The Defendant Must Intend the Plaintiff to Rely— The Assumption of Responsibility Requirement

To support the requirement that the defendant intend the plaintiff to rely I will refer mainly to three rights-based torts theorists; Professor Allan Beever,^[1373] Profes­sor Stephen Perry,^[1374] and Professor Peter Benson.^[1375] Not coincidentally, each has studied law at the University of Toronto and each has been influenced by Professor Ernest Weinrib, upon whom I also rely.^[1376] In so doing, I do not wish to endorse the full implications of the rights-based approach to negligence law in preference to other approaches.^[1377] It is not necessary to do so for present purposes.

The rights-based approach to misrepresentation depends, first, on the distinc­tion between the primary rights to personal integrity and property, on the one hand, and purely economic interests, on the other. Beever, for example, would argue that negligence law is best understood as a vehicle with which to develop legal principles about what consititutes a violation to personal integrity or prop­erty rights, and how to correct it.^[1378] He identifies personal integrity and property rights as exclusively worthy of protection in negligence because these are primary rights^[1379] that are recognised in the positive law.^[1380] Others have informed us about the content of such rights by relying on moral philosophers.^[1381] This

rights base of the law of negligence is grounded in corrective justice and not in distribu­tive justice. This means that it is plausable to hold that property rights and rights to the person, such as bodily integrity, are founded on a conception of interpersonal morality— on a view of how persons should treat each other as individuals.^[1382]

In contrast, a citizen does not enjoy a primary right to be free from pure eco­nomic loss. This leads the rights-based theorists to argue that one should not owe a duty of care to avoid causing foreseeable economic loss under the paradigmatic application of the neighbour principle.

Admittedly, there is a certain circularity in saying one cannot recover pure eco­nomic loss in negligence because one does not have a property right to uninter­rupted economic security.^[1384] But the position has substance. Our market system encourages parties to take economic advantage of one another. The law must con­sider carefully the circumstances that caused the economic loss. Conduct causing purely economic harm may be sanctioned by criminal and regulatory law. The intentional infliction of economic harm is governed by a series of well-recognised intentional economic torts, including deceit. The rights-based theorists' concern is with imposing liability for inadvertent conduct that causes foreseeable economic harm.⁸¹ Such an extensive obligation would upset the moral accommodation that Western societies support between free trade on the one hand, and duties of pro­tection on the other.⁸²

More significant than the purely economic nature of the harm is the fact that the defendant's words alone do not harm the plaintiff. The plaintiff's own decision to act in reliance is a necessary cause of the harm. Hercules suggests that recov­ery is justified, at least prima facie, when the plaintiff unilaterally, by choosing to rely on the defendant, creates an obligation owed by the defendant. But why does the plaintiff's unilateral decision to rely create an obligation on the part of the defendant? A right unilaterally to rely on receiving assistance from another is not grounded in philosophy, nor in generally accepted positive law elsewhere in the Commonwealth or in the United States.⁸³ Instead, one generally secures the right to rely on another by contract.

Circumstances may permit the plaintiff to rely in fact, and it may be quite reasonable to do so. So it was in Hercules. But the plaintiff has no right to legal protection from the consequences of his or her own detrimental reliance unless the defendant intended that the plaintiff so rely. Even in analogous situations

⁸¹ This point is made by Lord Pearce in Hedley Byrne (n 1) in the text following n 288. I am not sure that a rights-based approach is the only route to this conclusion. The similarities among the rights- based approach and other standard doctrinal approaches are noted below in Section VIA.

⁸² I am grateful for Professor Kit Barker's comments on this point when he reviewed an earlier draft of this chapter.

⁸³ There is a new American Law Institute project, Riestatement (Third) of Torts: Liability for Economic Harm, currently underway. The Reporter is Dean Ward Farnsworth. Unless otherwise stated, all refer­ences herein are to the preliminary draft of February 2012. The drafts are unlikely to be modified in any major way, and give a good indication of the prevailing majority opinion about the current state of the law in most of the US. §5 (‘Negligent Misrepresentation') states in part:

(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose guidance the actor intends to supply the information, or for whose guidance he knows the recipient intends to supply it; and

(b) through reliance upon the information in a transaction that the actor intends to influence (emphasis added), or that he knows the recipient intends to influence, or in a substan­tially similar transaction.

