United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/254

Spring (A.P.) (Appellant)

v.
Guardian Assurance plc and others (Respondents)




JUDGMENT

Die Jovis 7° Julii 1994

Upon Report from the Appellate Committee to whom was
referred the Cause Spring against Guardian Assurance plc and
others, That the Committee had heard Counsel as well on Monday
the 29th and Tuesday the 30th days of November last as on
Wednesday the 1st day of December last upon the Petition and
Appeal of Graham Spring of 9 Farriers Croft, Bussage, Stroud,
Gloucestershire, praying that the matter of the Order set forth
in the Schedule thereto, namely an Order of Her Majesty's Court
of Appeal of the 17th day of December 1992, might be reviewed
before Her Majesty the Queen in Her Court of Parliament and that
the said Order might be reversed, varied or altered or that the
Petitioner might have such other relief in the premises as to Her
Majesty the Queen in Her Court of Parliament might seem meet; as
upon the case of Guardian Assurance plc, Corinium Holdings
Limited, Corinium Mortgage Services (Cirencester) Limited and
Guardian Royal Exchange Assurance plc lodged in answer to the
said Appeal; and due consideration had this day of what was
offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty's Court of Appeal
of the 17th day of December 1992 complained of in the said Appeal
be, and the same is hereby, Set Aside save as to legal aid
taxation and that the Order of His Honour Judge Lever QC (sitting
as a Deputy High Court Judge) of the 20th day of December 1991
be, and the same is hereby, Restored: And it is further Ordered.
That the Cause be, and the same is hereby, remitted back to the
Court of Appeal with a direction to consider the appeal from the
said order of His Honour Judge Lever QC on the issue of
causation: And it is also further Ordered. That the Respondents
do pay or cause to be paid to the said Appellant the Costs
incurred by him in the Court of Appeal and in respect of the said
Appeal to this House, the amount of such last-mentioned costs to
be certified by the Clerk of the Parliaments if not agreed
between the parties: And it is also further Ordered. That the
costs of the Appellant be taxed in accordance with the Legal Aid
Act 1988.

Cler: Parliamentor:

Judgment: 7 July 1994

HOUSE OF LORDS

SPRING (A.P.)
(APPELLANT)

v.

GUARDIAN ASSURANCE PLC AND OTHERS
(RESPONDENTS)

Lord Keith of Kinkel
Lord Goff of Chieveley
Lord Lowry
Lord Slynn of Hadley
Lord Woolf




LORD KEITH OF KINKEL

My Lords,

The facts of this case are quite complex. They are set out very fully
in the judgment of Glidewell L.J. in the Court of Appeal, and it is
unnecessary to rehearse them in detail in order to identify the most important
issue of law which arises on the appeal to this House, which is whether one
who supplies a defamatory reference about a person in response to a request
from a concern with which that person is seeking employment is liable in
negligence to the subject of the reference if it has been compiled without
reasonable care.

It is, however, necessary for an understanding of the manner in which
the issue arises to give a brief outline of the salient facts. The plaintiff, Mr.
Spring, was in 1989 employed by the third defendants ("Corinium") as sales
director (designate) and office manager at their premises in Cirencester.
Corinium were estate agents and were also agents for the sale of insurance
policies issued by the first defendants ("Guardian Assurance") of which they
were an "appointed representative" within the meaning of section 44 of the
Financial Services Act 1986, and thus authorised to carry on investment
business. On 22 July 1988 Mr. Spring was appointed a "company
representative" of Guardian Assurance and was thus authorised, in accordance
with rule 1.2. of the Lautro Rules 1988, to sell Guardian insurance policies
and to advise on their merits. Lautro is the Life Assurance and Unit Trust
Regulatory Organisation, the self-regulatory body of the industry set up under
the Act of 1986.

On 7 July 1989 the major shareholder in Corinium sold the company
to Guardian Assurance, which appointed a Mr. Siderfin to be its chief
executive. Mr. Siderfin did not get on with Mr. Spring, and on 26 July 1989



he dismissed him without explanation. Mr. Spring then ceased to be a
Guardian Assurance company representative. Mr. Spring, together with a Mr.
Parker, sought to go into business in Dursley, near Cirencester, selling the
policies of another insurance company, and to this end he approached the
Scottish Amicable Life Assurance Society Plc. Scottish Amicable, like
Guardian Assurance, was a member of Lautro, the rules of which at the time
included the following:

"3.5(1) A person shall not be appointed as a company
representative of a member unless the member has first taken
reasonable steps to satisfy itself that he is of good character and of the
requisite aptitude and competence, and those steps shall ... include ...
the taking up of references relating to character and experience.

"(2) A member which receives an inquiry for a reference in respect of
a person whom another member or appointed representative is
proposing to appoint shall make full and frank disclosure of all
relevant matters which are believed to be true to the other member or
the representative."

Scottish Amicable applied to Guardian Assurance for a reference and
received a reply dated 12 November 1989 stating inter alia:

"Mr. Spring held the position of Sales Manager until he was
asked to leave in August of this year. His former superior has stated
in writing that he was seen by some of the sales staff as a person who
consistently kept the best leads for himself with little regard for the
sales team that he supposedly was to manage; and his former superior
has further stated that he is a man of little or no integrity and could not
be regarded as honest. . . . Since the 1st January 1989, Messrs.
Spring and Parker shared all their commission earnings on a 50:50
basis and left owing the company some £12,000 in funding which to
date has not been repaid. This matter is now in the hands of
solicitors. The current lapse ratio is running at 18 per cent. and this
is only for policies written since March of this year. Since their
departure, we have found a serious case of mis-selling where the
concept of 'best advice' was ignored and the policies sold yielded the
highest commissions. Gre personnel have had to visit the investor to
rectify the situation. There have been other cases where there has
been bad advice but there is no current evidence to indicate whether
it was deliberate or through ignorance."

Scottish Amicable naturally declined to appoint Mr. Spring as one of
its company representatives. Mr. Spring applied to two other companies for
such an appointment, but each of them received from Guardian Assurance a
reference in the same terms, which led to their refusing his application.

