and the claimants had to shut down their factory. They claimed for damage to the metal that was in the furnace at the time of the power cut (physical damage to property), loss of the profit that they would have made on selling that metal (economic loss arising from damage to property), and loss of profit on the metal that would have been processed during the time that the factory was closed (pure economic loss). A majority in the House of Lords held that although the first two claims were recoverable, the third for pure economic loss was not.

The present position of the Courts towards claims in negligence for purely economic loss was laid down in the landmark case of Hedley Byrne v Heller^[2]. Here the claimants asked their bankers to inquire into the financial stability of a company with which they were having business dealings. Their company made inquiries of their company’s bankers, who carelessly gave favourable references about the company. Reliance on these references made the claimants lose 17,000. The claimants sued the defendants for their careless statements.

The Court held, inter alia, that in relation to negligent misstatements, a duty of care could arise, but only where there was a special relationship between the recipient and the giver of the negligent advice. The nature of the special relationship was not fully defined, but the requirements for its existence appeared to be:

1. 1. a reliance by the claimant on the defendant’s specialist skill and judgment;
   2. knowledge, or reasonable expectation of knowledge on the part of the defendant, that the claimant would be relying on that statement;
   3. it was reasonable in the circumstances for the claimant to rely on the defendant;
   4. there had to be an assumption, either explicit or implicit, of responsibility on behalf of the defendant.

Applying this to the present factual scenario, can it be said that, first of all, there was a reliance by the claimants on the defendant’s specialist skill and knowledge. It is submitted that in the case of Ruth as well as Bertram, quite clearly there was such reliance. Ruth relied on Freddy’s claim that the painting was expensive when she used up her life savings to go on holiday whilst Bertram clearly relied on Freddy’s comments when she bought the painting from Ruth. Moreover, Freddy quite clearly had specialist skill and judgment, which goes some way in supporting both of the claimants’ cases. As to the second requirement: that there must be knowledge, or reasonable expectation of knowledge on the part of the defendant, that the claimant would be relying on that statement, this is rather more difficult. It is submitted that in Ruth’s case, although it would be hard for her to prove that Freddy had knowledge that she would be relying on the statement, nevertheless she could argue that there was reasonable expectation on Freddy’s behalf that she would, or at least could, rely on such a statement. Bertram, like Ruth will find it hard to convince a court that Freddy did not know that Bertram would rely on the statement, as this is quite clearly not the case. However, like Ruth, Bertram could try to argue that Freddy should have had a reasonable expectation that she, as well as any potential buyer, would rely on such a statement.

The third requirement according the case of Hedley Byrne is that it was reasonable in the circumstances for the claimant to rely on the defendant. In the present situation, of course, arguments could be made on both sides. As regards the case brought forward by Ruth, it is submitted that she has a strong argument that it was reasonable for her to rely on the information, particularly taking into account Freddy’s specialist skill and knowledge. Bertram, it is submitted, could put forward the same argument.

Finally, it was stated in Hedley Byrne that in order for the claimant to be able to successfully bring forward a claim against the defendant there had to be an explicit or implicit assumption of responsibility on behalf of the defendant. However, this element has been the subject of much controversy. In Smith v Bush^[3] Lord Griffiths suggested that it is not a helpful or realistic test for liability, whilst in Henderson v Merrett Syndicates Ltd^[4] Lord Goff said that the criticism of the concept of a voluntary assumption of responsibility in Smith v Bush was misplaced. In Commissioners for Customs and Excise v Barclays Bank plc^[5], this element was placed under great scrutiny by the Court of Appeal, who seemed indecisive and vague as to the role to be played by a voluntary assumption of responsibility. It was stated that the existence of such an assumption should prove conclusive that a duty does exist, whereas the lack of such an assumption would not necessarily be detrimental. In the present circumstances, then, can it be said that there was either an explicit or implicit assumption of responsibility on Freddy’s behalf? Again, there can be arguments here for both sides, but at the very least Bertram and Ruth can attempt to argue that there was such an assumption.

If Ruth and Bertram are able to satisfy the court that a duty of care existed, they will then have to prove on a balance of probabilities that Freddy actually breached the standard of the duty of care. In the present case account will be taken of the fact that Freddy has a professional skill and that this case involves an exercise of that skill. In this case, then, the law will expect Freddy to show the degree of competence usually to be expected of an ordinary skilled member of that profession when doing their duty properly. A defendant who falls short of that level of confidence, with the result that damage or loss ensues, is likely to be held negligent. In the present scenario we are told that the painting was the work of a late nineteenth century hoaxer who had produced a number of imitation “masters” which had not fooled experts in the past. The brushwork, quite obviously, had nothing in common with that of Donalduccio’s known paintings. On these facts it seems that both Ruth and Bertram will have very strong arguments that Freddy did indeed breach the requisite standard of care.