The general theory of liability is the same under both Sections. A plaintiff's reliance alone, even if foreseeable, is not a sufficient basis for recovery; under either Section a defendant generally must act with the apparent purpose of providing a basis for the reliance. It may be useful to say that a defend­ant held liable under either Section must ‘invite reliance' by the plaintiff, so long as the expression is understood to refer to the defendant's apparent purpose and not to a temptation incidentally created by the defendant's words or acts. involving attempts to impose liability for nonfeasance in failing to protect a plain­tiff from independently caused physical harm, the law does not go so far.^[1385]

The defendant must do something that can be interpreted objectively as man­ifesting an intention that the plaintiff rely.^[1386] Stephen Perry gives the following example:^[1387]

Immanuel Kant might have known or been able to foresee that some citizen of Konigs­berg would set his own schedule on the basis of Kant's notoriously regular daily walks, but this does not mean that Kant had any obligation either to stick to his usual time or, if he did not, to ensure that such a citizen was not late for his appointments. Matters would stand differently, however, if Kant had told the citizen that he could rely on Kant in this respect.

Beever would say that the plaintiffs right to rely on the statement must be cre­ated by the defendant.^[1388] One could ground the right in the defendants consent. Perry would say that by intending, inducing or inviting the plaintiff to rely to his or her detriment the defendant has interfered with the plaintiff’s interest in his or her autonomy.^{[1389] [1390] To impose a duty of care, even a prima facie duty of care, in the absence of the defendant objectively manifesting an intention that the plaintiff rely would permit the plaintiff to interfere with the autonomy of the defendant to advance the defendant’s own economic interests.}

A word about knowledge may be in order. If the defendant knows that the plain­tiff intends to rely on his or her representation, this may be useful evidence on the question of whether one may infer an intention that the plaintiff rely. Certainly, if the defendant did not know and ought not to have reasonably known that the plaintiff intended to rely, it would be difficult to find an intention that the plain­tiff do so. But knowing that the plaintiff is relying, without more, ought not to establish the duty. This is the Kant example above. This can be a fine line and it is important to consider it carefully. Consider what Lord Reid said in Hedley Byrne⁸

I can see no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him. I say ‘ ought to have known' because in questions of negli­gence we now apply the objective standard of what the reasonable man would have done.

A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.

If Lord Reid meant to say that the defendant’s knowledge or constructive knowl­edge alone would support the duty of care, I would argue that he was wrong. How­ever, it is important to note that he was speaking about a request by the plaintiff to the defendant for information or advice. It is reasonable to infer an intention that the plaintiff rely when the defendant replies to the inquiry knowing he or she is being relied upon. If Kant has no interaction with the citizen he knows is relying on him, he does not owe a duty of care. The same is true of Lord Reid’s ‘reason­able man’ who keeps silent. Kant might well owe a duty if the citizen asks if he will come by at the same time tomorrow and Kant, knowing the citizen is relying, says < > yes.

The need for the defendant to intend that the plaintiff rely, not the purely eco­nomic nature of the loss, is the key point to proper misrepresentation analysis.^[1391] This is why any conception of proximity in misrepresentation that does not take into account the role of the defendant in creating a nexus between the parties is wrong. It is not wrong because it creates potentially indeterminate liability, as Her­cules would have it. It is wrong because the plaintiff’s right to claim damages must derive from conduct of the defendant directed to the plaintiff.

The final question is: when an objective test determines that the defendant intended the plaintiff to rely, is it accurate and convenient to speak of liability being based on an assumption of responsibility? This is the best explanation of the justification for a duty of care developed in Hedley Byrne, and in particular for the failure of the claim because the defendant had expressly declined to assume liability.^[1392] There is nothing in Hedley Byrne that is clearly inconsistent with the intention approach, but of course it was unnecessary to define assumption of responsibility exhaustively in the case itself. The rights-based theorists do define an assumption of responsibility as the defendant's intention to induce the plaintiff to rely on him. Perry puts it this way:^[1393]

As is explained below, the paradigm of a Hedley Byrne-type case is one in which the defendant has an intention, or knows that his conduct could be taken as evincing an intention, to persuade the plaintiff that it is safe to rely on the defendant. Anyone who has such an intention or knowledge can sensibly be said to be voluntarily assuming a responsibility, even if he cannot be said, because he is not exercising a normative power, to be voluntarily placing himself under an obligation.

I prefer to eliminate the adjective ‘voluntary' and to speak of a simple assumption of responsibility when the defendant knows or ought to have known that his or her conduct evidenced an intention that the plaintiff rely.