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The reference was compiled by a Mrs. Debra Lee-Moore, who was
assistant chief compliance officer of the fourth defendants ("Gre Assurance").
She relied for the purpose principally upon information given to her by Mr.
Siderfin. by a Mr. Beard, who was a member of a Gre Assurance compliance
team which had paid a visit to Corinium in November 1989, and by a Mr.
Dixon, who was senior sales consultant for Gre Assurance in Gloucester. The
statement that Mr. Spring could not be regarded as honest came from Mr.
Siderfin ("his former superior"), and that about a serious case of mis-selling
came from Mr. Beard and Mr Dixon. The case in question involved a Mr.
Fennell, to whom Mr. Spring had sought to sell a highly unsuitable policy
which would have generated a very large commission for him. The trial judge
found that in so doing Mr. Spring had acted incompetently, and not
dishonestly with the object of securing a substantial commission. The trial
judge further found in relation to the reference that Mrs. Lee-Moore had
accurately stated what she had learnt from her sources of information and that
she was not guilty either of malice or of negligence. He went on to find that
neither Mr. Siderfin or Mr. Dixon had acted out of malice, in respect that
each of them genuinely believed in the truth of the allegations he was making,
hut that each of them had failed to exercise reasonable care in respect of the
allegations through making them without carrying out a thorough investigation
into their truth. Such an investigation, he found, would have shown that Mr.
Spring had not acted dishonestly.

Mr. Spring raised an action of damages against all tour defendants
pleading causes of action in malicious falsehood, breach of contract and
negligence. The trial judge, Judge Lever Q.C.. rejected the claim in
malicious falsehood, following his finding that none of the persons involved
in the giving of the reference had acted maliciously. As regards the claim for
breach of contract he held that there was no contract between Mr. Spring and
either Guardian Assurance or GRE Assurance and that there was not to be
implied into the contract between Mr. Spring and Corinium a term that any
reference given about him should be prepared with reasonable care. He found
in favour of Mr. Spring, however, on the claim founded on negligence, with
damages to be assessed. On appeal by the defendants his judgment was set
aside by the Court of Appeal (Glidewell and Rose L.JJ. and Sir Christopher
Slade) on 10 December 1992 ([1993] 2 All E.R. 273). Mr. Spring now
appeals to your Lordships' House, but only on the issues concerned with
negligence and with breach of contract.

My Lords, if no reasons of policy intervened there might be much to
be said for the view that Mr. Spring is entitled to succeed in his claim based
on negligence, on the basis that it was reasonably foreseeable that damage to
him would result if the reference were prepared without reasonable care and
it thus incorrectly disparaged him. that there was proximity between him and
those who prepared the reference, and that it would be fair, just and
reasonable to impose a duty of care on the latter. This would, however,
extend the ambit of liability in negligence for pure economic loss. In Hedley
Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465 such liability



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was held to exist in circumstances where a plaintiff has relied to his detriment
upon a negligent misstatement by a defendant. In the present case there is no
question of reliance by the plaintiff on the carelessly prepared reference. But
in any event this is, in my opinion, a case in which the second stage of the
test propounded by Lord Wilberforce in Anns v. Merton London Borough
Council [1978] AC 728 properly comes into play. He there said, at p. 752:

"Secondly, if the first question is answered affirmatively, it is
necessary to consider whether there are any considerations which ought
to negative, or to reduce or limit the scope of the duty or the class of
person to whom it is owed or the damages to which a breach of it may

give rise."

In Yuen Kun Yeu v. Attorney-General of Hong Kong [1988] A.C. 175, I said.
at p. 193:

"The second stage of Lord Wilberforce's test in Anns v. Merton
London Borough Council is one which will rarely have to be applied.
It can arise only in a limited category of cases where, notwithstanding
that a case of negligence is made out on the proximity basis, public
policy requires that there should be no liability."

I gave as an instance of such a case Rondel v. Worsley [1969] 1 AC 191
dealing with the liability of a barrister for negligence in the conduct of
proceedings in court. Hill v. Chief Constable of West Yorkshire [1989] A.C.
53 was a case where the executor of the last victim of a serial murderer sued
the Chief Constable on grounds of alleged negligence in failing to apprehend
the murderer before he killed that particular victim. The claim failed on the
basis that no duty of care had been made out. But in the course of my
speech, concurred in by three of my colleagues. I said at p. 63 that the action
was in any event precluded by considerations of public policy.

In this present case the reference was defamatory of Mr. Spring, and
so were the communications made for the purpose of its preparation by Mr.
Siderfin and Mr. Dixon to Mrs. Lee-Moore. Mrs. Lee-Moore was under a
duty to give the reference and Mr. Siderfin and Mr. Dixon were under a duty
to make the communications to her which they did make. So an action in
defamation by Mr. Spring against any of them or against their employers
would have been defeated by the defence of qualified privilege unless Mr.
Spring proved malice. He sought to do so for the purpose of his claim on
grounds of malicious falsehood, but the trial judge found that he had failed in
this. That finding was affirmed by the Court of Appeal, and no appeal against
it is before your Lordships.

The policy grounds which underlie the defence of qualified privilege
in an action for defamation were thus stated by Lord Diplock in Horrocks v.
Lowe [1975] A.C. 133, 149:

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"My Lords, as a general rule English law gives effect to the
ninth commandment that a man shall not speak evil falsely of his
neighbour. It supplies a temporal sanction: if he cannot prove that
defamatory matter which he published was true, he is liable in
damages to whomever he has defamed, except where the publication
is oral only, causes no damage and falls outside the categories of
slander actionable per se. The public interest that the law should
provide an effective means whereby a man can vindicate his reputation
against calumny has nevertheless to be accommodated to the competing
public interest in permitting men to communicate frankly and freely
with one another about matters in respect of which the law recognises
that they have a duty to perform or an interest to protect in doing so.
What is published in good faith on matters of these kinds is published
on a privileged occasion. It is not actionable even though it be
defamatory and turns out to be untrue. With some exceptions which
are irrelevant to the instant appeal, the privilege is not absolute but
qualified. It is lost if the occasion which gives rise to it is misused.
For in all cases of qualified privilege there is some special reason of
public policy why the law accords immunity from suit - the existence
of some public or private duty, whether legal or moral, on the part of
the maker of the defamatory statement which justifies his
communicating it or of some interest of his own which he is entitled
to protect by doing so. If he uses the occasion for some other reason
he loses the protection of the privilege."

In my opinion the same grounds of public policy are applicable where
the claim is based not on defamation as such but on negligence associated with
the making or publication of an untrue statement, where the occasion on which
that was done was a privileged one in the sense in which that expression is
used in the context of defamation law. If liability in negligence were to
follow from a reference prepared without reasonable care, the same adverse
consequences would flow as those sought to be guarded against by the defence
of qualified privilege. Those asked to give a reference would be inhibited
from speaking frankly lest it should be found that they were liable in damages
through not taking sufficient care in its preparation. They might well prefer,
if under no legal duty to give a reference, to refrain from doing so at all.
Any reference given might be bland and unhelpful and information which it
would be in the interest of those seeking the reference to receive might be
withheld.

