Assumption of Responsibility

Having reviewed a number of claims made about negligent misstatements in the literature, this chapter now begins an assessment of the remaining (and less extreme) claims by examining the main cases in which the assumption of respon­sibility concept was adopted.

A. Hedley Byrne v Heller

As Mitchell has explained,^[1160] the concept of an ‘ assumption of responsibility' (or ‘voluntary undertaking' ) is not new. It has a long-ish pedigree in actions on the case involving warranties, bailments and undertakings arising from common callings. However, we must be careful here to distinguish between this juridical concept and the former action of assumpsit which relied upon it. Mitchell argues that ‘ assumpsit duties[, which] arose where one party gratuitously undertook to act for the benefit of another and carelessly misperformed[,] do not fit neatly into tort, contract or any other modern legal category’.^[1161] The first point to note is that assumpsit itself, as a form of action requiring a request to do something and spe­cific pleading of the circumstances in which it came about,^[1162] was swept away in the second half of the 19th century. The conventional view now is that the law of torts consists in ‘ the action of trespass and the action of case minus assumpsit’. ^[1163] The second point to note, then, is that one has to be very wary of Mitchell’s asser­tion that ‘Hedley Byrne... is best understood as a reassertion of [this] very old idea’ of an assumpsit duty and that the seminal negligent misstatement case is ‘the articulation of a principle that would have been obvious to a fourteenth century lawyer’.^[1164] As will now be demonstrated, their Lordships in Hedley Byrne consid­ered voluntary undertakings (not assumpsit as such) to be significant within a conception of proximity used to ground an obligation on the part of professionals and other advisors who hold themselves out as having certain skills and compe­tence and as being able to meet certain minimum standards of care.

In Hedley Byrne v Heller, there was majority support for the propositions that ‘irrespective of any contractual or fiduciary relationship and irrespective of any direct dealing, a duty may be owed by one to another’ ^[1165] and that a duty of care could be said to arise where there was a special relationship between the parties. A special relationship, in this context, would arise upon the basis of an assumption or undertaking of responsibility by the defendant in making the statement subse­quently relied upon.^[1166] Reliance would be reasonable in circumstances where, for example, the maker of the statement was possessed of a special skill^[1167] and where the statement was made on a serious (eg business) occasion, rather than on a social occasion.^[1168] Each of their Lordships agreed that there could be no liability where the statement maker disclaimed responsibility for the accuracy of its contents.^[1169] Around this core of principle, there were other expressions of opinion about the appropriate ambit of liability.

It is important to understand how their Lordships in Hedley Byrne conceptu­alised the ‘assumption of responsibility’. Although opposing accounts exist,^[1170] it is submitted that the House of Lords (1) inclined towards the view that any assump­tion of responsibility was to be discerned from an examination of the facts and would be imputed to the defendant^[1171] and (2) was adamant that an ‘assumption of responsibility’ was a kind of proximity.^[1172] This latter point deserves emphasis and can be established by reference to the speeches of four of their Lordships.

Lord Reid cited a passage from Sir Roundell Palmer in Peek v Gurney concerned with the issue whether ‘there was such a proximate relation between [the plaintiff] and the person making the representation’^[1173] and stated that, with respect to three- party misstatement cases, he did not ‘ intend to decide anything about the degree of proximity necessary to establish a relationship giving rise to a duty of care’.

Finally, we turn to Lord Devlin, whose speech in the Hedley Byrne case, although no model of clarity, has been greatly misunderstood by courts and scholars. His Lordship stated that:

[T]here is no general duty not to make careless statements. No one challenges that. Nor indeed is there any general duty to be careful in action. The duty is limited to those who can establish some relationship of proximity such as was found to exist in D onoghue v Stevenson. A plaintiff cannot, therefore, recover for financial loss caused by a careless statement unless he can show that the maker of the statement was under a special duty to be careful.^[1177]

This passage should be read bearing in mind that, in his Lordship’s view, what Lord Atkin had done in D onoghue v Stevenson was ‘to use his general conception to open up a category of cases giving rise to a special duty’.^[1178] Lord Devlin was thus asserting that, through a finding of an assumption of responsibility, a similar special duty could be found in a misstatement case.^[1179] His Lordship later consid­ered whether the appellants had ‘tried to press Donoghue v Stevenson too hard’. Lord Devlin opined that their Lordships ‘asked whether the principle of proximity should not apply as well to words as to deed.

