Voluntarism and Policy in the High Court
Before moving directly to the law, it is appropriate to make some prefatory remarks about the High Court's general style of reasoning in cases of pure economic loss caused by misstatement.
Given the fierce theoretical debate in Chapters 3, 4 and 10 of this book, it is informative to note that the Court has not generally understood the law in the voluntaristic terms advocated by Professors Stevens[1531] and Beever.[1532] This is not to say that the language of âassumed responsibility' or ârelationship akin to contract' is not sometimes used to justify an advisor's duty of care,[1533] [1534] but the ideas have not been given the prominence that they currently enjoy in the United King- dom.10 Moreover, when these concepts are deployed in Australia, they are generally understood to do little real work, but rather to operate as proxies or labels for more detailed factors, which, in combination, operate to create the relevant duty.This antipodean wariness of voluntarism was evident from the word âgo'. Chief Justice Barwick, whose seminal judgment in Mutual Life and Citizensâ Assurance Co Ltd v Evatt[1535] is perhaps more frequently cited than any other, emphasised as long ago as 1968 the fact that duties of care in this field are imposed by the law in consequence of statements the defendant has made in the context of a particular relationship with the plaintiff and do not arise from any â consensual or unilatÂeral assumption of duty' on the defendant's part.[1536] Although the duty stems from something a speaker willingly does (namely, speak) with someone with whom he is â bilaterally' involved, it is not, he said, a duty â ex contractu, or flowing from any âconsensus or assumption of responsibility' on his part.[1537] Nor did that lanÂguage appeal to the High Court in Shaddock & Associates Pty Ltd v Parramatta City Council (No 2)[1538] in 1981, or play a major part in its reasoning in San Sebastian Pty Ltd v The Minister[1539] in 1986, although, as we shall, some reference was made in the joint majority judgment in the latter case to American case law, which emphasises the importance of establishing an âintention' on the part of the speaker to induce reliance by the plaintiff.
The cases of Esanda[1540] and Hill[1541] (both in 1997), and Kenny & Good Pty Ltd v MGICA (1992) Ltd[1542] (1999) are more equivocal, but on the most recent occasion that the High Court had the opportunity to engage in any detailed consideration of the duty issue in a misstatement case, in Tepko Pty Ltd v Water Board[1543] (2001), all members of the Court (including those in dissent) approved and applied Barwick CJ's statement of the law.I suggest below that the language of intention, purpose, assumption of responÂsibility and âequivalence to contract' is misleading and inappropriate as the founÂdation of duties of care in misstatement cases. It implies something meaningfully voluntary about liabilities for the consequences of substandard conduct that is basically untrue.20 I am fortified in this view not just by the detailed and revealing account of the way the concepts have been used provided by Andrew Robertson and Julia Wang in Chapter 3 of this book, but also by the fact that, although EngÂlish Courts persist with the language of â assumed' responsibility, they themselves now accept that it can be used to produce exactly the same results as other, non- voluntaristic models;21 that assumptions often need to be âextended' or âdeemed' (ie fabricated) in the interests of âpractical justice';22 that they denote no more than the existence of a close ânexus' or ârelationship' between plaintiff and defendant on the facts;23 that their existence is a â legal inference' affected by considerations of âfairness and policy';24 that the concept is not a âtest' for duty, but rather a conclu- sory label;25 and that whether or not an â assumption of responsibility' is present on the facts of a case is an objective matter that can only be determined by looking at the legal precedents, and having regard to a much more detailed, lower-level set of factors.26 All of this suggests that Barwick's CJ's scepticism of voluntarism
20 The language of voluntariness is notoriously slippery.
For a full exposition, see K Barker, âUnreliable Assumptions in the Modern Law of Negligence (1993) 109 LQR 461. Cf Perry (n 8) 270-302. Note that Perry himself accepts (at 286) that duties arising from âundertakings' are not voluntary because they do not involve the exercise of a normative power. I have also never denied that a genuine promise of care giving rise to detrimental reliance provides a good justification for liability (at 465) (although my preference would be for it to take effect within contract). The point is that the tensile strength of such a model of tort liability is exceeded by the weight of those cases in which a duty of care has actually been imposed. See also K Barker, âWielding Occam's Razor: Pruning Strategies for Economic Loss' (2006) 26 OJLS 289 (where the points are further pressed).21 Bank of Credit and Commerce International (Overseas) Ltd (In Liquidation) v Price Waterhouse (No 2) [1998] PNLR 564 (CA) (âBCCΓ) [586] (Sir Brian Neill, Brooke LJ and Nourse LJ agreeing); Dean v Allin & Watts [2001] 2 Lloyds Rep 249 (CA) [33] (Lightman J); Merrett vBabb (2001) QB 1174 (CA) 1193 (May LJ) (the Caparo test and âassumption of responsibility' test âmerge'); Kyrris v Oldham [2003] EWCA Civ 1506 [1141] (Jonathan Parker JL, Dyson and Thorpe LJJ agreeing); Customs (n 10) [5], [8] (Lord Bingham), [83] (Lord Mance). Whether this is true depends on what one means by âassumption of responsibility'.