It appears that the issue which arises has only once been considered in
this jurisdiction. That was in Lawton v. B.O.C. Transhield Ltd. [1987] 2 All
E.R. 608, a decision of Tudor Evans J. A former employee of the defendants
sued them in negligence on the basis of a reference which they had given to
other employers who had engaged him temporarily, and who by reason of the
reference had refused to make his employment permanent. Tudor Evans J.
held that the defendants owed the plaintiff a duty of care in respect of the
reference, but that it was honest, accurate and not negligently written, so that



- 5 -

the claim failed. In holding that the defendants were under a duty of care to
the plaintiff Tudor Evans J. did not give any consideration to the possible
relevance of the position in the law of defamation, particularly the defence of
qualified privilege. The report does not indicate to what extent if at all, this
matter was argued, and the only passage in the judgment which may touch
upon it is this, at pp. 617-618:

"The next point of counsel for the defendants is that there are policy
reasons which should negative a duty of care in a case such as this.
First, he says that the existence of a duty of care might inhibit an
employer from giving a reference freely and frankly. But it is always
open to an employer to protect himself with a disclaimer of
responsibility, as the respondents did in Hedley Byrne. I can see no
reason why a disclaimer cannot be so framed as to exclude a liability
not only to the recipient but also to the subject of the reference and
also to protect the actual servant who writes the reference, Mr.
Uffendale in this case. As to the subject of the reference, I cannot see
why an employer cannot effectively protect himself, either in the
reference itself or by writing separately to the subject indicating a
willingness to give a reference but stating that it will be given without
responsibility."

If Tudor Evans J. had received fuller argument on the point he might well
have reached a different decision. As it is, I am of opinion that his decision
upon it was wrong.

The point has arisen more than once in New Zealand. In Bell-Booth
Group Ltd. v. Attorney-General [1989] 3 N.Z.L.R. 148 the Ministry of
Agriculture and Fisheries took part in a television broadcast the thrust of
which was that a product of the plaintiffs called Maxicrop was ineffective for
its claimed purpose of stimulating plant growth in agriculture and horticulture.
The plaintiffs sued the Ministry and the Broadcasting Corporation of New
Zealand in defamation and in negligence. The trial judge held that the claim
in defamation failed because it had been proved that Maxicrop was indeed
useless, thus establishing the defence of justification, but he sustained the
claim in negligence against the Ministry, on the ground that it owed the
plaintiffs a duty to inform the plaintiffs of the results of certain trials of the
product before publishing and to consult them about the presentation of the
results. The Court of Appeal set aside the decision on negligence. Sir Robin
Cooke P., giving the judgment of the court, said, at pp. 155, 156:

"Negligence in words can certainly give rise to liability if there
is a duty of care. One need only mention Hedley Byrne. Breach of
confidence is actionable, subject to special defences, however the duty
of confidence arises (Attorney-General v. Wellington Newspapers Ltd.
[1988] 1 N.Z.L.R. 129, 172). A contract may impose restraints on
freedom of speech, subject no doubt to public policy defences. In some
cases damages for breach of contract can extend to loss of publicity or

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positive harm to reputation: see generally McGregor on Damages, 15th
ed. (1988), para. 54, p. 32. But cases in the foregoing categories are
all readily distinguishable. As far at least as the law of torts is
concerned, the common understanding is almost certainly as expressed
by Hallett J. in Foaminol Laboratories Ltd. v. British Artid Plastics
Ltd. [1941] 1 All E.R. 393, 399: 'a claim for mere loss of reputation
is the proper subject of an action for defamation, and cannot ordinarily
be sustained by means of any other form of action.'

"The closest reported cases which counsel for the appellant
were able to find were two. First, Thurston v. Charles (1905) 21
T.L.R. 659, where Walton J. gave damages for the tort of conversion
on the basis that the conversion of a letter had resulted in damage to
the plaintiff's reputation. (See further Gatley on Libel and Slander,
8th ed. (1981), para. 895.) That case deals with the scope of damages
for a tort that has undoubtedly been committed and does not touch the
issue of judicial creation of a duty of care.

"Second. Lawton v. B.O.C. Transhield Ltd. [1987] 2 All E.R.
608, where Tudor Evans J. held that a former employer owed to its
former employee a duty of care in giving a reference. That action
tailed, however, because the reference was honest, accurate and not
negligently written. The bearing of defamation law is not discussed in
the judgment and the case is a difficult one: see notes by Mr. Philip
Lewis (the editor of Gatley) in (1988) 17 I.L.J. (Recent Cases) 108
and Mr. Andrew Demopoulos in (1988) 104 L.Q.R. 191. The latter
writer is of the opinion, citing Horrocks v. Lowe [1975] A.C. 135, that
Lawton 'involves an extension of the law of negligence which flies in
the teeth of express statements that anything less than malice in the
making of a privileged statement cannot engage liability.' Similar
comments could be made in cases of justification or fair comment.

The common law rules, and their statutory modifications,
regarding defamation and injurious falsehood represent compromises
gradually worked out by the courts over the years, with some
legislative adjustments, between competing values. Personal reputation
and freedom to trade on the one hand have to be balanced against
freedom to speak or criticise on the other.

"In the result the present rules are in broad terms well-known
and reasonably clear. To an action for defamation truth is an absolute
defence. Privilege, where applicable, is in a few areas an absolute but
in most a qualified defence. Fair comment is a qualified defence
subject to rather different rules. In injurious falsehood, on the other
hand, the plaintiff has the burden of proving both falsity and malice.
These evolved compromises may not draw the lines in places that will
always be found generally acceptable in the community. Some argue.

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for instance, for greater media freedom or licence; statutory changes
have been recommended but not enacted. It is a controversial area.
The important point for present purposes is that the law as to injury to
reputation and freedom of speech is a field of its own. To impose the
law of negligence upon it by accepting that there may be common law
duties of care not to publish the truth would be to introduce a
distorting element.

"It was argued for the appellant, inter alia, that neither
defamation nor slander of goods requires a background duty or breach;
and if injury does or may involve those separate elements, there is no
ground for depriving the plaintiff of a separate cause of action. That
is really no more than a semantic point. The duty in defamation may
be described as a duty not to defame without justification or privilege
or otherwise than by way of fair comment. The duty in injurious
falsehood may be defined as a duty not to disparage goods untruthfully
and maliciously. In substance the appellant would add to these duties
a duty in such a case as this to take care not to injure the plaintiffs
reputation by true statements. All the arguments for the appellant,
though put skilfully in various ways by counsel, reduce to that
proposition. In our opinion, to accept it would be to introduce
negligence law into a field for which it was not designed and is not
appropriate."