Cases may arise in the future in which a new and wider proposition, quite independent of any notion of contract, will be needed. There may, for example, be cases in which a state­ment is not supplied for the use of any particular person. and it will then be necessary to return to the general conception of proximity and to see whether there can be evolved from it, as was done in Donoghue v Stevenson. a specific proposition to fit the case. English law is wide enough to embrace any new category or proposition that exemplifies the principle of proximity.^[1182]

His Lordship was, in this passage, rejecting the idea that duties of care in negligent misstatement cases could arise only where the facts are ‘equivalent to contract’. Although such equivalence makes for an incontrovertible case in favour of duty, this is not a necessary requirement. The law could be expected to develop regard­ing care in word as it had done so as regards care in deed.

One might conclude examination of the Hedley Byrne case by noting that there was no statement anywhere within it that was inconsistent with the highlighted propositions. The result must be that any scholar attempting, as the corrective justice and rights theorists have attempted, to carve out a special place for the law of misstatements—either as a separate branch of the law, as part of the law of contract, or as a separate type of negligence liability—cannot use Hedley Byrne as their anchor.

Stephen Perry was right to conclude that the misstatement cases do not col­lapse the distinction between tort and contract, given the willingness of courts in tort to award damages for losses of opportunity to make a profit or otherwise obtain a benefit.^[1183] Perry was also correct to write that ‘there is no basis for think­ing that negligent misrepresentation cases should be treated as distinct from all other negligence cases, including those that involve an undertaking to perform a service other than conveying information or advice’.

Many Donoghue v Stevenson-type cases involve, as part of the causal chain leading to damage, foreseeable reliance by the plaintiff on a belief that the defendant will not act in such a way as to subject the plaintiff to an unreasonable risk of harm to person or property. This is often true of products liability cases, for example, including, presumably, Donoghue v Stevenson itself: the plaintiff believes that the defendant will manufacture a reasonably safe product and relies on him or her to do so, thereby omitting to take pre­cautionary measures... that he would otherwise have adopted.^[1185]

A review of negligence cases prior to Hedley Byrne reveals that the courts had regularly awarded damages for misstatements causative of physical loss.^[1186] The real limitation in English case law lay in the point that there could be no liability for misstatements causative of purely financial loss except where the requirements of deceit were satisfied, which, following Derry v Peek,^[1187] included the need for proof of fraud. The limitation in the extent of liability related to the form of dam­age rather than to the means of causation. This is somewhat ironic, given that the focus of discussion in Hedley Byrne lay in the significance of the distinction between acts and words rather than in the type of loss at issue (although there was, to be sure, some comment about it).^[1188]

B. Williams v Natural Life Health Foods

We now come to a more modern authority in which negligent misstatements were treated as a special category of case, different and apart from ordinary doctrine. In Williams v Natural Life Health Foods Ltd,^[1189] it is clear that the House of Lords used the assumption of responsibility concept in order to deny or drastically reduce the scope of a small company director's liability for misstatements. In the Williams case, franchisees sued a franchisor company for misleading projections about the viability of a health foods store.

The present writer has argued^[1198] that the reasoning in the Williams case, evi­denced especially in the adoption of the ‘assumption of responsibility' test for duty, was very much influenced by the nature of the defendant as the sole director­shareholder in a small company. Although the claimant sought to make Mr Mistlin liable in his capacity as a director of the company, it would appear that the House of Lords was very concerned by the potential consequences—for the corporate form—of such a ruling. In these circumstances, the House found it expedient to employ assumption of responsibility reasoning, which might be seen to create a higher threshold to liability than one based on simple proximity. The assertion that the House consciously deviated from the application of the standard test for duty of care i n order to protect the director of the small company seems a reason­able conclusion to draw when one considers that the three-stage test, as set out in Caparo Industries plc v Dickman,^[1199] was entirely apposite given that it concerned a negligent misstatement causative of financial loss. No reason was given for the failure to apply this test.

The result of the Williams case is that it is ‘almost impossible to bring a claim against directors personally' for negligent misstatements.^[1200] Yet its reasoning is vul­nerable on a number of grounds. In ordinary parlance, an ‘assumption of respon­sibility' would seem most naturally to refer to a responsibility that is subjectively assumed—that is, where the statement maker intends as a factual matter to assume responsibility for the task being undertaken.^[1201] There can be no difficulty with the idea that onerous legal obligations should be acknowledged in a person who has assumed responsibility for the interests of the claimant. The subjective assump­tion of responsibility is normatively significant and capable of grounding a legally enforced duty of care in tort.^[1202] In such cases, it appears correct to say that ‘ there should be no need to embark upon any further inquiry whether it is “fair, just and reasonable” to impose [a duty of care] for economic loss'. ^[1203] The problem is that such usage is the exception rather than the rule.