The nest issue, then, is causation. In order to establish negligence it must be proved on a balance of probabilities that the defendant’s breach of his duty of care actually caused the damage or loss complained about, and that the damage caused was not too remote from the breach. There are several tests for establishing causation. The first of these is the ‘but for’ test, whereby it must be shown that had it not been for the defendant’s actions, the claimant/s would never have suffered loss. In the present case, it is submitted that Ruth would never have spent her savings on a holiday in reliance of the money she would earn from the painting, whilst Bertram would never have bought the painting from her, had it not been for Freddy’s negligent statements. In some cases, however, there may be more than one cause of the loss, and the defendant’s conduct may be one of them. This has proved a difficult area of law and the cases are slightly contradictory. One approach can be seen in McGhee v National Coal Board^[6], where the courts held that where a defendant’s negligence made a substantial contribution to the injury or loss they could be liable, and it was not necessary to prove that their negligence was the sole cause. On the other hand, in Wilsher v Essex Area Health Authority^[7], it was held that the claimant had to prove that the defendant’s breach of duty was a material cause of the injury; it was not enough to prove that the defendant had increased the risk that the damage might occur, or had added another possible cause of it. Recent cases have shown that no consensus has been reached on which of these approaches, if any, is correct. In Ruth’s case, then, Freddy might argue that Ruth was negligent in going on a luxurious holiday using her life savings before having the painting officially valuated at Botherby’s, and that that, in fact, was a bigger cause of her loss than Freddy’s negligence.

Moreover, Freddy could argue that Ruth’s actions in fact constituted an intervening act. This is because the law holds that in some circumstances an intervening event may occur after the breach of duty and contribute to the claimant’s loss. Where such an event is said to break the chain of causation, the defendant will only be liable for such damage as occurred leading up to the intervening event. Most of the cases on intervening acts are on personal in jury and difficult to apply to the present scenario, but clearly Freddy could argue that Ruth’s conduct in using up all her life savings on a luxurious holiday before having the painting officially valuated amounts to an intervening act. As regards Bertram’s claim, however, this is irrelevant.

As well as proving that the defendant’s breach of duty factually caused the damage or loss suffered by the claimant, the claimant must prove that the loss was not too remote from the defendant’s breach. Like the issue of duty of care, the test is a legal and not a factual one which forms one of the ways in which the law draws the line between loss which can be compensated and that which cannot. The current test for remoteness was laid down in the case of The Wagon Mound No 2^[8], which established that so long as a type of damage is foreseeable, it will not be too remote, even if the chances of it happening were slim. In the present case, then, it is submitted that it was no doubt foreseeable that people would rely on Freddy’s comments and take action accordingly as regards the painting. Such conduct could invariably result in economic loss. Moreover, Freddy would no doubt have had experience of people relying on his expert advice and statements in the past. As regards Ruth’s claim, however, could it be said that Ruth’s actions of using up her life savings on a holiday in reliance of the money she would get for the painting was too remote from Freddy’s breach? In Hughes v Lord Advocate^[9], Post Office employees had opened a manhole in the street and had only covered it with a canvas and, moreover, surrounded it with paraffin lamps. An eight year old boy picked up one of the lamps and took it into the shelter. While playing there he dropped the lamp into the hole, paraffin vapour from the lamp ignited causing an explosion as a result of which the boy fell in the hole and was burnt. The House of Lords stated that if it was reasonably foreseeable that the damage would be of a certain type, it did not matter that the damage was produced in an unforeseeable way. In the present circumstances, then, Ruth could argue that economic loss was foreseeable as a result of Freddy’s breach, and it does not matter that it occurred in an unforeseeable way: spending her savings on a holiday. Moreover, recent cases seem to suggest that the approach in Hughes is gaining favour.

As a result, both Ruth and Bertram have at least a potential claim against Freddy.

BIBLIOGRAPHY

Cases

• • Spartan Steele v Martin [1973] QB 27
  • Hedley Byrne v Heller [1964] AC 465
  • Henderson v Merret Syndicates [1995] 2 AC 145
  • Commissioners for Customs and Excise v Barclays Bank plc [2004] EWCA Civ 1555
  • McGhee v National Coal Board [1972] 3 All ER 1008
  • Wilsher v Essex Area Health Authority [1988] AC 1074
  • Overseas Tankship (UK) v Miller Steamship Co (The Wagon Mound No 2) [1967] 1 AC 617.
  • Hughes v Lord Advocate [1963] AC 837

Books

• • Brazier, m and Murphy, J. Street on Torts, 1999, London: Butterworths
  • Elliot, c and Quinn, F. Tort Law, 2003, London: Longman

Footnotes

^[1] [1973] QB 27

^[2] [1964] AC 465

^[3] [1990] 1 AC 831

^[4] [1995] 2 AC 145

^[5] [2004] EWCA Civ 1555

^[6] [1972] 3 All ER 1008

^[7] [1988] AC 1074

^[8] Overseas Tankship (UK) v Miller Steamship Co (The Wagon Mound No 2) [1967] 1 AC 617.

^[9] [1963] AC 837