Later, at p. 157. he said:

"For these reasons in our opinion justice does not require or
warrant an importation of negligence law into this class of case.
Where remedies are needed they are already available in the form of
actions for defamation, injurious falsehood, breach of contract or
breach of confidence."

Although the case was directly concerned with a publication which was found
to be true, it is clear that Sir Robin Cooke P. considered its ratio to cover
situations which in the law of defamation would involve the defences of
qualified privilege and fair comment. This becomes even clearer in South
Pacific Mfg. Co. Ltd. v. New Zealand Security Consultants & Investigations
Ltd. and the associated case of Monensen v. Laing [1992] 2 N.Z.L.R. 282.
Both were striking out cases, involving claims in negligence against fire loss
investigators, whose reports to insurers had resulted in the rejection of claims
against them by the parties whose premises had been damaged by fire and in
the second case a prosecution for arson. The Court of Appeal held that both
actions should be struck out. Sir Robin Cooke P. said, at pp. 301-302:

"So far then there are weighty considerations in favour of a
duty in the kind of situation with which we are now dealing. But in
the other scale there have to be put a series of formidable objections

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arising because the duty asserted would cut across established
principles of law in fields other than negligence.

"The first is the one that weighed most with this Court in Bell-
Booth, namely the defences available in a defamation action. Any
shortcomings in the investigation of a fire assurance claim are unlikely
in themselves to harm the insured. If there is real harm it will
probably arise from the report by the investigators to the insurer. To
the extent that the report reflects adversely on the insured by
suggesting that he may have been guilty of arson the insured will
prima facie have a cause of action in defamation. Initially at least, the
publication may be very limited; yet it could have most serious
consequences for the insured and warrant substantial general or special
damages. These matters are all sufficiently elementary to require no
authority apart perhaps from a reference to 28 Halsbury's Laws of
England, 4th ed., vol. 28 (1979) paras. 10, 18, 59 and 244. It will be
a defence, however, if the investigators can prove the truth of the
imputation. And more importantly in the present context, the report
of the investigators made pursuant to their contractual duty to the
insurer will be the subject of qualified privilege.

"Qualified privilege can be defeated by proof of malice, but not
by proof of mere negligence. The suggested cause of action in
negligence would therefore impose a greater restriction on freedom of
speech than exists under the law worked out over many years to cover
freedom of speech and its limitations. By a side wind the law of
defamation would be overthrown. That this is reality, not mere
theory, is apparent from the various causes of action in defamation
pleaded in the South Pacific case and from the plea in Laing v.
Mortensen that the plaintiffs have suffered loss of reputation.
Qualified privilege is conferred because of reciprocal duty and interest
between a writer or speaker and those with whom he communicates.
To cut down the practical scope of the protection would run counter
to public policy in this field."

Balfour v. Attorney-General [1991] 1 N.Z.L.R. 519 was a case
concerning a school teacher whose employment prospects were seriously
jeopardised by the presence in his file at the Department of Education of a
memorandum stating that he was a long practising and blatant homosexual.
He sued the Department claiming damages for breach of statutory duty and in
negligence. The claim failed principally on the issue of causation, but Hardie
Boys J., giving the judgment of the Court of Appeal, said in relation to the
claim in negligence, at p. 529:

"This second aspect comes perilously close to defamation. Any
attempt to merge defamation and negligence is to be resisted. Both
these branches of the law represent the result of much endeavour to



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reconcile competing interests in ways appropriate to the quite distinct
areas with which they are concerned, but not necessarily appropriate
to each other: see Bell-Booth Group Ltd. v. Attorney-General [1989]
3 N.Z.L.R. 148, 155-157. An inability in a particular case to bring
it within the criteria of a defamation suit is not to be made good by the
formulation of a duty of care not to defame. In Lawton v. B.O.C.
Transhield Ltd. Tudor Evans J. held that an employer owed his former
employer a duty of care in giving a reference co a prospective new
employer, but his decision, which has been considerably criticised, was
disapproved by this court in Bell-Booth."

The views expressed in these three cases decided in a jurisdiction
which is well known to be tender in its approach to claims in negligence
involving pure economic loss are of great importance. The process of
reasoning which they contain is in my opinion entirely sound and apt to be
followed and applied in the present case. It is appropriate to add a reference
to what was said by Lord Templeman in Downsview Nominees Ltd. v. First
City Corporation Ltd. [1993] AC 295, 316:

"The House of Lords has warned against the danger of
extending the ambit of negligence so as to supplant or supplement
other torts, contractual obligations, statutory duties or equitable rules
in relation to every kind of damage including economic loss: see
C.B.S. Songs Ltd. v. Amstrad Consumer Electronics Plc. [1988] A.C.
1013. 1059: Caparo Industries Plc v. Dickman [1990] 2 A.C. 605 and
Murphy v. Brentwood District Council [1991] 1 AC 398."

Lord Templeman went on to describe the adverse consequences likely
to flow from such an extension in the type of case before him. If the ambit
of negligence were extended to cover the son of circumstances that exist in
the present case, the consequences would be no less deleterious. The purpose
of the defence of qualified privilege is to encourage frankness. Although in
many instances the encouragement of frankness may operate only in the
interests of the particular person to whom the communication is made, in
many other instances it is necessary for the protection of the wider public. In
the present case that is the position. The purpose of Lautro rule 3.5(2) is to
protect the public against being exposed to the activities of company
representatives selling insurance policies who may be dishonest or
incompetent. The need for that has been amply demonstrated by the many
instances of mis-selling that have recently been uncovered by Lautro. If there
exists some suspicion that a person in respect of whom a reference has been
asked for has not acted with complete integrity, the public interest requires
that such suspicion should be communicated. If liability for negligence
towards the subject of the reference were to be held to exist, there would be
a temptation not to communicate the suspicion. In the present case it required
a protracted trial with examination and cross-examination of witnesses to
establish that in relation to the Fennell transaction Mr. Spring had on a



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balance of probabilities acted incompetently but not dishonestly. An inquiry
of comparable scope would not be within the powers of the ordinary
employer. Faced with the possibility of an action of damages for negligence
at the instance of the subject of the reference there are grounds for expecting
that the employer would be inhibited from expressing frankly any reservations
which he might have about the honesty of the employee. Another field of
employment where frankness is of the greatest importance is that where
contact with children is involved. It may be very difficult to prove that a
person has interfered with young children, yet there may be grounds for
suspecting it. The public interest demands that the existence of such suspicion
should not be suppressed. In general, 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 of damages for
negligence in similar situations. If it were to be held that such an action was
to be available in relation to the giving of references in the employment field,
there would be pressure to extend the principle to cover all situations where
the defence of qualified privilege would be available if the action were one for
defamation, and such extension could not logically be resisted. Thus the
whole rationale of the defence of qualified privilege would be overthrown.
While giving Mr. Spring a right of action in negligence would operate
favourably in his interest and in those of other individuals who might find
themselves in a like position, the adverse consequences from the point of view
of public interest which would flow from doing so in my opinion militate
strongly against it.