Virtually all of the cases in which advice or information is offered in the course of a professional relationship and within the purposes contemplated by the par­ties can be characterised as involving a subjective assumption of responsibility for the task in question—but less frequently for the implications of negligence.^[1204] Under Lord Browne-Wilkinson's conception of the assumption of responsibility set out in White v Jones,^[1205] this would suffice to ground a duty of care. The normatively salient aspect of the defendant's actions is that he or she makes a choice to answer an inquiry or to take action which is likely to affect another's interests.^[1206]

The more difficult use of the assumption of responsibility test arises in cases where the defendant is not in the business of supplying statements of the kind in question, where the parties have not concluded a contract or entered into a formal relationship or where the parties have not directly dealt with each other at all. In such cases, it would seem futile to employ the assumption of responsibility test. This explains why, in Customs and Excise Commissioners v Barclays Bank plc, Lord Bingham stated that ‘ an assumption of responsibility [is] a sufficient but not a necessary condition of liability' in negligence.^[1207] Various cases indicate that the assumption of responsibility becomes, in such circumstances, an issue of the ‘exchanges or conduct crossing the line' between the parties and other objective manifestations of proximity^[1208] so that ‘the Caparo strand and the [assumption of responsibility] strand in reality merge’.^[1209]

C. More Recent Authority

The Barclays Bank case was decided after the Williams case. It returns to the tra­ditional understanding by defining the ‘assumption of responsibility’ concept as a type of proximity found within the three-stage test for duty of care.^[1210] Lord Bing­ham noted that the assumption of responsibility ‘test’ is to be applied objectively.^[1211] Moreover, ‘the further the test is removed from the actions and intentions of the actual defendant, and the more notional the assumption of responsibility becomes, the less difference there is between this test and the threefold test’. ^[1212] Lord Hoffmann went further in conflating the tests, stating that the purpose of the objective assumption of responsibility test ‘is to establish whether there was... the necessary relationship (or “proximity”) between the parties’.^[1213] Lord Walker spoke similarly, saying that in financial loss cases ‘the voluntary assumption of responsi­bility towards others, judged objectively, may provide the necessary proximity’.^[1214] The latter two of their Lordships clearly envisaged that the concept of proximity encompassed the objective version of the assumption of responsibility test.

A more recent case in which the assumption of responsibility concept was explained in terms of an objective test similar to that of proximity is Chandler v Cape Industries.^[1215] This was a case concerned with the issue whether a parent com­pany owed a duty of care to its subsidiary’s employees in circumstances where the employees were exposed to asbestos and thereafter suffered from asbestos- related diseases. Its significance for our purposes is that it involved the question of whether to make a shareholder—the parent company—liable for the tort of its subsidiary. It presents the modern ‘take’ on use of assumption of responsibility­type reasoning in that context. In the course of holding that such a duty of care was owed, Arden LJ observed that cases employing the ‘ assumption of responsi­bility’ concept were more accurately explained as concerned with ‘ attachment’ of responsibility by the courts.^[1216] This is on the basis, no doubt correct, that ‘Whether a party has assumed responsibility is a question of law’. ^[1217] Having said as much, her Ladyship analysed the facts of the case so as to identify what were, essentially, the factual features linking the parties one to the other.

D. Further Proof of Argument

In Smith v Eric S Bush,^[1218] the House of Lords demonstrated that, at the end of the day, liability in tort is imposed, not assumed.^[1219] A duty of care was imposed upon a professional valuer despite a clear attempt to exclude liability and the decision reflects the minimum basis upon which liability for a negligent misstatement may be imposed—one which requires no assumption of responsibility.^[1220] Their Lordships explained, yet again, that the basis for the imposition of a duty of care was the proximity that arose between the parties. Both Lord Griffiths^[1221] and Lord Jauncey were explicit about this, the latter stating that ‘The question must always be whether the particular facts disclose that there is a sufficiently proxi­mate relationship between the provider of information and the person who has acted on that information to his detriment’. ^[1222] This decision is consistent with the idea that the law of torts is concerned with the creation of minimum stand­ards of conduct, so as to ensure that persons can interact with each other with a degree of certainty. Duties of care justifiably are imposed where profession­als, experts and others (such as local authorities) engage in regular patterns of conduct (including the provision of advice and information) upon which others come to rely.

Having analysed the assumption of responsibility concept, the present writer has been gratified to find his major conclusions affirmed in the meticulous research undertaken by Robertson and Wang for their chapter in this volume.^[1223] Bearing in mind a slight difference in the focus of each of the chapters,^[1224] the pre­sent writer agrees with Robertson and Wang’s conclusions that ‘The assumption of responsibility is not... a distinctive category of obligation but a loosely defined subset of proximity’ and that the ‘assumption of responsibility is not a distinctive category of obligation, but simply a particular manifestation of the neighbour principle’.^[1225]

V.