Gunning, Patrick --- "Spring v Guardian Assuance PLC" [1994] PrivLawPRpr 113; (1994) 1(8) Privacy Law & Policy Reporter 150

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SPRING v GUARDIAN ASSURANCE PLC

House of Lords, Lords Keith, Goff, Lowry, Slynn and Woolf, 7 July 1994

Negligence - duty to take care - economic loss caused by mis-statement - employment reference - whether and to whom duty to take care in preparing reference owed - relationship to defamation and defence of qualified privilege

The plaintiff, Mr Spring, sold life assurance policies. He was employed by the second defendant, C Ltd, until the first defendant, G Plc, took over C Ltd. Shortly after the takeover the plaintiff was dismissed from his position. He attempted to obtain employment with other companies selling life assurance policies. Under the rules of the industry's self-regulatory body each member was obliged to satisfy itself of the character of prospective employees and to provide references in respect of their former employees which made ''full and frank disclosure of all relevant matters which are believed to be true' to other members.

The first defendant provided references in relation to the plaintiff to various other members of the self-regulatory body. Each such reference was in similar terms and contained a number of false and damaging assertions to the effect that the plaintiff had acted dishonestly on a number of occasions. The trial judge found that the statements were not made maliciously but were made without exercising reasonable care in investigating their correctness. The plaintiff was, unsurprisingly, unable to obtain employment and suffered economic loss as a result.

The trial judge held that the defendants owed the plaintiff a duty of care in respect of the reference and ordered that damages be assessed. The Court of Appeal reversed the decision and held that the plaintiff's only remedy lay in defamation (in which no action could succeed because it could be met with the defence of qualified privilege).

Held, allowing the appeal:

1. (per Lord Goff, Lord Lowry concurring) A prima facie duty to take care arises upon an assumption or undertaking of responsibility by the defendant towards the plaintiff, coupled with reliance by the plaintiff on the exercise by the defendant of due care and skill. Specifically, an employer who provides a reference in respect of one of his employees to a prospective future employer will ordinarily owe a duty of care to his employee in respect of the preparation of the reference. The employer is possessed of special knowledge and the employee clearly relies on the employer to exercise due care and skill in the preparation of the reference before it is communicated to the third party (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465, applied.)

(per Lords Slynn and Woolf, Lord Lowry concurring) A duty to take care arises when: it is reasonably foreseeable that damage will be suffered by the plaintiff if due care and skill is not exercised by the defendant; the plaintiff and the defendant are in a relationship characterised by the law as one of ''proximity' or ''neighbourhood'; and the court considers it fair, just and reasonable that the law should impose a duty. In the case of a reference given by an employer in relation to an employee or ex-employee, the damage which may be suffered as a result of a carelessly prepared reference is clearly foreseeable and there is an obvious proximity of relationship. (Caparo Industries Plc v Dickman [1990] UKHL 2; [1990] 2 AC 605, applied.)

2. (per Lords Goff, Lowry, Slynn and Woolf) The torts of negligence and defamation impose liability according to different principles. The policy reasons which underlie the defence of qualified privilege to an action in defamation do not necessarily apply to a claim in negligence. In particular, there is no policy reason to protect carelessly prepared untrue statements. The situation may well be different if the statement is true. Even if the number of references given dropped as a result of potential liability in negligence, their quality was likely to increase. Accordingly, the defendants owed a duty of care to the plaintiff in respect of the preparation of the reference.

(per Lord Keith, dissenting) Precisely the same grounds of public policy which make the defence of qualified privilege available in an action for defamation strongly favour the exclusion of an action for damages for negligence in similar situations. If liability in negligence attaches to the giving of references, referees will be tempted not to communicate any suspicion that the subject of the reference has not acted properly on a particular occasion (Bell-Booth Group Lt v A-G [1989] NZCA 9; [1989] 3 NZLR 148; Balfour v A-G [1991] 1 NZLR 519; South Pacific Manufacturing Co Ltd v New Zealand Security Consultants and Investigations Ltd [1992] 2 NZLR 282, considered).

Obiter:

(per Lords Slynn and Woolf) A duty of care to the subject may not arise when the referee is a mere social acquaintance or was an employer many years ago (per Lord Goff). A duty of care may not be owed to the recipient of the reference

Patrick Gunning