My Lords, for these reasons I would affirm the decision of the Court
of Appeal on the issue of negligence.

As regard the claim for breach of contract. Glidewell L.J giving the
judgment of the Court of Appeal, after observing that the trial judge had held
that there was no contract between Mr. Spring and Guardian Assurance and
that it had been argued that he was wrong in this, said ([1993] 2 All E.R.

273. 295):

"If he was (which we do not find it necessary to decide), the
essential question is: did either the plaintiffs contract with Corinium
or his contract with Guardian Assurance contain the implied term
pleaded in the reamended statement of claim? This is set out in para
8 of the pleading as:

"... that, the Defendants and/or any of them would
provide a reference which was full, frank and truthful and
which was in any event prepared using reasonable care.

"The judge, having referred to the decisions in Addis v.
Gramophone Co. Ltd. [1909] AC 488 and The Moorcock (1889) 14
P.D. 64, cited a sentence from the speech of Lord Edmund-Davies in
Liverpool City Council v. Irwin [1976] 2 All E.R. 39 at p. 54 to the



- 11 -

effect that: 'The touchstone is always necessity and not merely
reasonableness.' (Lord Edmund-Davies's emphasis.)

"More recently Lord Bridge in Scally v. Southern Health and
Social Services Board (British Medical Association, third party) [1992]
1 A.C. 294 at 307 drew a clear distinction between what he described
as -

'the search for an implied term necessary to give
business efficacy to a particular contract and the search, based
on wider considerations, for a term which the law will imply
as a necessary incident of a definable category of contractual
relationship.'

"In our view the judge directed himself entirely correctly that
he had to decide whether a term of the kind pleaded was a necessary
incident of either contract. He concluded that it was not. and thus that
he would not imply such a term. In our view, if the law implied any
term in the plaintiffs contract with either Guardian Assurance or
Corinium in relation to this matter, such a term would go no further
than to require the defendants to comply with their obligations under
r. 3.5(2) of the Lautro Rules, i.e. to give a reference which made 'full
and frank disclosure of all relevant matters which are believed to be
true.' With such an obligation the judge of course held that the
defendants complied."

I respectfully agree and find it unnecessary to add anything.
Accordingly, I would dismiss the appeal.

LORD GOFF OF CHIEVELEY

My Lords,

The facts of the present case are set out in the judgment of the Court
of Appeal delivered by Glidewell L.J., and have been summarised by my
noble and learned friend Lord Keith of Kinkel. I gratefully adopt these
accounts. I wish only to stress that the contract under which the appellant was
engaged by Corinium was held by the learned judge to be a contract for
services, as opposed to a contract of service; and that the judge held that
there was no contractual relationship between the appellant and Guardian
Assurance, for whom he was appointed a company representative. Although
the judge's finding on this point was challenged by the appellant before the
Court of Appeal, they did not find it necessary to express an opinion on it.
The point was pursued again by the appellant before this House; but I too,
though for rather different reasons, find it unnecessary to decide it.

- 12 -

The central issue in this appeal is whether a person who provides a
reference in respect of another who was formerly engaged by him as a
member of his staff (at this point I use a deliberately neutral term) may be
liable in damages to that other in respect of economic loss suffered by him by
reason of negligence in the preparation of the reference. That issue can. for
the sake of convenience, be subdivided into two questions. (1) Whether the
person who provided the reference prima facie owes a duty of care, in
contract or tort, to the other in relation to the preparation of the reference.
(2) If so, whether the existence of such a duty of care will nevertheless be
negatived because it would, if recognised, pro tanto undermine the policy
underlying the defence of qualified privilege in the law of defamation.

I recognise, of course, that there is some interaction between these two
questions. Even so, I think it is desirable to address the first question in
isolation, not only for the sake of convenience, but also because the answer
to that question may, in my opinion, cast light on the way in which the second
question should be answered.

As will appear hereafter, I have come to the conclusion that, on the
facts of the present case, both Guardian Assurance and Corinium owed a duty
of care to the appellant in respect of the preparation of the reference in
question. In my opinion, the source of duty of care lies in the principle
derived from Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C.
465, viz. an assumption of responsibility by those companies to the appellant
in respect of the reference, and reliance by the appellant upon the exercise by
them of due care and skill in respect of its preparation. I am however
concerned by the fact that the appellant's case was not advanced to the
Appellate Committee on the basis of that principle. In these circumstances I
would ordinarily have proposed that, before the appeal could be decided on
a point which had not been argued, the parties should be given the opportunity
of making submissions upon it. In the present case, however. I understand
chat a majority of your Lordships are minded to allow the appeal in any event.
proceeding upon a broader basis than the principle in Hedley Byrne. In these
circumstances it would be pointless to delay the matter further, or to cause
extra expense to the parties, by inviting further submissions. Even so. I
propose to set out the reasoning upon which I, for my part, would allow the
appeal. I feel it necessary to do so because I have come to the conclusion
that, if the Hedley Byrne principle cannot here be invoked, or a contractual
term to that effect cannot be relied upon by the appellant, the appeal ought to
be dismissed; because in those circumstances it would be a simple case of the
respondents having negligently made a statement damaging to the appellant's
reputation. In such a case, in agreement with the reasoning of the Court of
Appeal. I do not see how there can be a liability upon the respondents in
negligence consistently with the policy of the law established in the law of
defamation in relation to the principle of qualified privilege which, in the
absence of malice, protects from liability the maker of a statement made on
the privileged occasion. Even so, I wish to stress that the view which I shall



- 13 -

express in this opinion has been formed without the benefit of argument from
counsel, and so to that extent must be regarded as being of limited authority.

Whether prima facie such a duty of care is owed, in contract or in tort.

In a series of well known cases, your Lordships' House has
commended a gradual case by case approach to the development of the law of
negligence, particularly in cases concerned with claims in respect of pure
economic loss. Even so, one broad category of cases has been recognised in
which there may be liability in negligence for loss of this kind. These are the
cases which spring from, or have been gathered under the umbrella of, the
landmark decision of your Lordships' House in the Hedley Byrne case.