There have been many thoughtful objections to the assumption of responsibil­ity touchstone for duty of care in misrepresentation. Professor Kit Barker's chal­lenges are the best known.^[1394] Barker describes the Hedley Byrne formulation as the ‘strong version' of the assumption of responsibility approach. He concedes it works reasonably well in cases like Hedley Byrne, but believes it breaks down to impose duties in cases in which the relationship of the parties was indirect, where the defendant had disclaimed responsibility, or where the services or advice provided by her were in no meaningful sense ‘voluntary' but rendered under a statutory obligation, or contract with a third party. His points have been chal­lenged by Professor Beever, with whom I tend to agree.^[1395] Statutory obligations are distinguishable—the legislature may impose what duties it wishes independent of the defendant's intention.^[1396]

I have also had the opportunity to review earlier drafts of two, excellent chapters published in this volume: ‘The Assumption of Responsibility' authored by Andrew Robertson and Julia Wang and ‘What Are We Doing Here ? The Relationship between Negligence in General and Misstatements' by Christian Witting. Like Barker, these authors seem to feel that the use of objective tests to determine what the defendant intended thereby debunks the assumption of responsibility approach. Certainly, a duty may arise where the defendant in fact did not intend to assume responsibil­ity for its advice or information, let alone indicate expressly that it intended to be legally bound. The issue is whether the defendant's conduct viewed objectively suggests that the defendant did assume such responsibility, that is, did intend the plaintiff to rely. I know of no judicial success in reading the minds of actors to determine subjective intention, so I fail to see how employing an objective test to determine a subjective intention undermines the quest for a subjective intention. Are contractual obligations assumed or imposed? How do we answer that question and why? What we really ought to care about is the impression created in the rea­sonable plaintiff's mind leading to detrimental reliance. This is the relevant wrong.

The authors demonstrate that there are many judicial decisions in the United Kingdom rendered subsequent to Hedley Byrne that are inconsistent with a voluntary assumption of responsibility approach. Some are not misrepresentation cases, others might be interpreted differently, and some may be wrongly decided. That said, these authors are much better positioned than I am to state the current doctrinal law in the United Kingdom. I am more interested in what the law ought to be than what the House of Lords has decided in various cases. Given that the Canadian courts have never given the matter any consideration, that field is open for me.

Robertson and Wang emphasise that the case law illustrates that liability derives not from an assumption of responsibility, but from imposed obligations that emerge from certain, might we say, ‘special', relationships. Witting would agree and perhaps go further. Certainly, the special relationships entailing imposed affirmative duties exist in Canadian tort law, whether one is talking about boat captains and passengers as the authors do, or doctors and patients, or teachers and students, or employers and employees, and so on. This ‘special relationship' foun­dation for affirmative duties to control or assist others deserves its own detailed treatment. While the term ‘special relationship' is prominent in Hedley Byrne itself, I would argue that the relationship-based approach is a different basis for liability from that actually supported by any of the Law Lords in Hedley Byrne, however ambiguous and sometimes contradictory their speeches admittedly were. The spe­cial relationship approach may offer an alternative basis for decision in some cases, as where an employer advises an employee about the pension plan evidencing an intention that the employee rely. It might be the only explanation for some Cana­dian negligent misrepresentation decisions, but very few.

Like LaForest J in Hercules, Robertson, Wang and Witting conclude that the assumption of responsibility is not a distinctive category of obligation, but sim­ply a variation of the basic neighbour principle. Obviously, for the reasons given throughout this chapter, I disagree. The relationship thesis ignores the actual holding in Hedley Byrne that no duty of care ever arose because the defendants indicated expressly that they declined to accept responsibility. The words ‘without responsibility' were relevant to the absence of a duty of care, not disclaimers from an antecedent duty of care based on a proximate or special relationship. The dif­ference between economic interests and property is much more than a ‘ simple variation'. So too is the fundamental difference between an injury suffered directly and an injury suffered because the plaintiff chooses to rely on the defendant.

Witting in particular seems to justify his conclusion by offering a definition of proximity that is unique to misrepresentation. He thereby concludes that misrepresentation law fits perfectly into the standard UK three-stage test for duty, comprising foreseeability, proximity and policy. If one concedes that anything whatsoever can constitute proximity, and that the factors chosen as suggesting proximity in misrepresentation are particular and quite different from the para­digmatic Donoghue v Stevenson approach, it is impossible to argue with Witting. However, it is difficult to see such an application of the so-called ‘ three-part test' as any test at all. It is a roadmap to guide an enquiry. Beever sees the differences between proximity in misrepresentation as sufficiently different from paradig­matic negligence claims to justify refusing to call misrepresentation claims ‘neg­ligence claims' at all. His is a radical exercise in labelling. In the end, Beever and Witting both agree that the basis of liability in misrepresentation in any concrete sense is different from the basis in a standard act/physical harm case.

Dealing with the arguments against voluntary assumption of responsibility fully and fairly is beyond the scope of this chapter. It may be that the notion has become so contentious that we would be better to abandon it altogether. I would be con­tent instead, as in the United States, simply to require the plaintiff to establish the defendant's intention to have the plaintiff rely. As Jay Feinman's chapter about the US law (also published in this volume) demonstrates, the intent approach also has its critics. At least there we can agree on what is being criticised. For present purposes, I am content with any principled approach that gives due deference to the need to derive the duty from the conduct of the defendant in some rational manner. All the speeches in Hedley Byrne seem to me to have done this.

IV.