22 White (n 10) 268 (Lord Goff); Williams (n 10) 834, 837 (Lord Steyn, Lords Goff, Hoffmann, Clyde and Hutton agreeing) (âcoherence must sometimes yield to practical justice' ); Carr-Glynn v Frearsons (A Firm) (1999) Ch 326 (CA) 334-35 (Chadwick LJ), 339 (Thorpe LJ); Gorham v British Telecommunications plc [2000] 1 WLR 2129 (CA) 2140-1 (Pill LJ); Dean (n 21) 261 (Lightman J). There is some recent shrinking from this approach and an attempt to confine use of the concept to cases of genuine implied agreement, but the latter model is also often misleading, and too narrow to support liability in the cases in which justice demands it.
23 Dean (n 21) 264 (Sedley LJ); Phelps v Hillingdon London Borough CounciI [2003] 3WLR 776 (HL) 791 (Lord Slynn); Customs (n 10) [35] (Lord Hoffman) (â the purpose of the inquiry is to establish whether there was, in relation to the loss in question, the necessary relationship (or âproximityâ) between the parties').
24 Customs (n 10) [35]-[36] (Lord Hoffman).
25 Caparo Industriesplc v Dickman [1990] 2 AC 605 (HL) 637F (Lord Oliver); Henderson (n 10) 929G, 181C (Lord Goff); Riyad Bank & Ors v Ahli United Bank (UK) plc [2006] EWCA Civ 780 [128] (Buxton LJ).
26 BCCI (n 21) 587 (Sir Brian McNeill); Precis Plc v William M Mercer Ltd [2005] EWCA Civ 114 [24] (Arden JL, Kennedy and Laws LJJ agreeing); Customs (n 10) [83] (Lord Mance), Clerk & Lindsell on Torts, 20th edn (London, Sweet & Maxwell, 2010) [8-101]-[8-120]. in Evatt was justified and that âwill theories' of negligence law, whether framed in terms of a defendant's subjective or objective intentions, seduce the intelligence in ways that blind it to the subtle complexities of the decisions that have to be made. They perpetuate in the twenty-first century an âimplied contract fallacy' of tort law, giving vent to the same psychological instinct to attribute controversial economic duties to the âwill of the parties' as bedevilled the law of restitution in the early part of the twentieth century, when that subject was forced to inhabit the shadows ofâquasi-contract.'
The Second and draft Third US Restatements[1544] significantly make no reference to assumptions of responsibility and frame the legal test for duty in misstatement cases pragmatically, with an eye on the defendant's fault, the relationship between the parties, and operative policy concerns. This more ârealistic' approach is shared by Australian judges. The concerns they express about overextending the bounds of liability for faulty advice are familiar ones, akin to those recently identified in the Third Restatement Draft.
They include concerns about: (1) unduly inhibitÂing personal freedom of expression and social interaction; (2) contradicting ways in which economic risk has been allocated contractually or producing incoherÂence with the purposes of regulatory schemes under which advice is often given; (3) swamping courts with evidentially complex cases and unmanageable workÂloads that may operate to the detriment of other litigants; (4) imposing liabilities on defendants that are disproportionate to their fault; (5) imposing liabilities that are so large as to distort the pricing, availability and quality of service provision in information markets generally; (6) imposing liabilities on advisors that are so uncertain (âindeterminate' ) that they are likely to be uninsurable; (7) imposing liabilities for âremote' harms that result from decisions that financial investors volÂuntarily make for themselves; (8) imposing liability on advisors who have played only a secondary role in bringing about a loss, relative to other wrongdoers and (9) imposing liability for losses against which plaintiffs might reasonably have taken their own protective measures, for example by obtaining independent advice, taking steps to verify the information a defendant has provided, diversifyÂing their investments, or (where they are using information to advance finance) by insuring the debts they are owed.[1545]Some of these concerns stem from the readily transmissible nature of inacÂcurate information and its capacity to cause downstream â ripple effects', but not all of them do. For example, concerns 1, 2 and 4 may clearly be present even in cases in which advice has been supplied directly to a single individual. Some of the concerns (1, 5) are arguably unique to cases involving negligent words, but the majority also arise in other cases involving pure economic loss and hence resurface in other spheres. Some are more likely to arise in âthree-party' cases than in âtwo-party' cases.
This is most obviously so with the concerns about huge (5) or indeterminate (6) liability, which may in turn explain why Australian courts have sometimes taken a stricter approach in such cases: the remoter the plaintiff's harm from the defendant's carelessness and the more the information supplied by a defendant has been âpassed on', the more difficult it will be for an advisor to preÂdict the scope of his potential liabilities, set pricing, or arrange the required levels of insurance to cover risk. Where information has been passed on by its immediate recipient, it is also more likely (though certainly not inevitable) that the plaintiff using it will be one of a large and/or uncertain class of persons; and the greater the spread and volume of liability is likely to be. It is possible to contest the legitimacy of several of these concerns, but it is not possible to deny that they exist.According to the pragmatic approach that dominates Australian law, the rules regarding duty are a direct reflection of the above concerns. They are designed to achieve a balance between norms of responsibility for harm caused by faulty conÂduct on the one hand, and a variety of other libertarian, economic and systemic considerations, on the other. On this view, there are no straightforward answers to the question when a duty will be owed, but the unattainability of perfect coherence is not regarded as a valid reason to avoid creating rules that represent an attainable compromise.
III.