In Hedley Byrne, the claim lay against a bank which had gratuitously
supplied a bank reference concerning a customer of the bank. The plaintiffs
claimed that the bank had been negligent in the preparation of the reference,
and that they had acted in reliance on the reference and had as a result
suffered loss. The question for decision was whether, in such circumstances.
the bank was liable to the plaintiffs in damages. It was held by your
Lordships' House that in principle a duty of care was owed by the bank to the
plaintiffs in respect of the preparation of the reference, but that on the facts
the hank was protected from liability because the reference had been supplied
under cover of a disclaimer.

No doubt because of the facts of the case there under consideration, the
case has been widely regarded as concerned with liability in damages in
respect of a negligent misstatement. and also with liability in negligence for
pure economic loss. This is undoubtedly true: and in both respects the
decision broke new ground. But it is important not to lose sight of the
principle which underlay the decision, which is of a wider importance. In his
speech (with which Lord Hodson agreed) Lord Morris of Borth-y-Gest
expressed himself as follows (at pp. 502-503):

"My Lords, I consider that it follows and that it should now be
regarded as settled that if someone possessed of a special skill
undertakes, quite irrespective of contract, to apply that skill for the
assistance of another person who relies upon such skill, a duty of care
will arise. The fact that the service is to be given by means of or by
the instrumentality of words can make no difference. Furthermore,
if in a sphere in which a person is so placed that others could
reasonably rely upon his judgment or his skill or upon his ability to
make careful inquiry, a person takes it upon himself to give
information or advice to, or allows his information or advice to be
passed on to, another person who, as he knows or should know, will
place reliance upon it, then a duty of care will arise."

Lord Devlin spoke in the following terms (at pp. 528 530):

- 14 -

"I think, therefore, that there is ample authority to justify your
Lordships in saying now that the categories of special relationships
which may give rise to a duty to take care in word as well as in deed
are not limited to contractual relationships or to relationships of
fiduciary duty, but include also relationships which in the words of
Lord Shaw in Nocton v. Lord Ashburton are 'equivalent to contract,'
that is, where there is an assumption of responsibility in circumstances
in which, but for the absence of consideration, there would be a
contract . . .

"I shall therefore content myself with the proposition that wherever
there is a relationship equivalent to contract, there is a duty of care.
Such a relationship may be either general or particular. Examples of
a general relationship are those of solicitor and client and of banker
and customer. For the former Nocton v. Lord Ashburton has long
stood as the authority and for the latter there is the decision of Salmon
J. in Woods v. Martins Bank Ltd. which I respectfully approve. There
may well be others yet to be established. Where there is a general
relationship of this sort, it is unnecessary to do more than prove its
existence and the duty follows. Where, as in the present case, what
is relied on is a particular relationship created ad hoc. it will be
necessary to examine the particular facts to see whether there is an
express or implied undertaking of responsibility."

The wide scope of the principle recognised in Hedley Byrne is reflected
in the broad statements of principle which I have quoted. All the members
of the Appellate Committee in this case spoke in terms of the principle resting
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. Lord Devlin, in particular, stressed that the
principle rested upon an assumption of responsibility when he said, at p. 531
that "the essence of the matter in the present case and in others of the same
type is the acceptance of responsibility." For the purpose of the case now
before your Lordships it is, I consider, legitimate to proceed on the same
basis. Furthermore, although Hedley Byrne itself was concerned with the
provision of information and advice, it is clear that the principle in the case
is not so limited and extends to include the performance of other services. As
for example the professional services rendered by a solicitor to his client (see.
in particular. Lord Devlin at pp. 529-530). Accordingly where the plaintiff
entrusts the defendant with the conduct of his affairs, in general or in
particular, the defendant may be held to have assumed responsibility to the
plaintiff, and the plaintiff to have relied on the defendant to exercise due skill
and care, in respect of such conduct.

For present purposes, I wish also to refer to the nature of the "special
skill" to which Lord Morris referred in his statement of principle. It is, I
consider, clear from the facts of Hedley Byrne itself that the expression
"special skill" is to be understood in a broad sense, certainly broad enough to

- 15 -

embrace special knowledge. Furthermore Lord Morris himself, when
speaking of the provision of a statement in the form of information or advice,
referred to the defendant's judgment or skill or ability to make careful
enquiry, from which it appears that the principle may apply in a case in which
the defendant has access to information and fails to exercise due care (and
skill, to the extent that this is relevant) in drawing on that source of
information for the purposes of communicating it to another.

The fact that the inquiry in Hedley Byrne itself was directed, in a case
concerned with liability in respect of a negligent misstatement (in fact a
reference), to whether the maker of the statement was liable to a recipient of
it who had acted in reliance upon it, may have given the impression that this
is the only way in which liability can arise under the principle in respect of
a misstatement. But. having regard to the breadth of the principle as stated
in Hedley Byrne itself. I cannot see why this should be so. Take the case of
the relationship between a solicitor and his client, treated implicitly by
Lord Morris and expressly by Lord Devlin as an example of a relationship to
which the principle may apply. I can see no reason why a solicitor should not
he under a duty to his client to exercise due care and skill when making
statements to third parties, so that if he fails in that duty and his client suffers
damage in consequence, he may be liable to his client in damages. The
question whether a person who gives a reference to a third party may, if the
reference is negligently prepared, be liable in damages not to the recipient but
to the subject of the reference, did not arise in Hedley Byrne and so was not
addressed in that case. That is the central question with which we are
concerned in the present case; and I propose first to consider it in the context
of an ordinary relationship between employer and employee, and then to turn
to apply the relevant principles to the more complex relationships which
existed in the present case.

Prima facie (i.e. subject to the point on defamation, which I will have
to consider later), it is my opinion that 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, derived from
his experience of the employee's character, skill and diligence in the
performance of his duties while working for the employer. Moreover, when
the employer provides a reference to a third party in respect of his employee,
he does so not only for the assistance of the third party, but also, for what it
is worth, for the assistance of the employee. Indeed, nowadays it must often
be very difficult for an employee to obtain fresh employment without the
benefit of a reference from his present or a previous employer. It is for this
reason that, in ordinary life, it may be the employee, rather than a prospective
future employer, who asks the employer to provide the reference; and even
where the approach comes from the prospective future employer, it will (apart
from special circumstances) be made with either the express or the tacit
authority of the employee. The provision of such references is a service
regularly provided by employers to their employees; indeed, references are

- 16 -

part of the currency of the modern employment market. Furthermore, when
such a reference is provided by an employer, it is plain that the employee
relies upon him to exercise due skill and care in the preparation of the
reference before making it available to the third party. In these
circumstances, it seems to me that all the elements requisite for the application
of the Hedley Byrne principle are present. I need only add that, in the context
under consideration, there is no question of the circumstances in which the
reference is provided being, for example, so informal as to negative an
assumption of responsibility by the employer.

Where the relationship between the parties is that of employer and
employee, the duty of care could be expressed as arising from an implied term
of the contract of employment, i.e. that, if a reference is supplied by the
employer for the employee, due care and skill will be exercised by him in its
preparation. Such a term may be implied despite the absence of any legal
obligation on the employer to provide a reference (as I understand to have
been accepted by the parties in the present case), and may be expressed to
apply even after the employee has left his employment with the employer.
But in the present case this adds nothing to the duty of care which arises
under the Hedley Byrne principle, and so may be applicable as a tortious duty,
either where there is no contract between the parties, or concurrently with a
contractual duty to the same effect.

I wish however to add that, in considering the duty of care owed by
the employer to the employee, although it can and should be expressed in
broad terms, nevertheless the central requirement is that reasonable care and
skill should be exercised by the employer in ensuring the accuracy of any facts
which either (1) are communicated to the recipient of the reference from
which he may form an adverse opinion of the employee, or (2) are the basis
of an adverse opinion expressed by the employer himself about the employee.
I wish further to add that it does not necessarily follow that, because the
employer owes such a duty of care to his employee, he also owes a duty of
care to the recipient of the reference. The relationship of the employer with
the recipient is by no means the same as that with his employee; and
whether, in a case such as this, there should be held (as was prima facie held
to be so on the facts of the Hedley Byrne case itself) a duty of care owed by
the maker of the reference to the recipient is a point on which I do not
propose to express an opinion, and which may depend on the facts of the
particular case before the court.

At this point I must face the possibility that the conclusion which I
have expressed may be thought to be inconsistent with the decision of the
Privy Council in Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt [1971]
A.C. 793. There a claim was made against a company for damages arising
from negligent advice gratuitously supplied by the company to the plaintiff in
respect of a particular investment. The company was not engaged in the
business of giving advice about investments; and it was held that a person
who renders services gratuitously in circumstances where he is not engaged

- 17 -

in the business or profession of rendering such services owes no duty to
exercise skill or competence, or indeed care, in so doing. Quite apart
however from the fact that the decision, which is not binding on your
Lordships' House, has attracted serious criticism, particularly in the light of
the formidable dissenting opinion of Lord Reid and Lord Morris (both of
whom were members of the Appellate Committee in Hedley Byrne), I do not
consider that it stands in the way of the approach which I favour in the present
case, since the skill of preparing a reference in respect of an employee falls
as much within the expertise of an employer as the skill of preparing a bank
reference fell within the expertise of the defendant bank in Hedley Byrne
itself.

I turn next to the particular circumstances of the present case, and I
consider first the position of Guardian Assurance. It was they who provided
the reference to Scottish Amicable. First, does it make any difference that the
appellant was not their employee, but a company representative? I do not
think so, I can see no material distinction from the position which would have
arisen if they had been the appellant's employers. In particular, they had
available to them special knowledge relating to the appellant's performance
while their representative, and the reference must have been provided by them
for the assistance of the appellant as their agent, as well as for the assistance
of the recipient of the reference. It is true that the judge found that there was
no contractual relationship between them and the appellant; but I am
nevertheless satisfied that, on the Hedley Byrne principle, a duty of care
would nevertheless arise in tort.

There is however one particular matter to which I must refer. Rule
3.5 of the Lautro Rules provides as follows:

"(1) A person shall not be appointed as a company
representative of a member unless the member has first taken
reasonable steps to satisfy itself that he is of good character and of the
requisite aptitude and competence, and these steps shall . . . . include
. . . . the taking up of references relating to character and experience.

"(2) A member which receives an enquiry for a reference in
respect of a person whom another member or appointed representative
is proposing to appoint shall make full and frank disclosure of all
relevant matters which are believed to be true to the other member or
the representative."

I have to consider whether these rules militate against a duty of care owed by
Guardian Assurance to the appellant in the present case. First of all, although
the rule is, understandably, concerned with the interests of the member who
receives it. and no doubt also the interests of his clients, I cannot see that this
precludes a duty of care owed to the subject of the reference by the member
who provides it. Indeed, the function of the second paragraph of the rule
appears simply to be to ensure that disclosure is made of matters which



- 18 -

referees are sometimes reluctant to disclose. Although the point does not
directly arise in the present case, I cannot see that this duty of disclosure as
between members could of itself prevent the existence of a duty of care being
owed by the provider of the reference to the recipient, on the Hedley Byrne
principle; and a fortiori I cannot see that it precludes a duty of care owed by

the provider to the subject of the reference.

Finally, there is the point that, at the time when the reference was
given, the appellant had ceased to be a company representative of Guardian
Assurance. Again, I cannot see that this makes any difference. The appellant
had ceased to hold this position shortly before the reference was required. I
can see nothing in the circumstances to differentiate the situation from that
where he was still a company representative at the relevant time.

For these reasons, subject to the point on defamation, I am satisfied
that Guardian Assurance owed a duty of care to the appellant in respect of the
preparation of the reference. It is true that the preparation of the reference
was carried out not by employees of Guardian Assurance, but by their parent
company, G.R.E. Assurance (through their assistant chief compliance officer,
Mrs. Debra Lee-Moore, assisted by Mr. Beard (a member of a G.R.E.
Assurance compliance team) and a Mr. Dixon (a senior sales consultant for
G.R.E. Assurance)) acting in collaboration with Corinium (through Mr.
Siderfin, who had been appointed by Guardian Assurance, when they took
Corinium over, to be chief executive of Corinium). I cannot see. however,
how the delegation by Guardian Assurance to others of the performance of the
service, in respect of which they had assumed responsibility to the appellant,
can absolve them from their duty to the appellant to exercise due skill and
care in the preparation of the reference. It follows that the negligence of Mr.
Dixon and Mr. Siderfin in the preparation of the reference, as found by the
judge, resulted in a breach of that prima facie duty by Guardian Assurance.

In these circumstances, it is probably academic whether a similar duty
was owed to the appellant by G.R.E. Assurance or Corinium. This was
however a case where three companies, all members of the same group,
collaborated in the preparation of the reference. In the circumstances of the
present case, I am satisfied that Corinium, which not only collaborated in the
preparation of the reference but was formerly in a contractual relationship
with the appellant under a contract for services, with which the appellant's
position as Guardian Assurance's company representative was evidently
connected, must be taken also to have assumed responsibility to the appellant
in respect of the preparation of the reference so provided. I cannot however
see any basis upon which G.R.E. Assurance can be said to have assumed
responsibility to the appellant in respect of the preparation of the reference,
even though that company played the principal part in its preparation. In
these circumstances I am prepared to hold prima facie that Corinium (as the
employer of Mr. Siderfin) was under a duty of care to the appellant together
with Guardian Assurance. Furthermore, on the facts as found by the judge.



- 19 -

it is plain that such a duty of care, if it exists, was broken by both of these
defendants.

It must not however be thought that, in so holding, I am expressing
any opinion upon the ordinary position where a person providing the reference
simply seeks information from an outsider, and the outsider is negligent in
relation to the supply to the referee of the information so requested. Indeed,
in the absence of assumption of responsibility (under a contract or otherwise)
by the outsider to the subject of the reference, there will, for the reasons I
have already given, be great difficulty in holding that there was any greater
duty imposed upon him than that arising under the law of defamation, which
I now turn to consider.

(2) If so. whether such a duty will nevertheless be negatived because it
would, if recognised, pro tanto undermine the policy underlying the defence
of qualified privilege in the law of defamation.

I think it desirable that I should first of all identify the nature of this
policy objection. As I understand it, the objection is as follows. First of all.
reference is made to the description of the policy underlying the defence of
qualified privilege given by Lord Diplock in Horrocks v. Lowe [1975] A.C.
133. 149. in the course of which he said:

"The public interest that the law should provide an effective means
whereby a man can vindicate his reputation against calumny has
nevertheless to be accommodated to the competing public interest in
permitting men to communicate frankly and freely with one another
about matters in respect of which the law recognises that they have a
duty to perform or an interest to protect in doing so. What is
published in good faith on matters of these kinds is published on a
privileged occasion. It is not actionable even though it be defamatory
and turns out to be untrue."

Second, it is suggested that the policy which underlies the defence of qualified
privilege, viz. that in the relevant circumstances men should be permitted to
communicate frankly and freely with one another about all relevant matters,
prevents the recognition of a duty of care owed by the giver of the reference
to the subject of the reference. In this connection, reliance is placed in
particular upon decisions of the Court of Appeal of New Zealand in Bell-
Booth Group Ltd. v. Attorney-General [1989] 3 N.Z.L.R. 148, and South
Pacific Mfg. Co. Ltd. v. New Zealand Security Consultants and Investigations
Ltd. and Mortensen v. Laing [1992] 2 N.Z.L.R. 282. In the former case. Sir
Robin Cooke P. said, at p. 156:

"The common law rules, and their statutory modifications,
regarding defamation and injurious falsehood represent compromises
gradually worked out by the Courts over the years, with some
legislative adjustments, between competing values. Personal reputation

- 20 -

and freedom to trade on the one hand have to be balanced against
freedom to speak or to criticise on the other.

"In the result the present rules are in broad terms well-known and
reasonably clear. To an action for defamation truth is an absolute
defence. Privilege, where applicable, is in a few areas an absolute but
in most a qualified defence. Fair comment is a qualified defence
subject to rather different rules. In injurious falsehood, on the other
hand, the plaintiff has the burden of proving both falsity and malice.
These evolved compromises may not draw the lines in places that will
always be found generally acceptable in the community. Some argue,
for instance, for greater media freedom or licence; statutory changes
have been recommended but not enacted. It is a controversial area.
The important point for present purposes is that the law as to injury to
reputation and freedom of speech is a field of its own."

Now I for my part accept that, as stated by Hallett J. in Foaminol
Laboratories Ltd. v. British Artid Plastics Ltd. [1941] 1 All E.R. 393. 399,
"a claim for mere loss of reputation is the proper subject of an action for
defamation, and cannot ordinarily be sustained by means of any other form of
action." Furthermore, it is (with respect) understandable that, in the Bell-
Booth case, the Court of Appeal of New Zealand should have rejected a claim
in negligence against the New Zealand Ministry of Agriculture and Fisheries
in respect of an alleged failure to inform the plaintiffs of the results of certain
trials of a product of the plaintiffs, or to consult them about the presentation
of the results, as a result of which trials the product was truthfully described
as "ineffective" in a television broadcast; or that in the South Pacific Mfg. Co.
and Mortensen cases the same court should have rejected claims in negligence
against fire loss investigators, whose reports to insurers (by whom they were
instructed) should have resulted in the rejection of claims by parties whose
premises had been damaged by fire and, in one case, a prosecution for arson.
In neither case was any question of assumption of responsibility to the
plaintiffs before the court. A case which bears some similarity to the present
case is Balfour v. Attorney-General [1991] 1 N.Z.L.R. 519. which was
concerned with a school teacher whose file at the Department of Education
contained a memorandum stating that he was a long practising and blatant
homosexual, as a result of which his prospects of employment as a teacher
were seriously prejudiced. However, the issue of assumption of responsibility
does not appear to have been considered in that case, in which the claim
appears to have failed primarily on the issue of causation.

By way of contrast, in the English case of Lawton v. B.O.C.
Transhield Ltd. [1987] 2 All E.R. 608. Tudor Evans J. held that an employer
owed a duty of care to a former employee in respect of the preparation of a
reference for him. However, on the facts of the case he held that there was
no breach of duty; and in any event he gave no consideration to the impact of



- 21 -

the law of defamation upon his decision that a duty was owed by the
employer.

In these circumstances it is, I consider, necessary to approach the
question as a matter of principle. Since, for the reasons I have given, it is my
opinion that in cases such as the present the duty of care arises by reason of
an assumption of responsibility by the employer to the employee in respect of
the relevant reference, I can see no good reason why the duty to exercise due
skill and care which rests upon the employer should be negatived because, if
the plaintiff were instead to bring an action for damage to his reputation, he
would be met by the defence of qualified privilege which could only be
defeated by proof of malice. It is not to be forgotten that the Hedley Byrne
duty arises where there is a relationship which is, broadly speaking, either
contractual or equivalent to contract. In these circumstances, I cannot see that
principles of the law of defamation are of any relevance.

It is true that recognition of a duty of care to an employee in cases
such as the present, based on the Hedley Byrne principle, may have some
inhibiting effect on the manner in which references are expressed, in the sense
that it may discourage employers from expressing views such as those which
are encouraged by rule 3.5(2) of the Lautro Rules. For my part, however. I
suspect that such an inhibition exists in any event. Employers may well, like
many people, be unwilling to indulge in unnecessary criticism of their
employees: hence the perceived necessity for rule 3.5(2). In all the
circumstances, I do not think that we may fear too many ill effects from the
recognition of the duty. The vast majority of employers will continue, as
before, to provide careful references. But those who, as in the present case,
fail to achieve that standard, will have to compensate their employees or
former employees who suffer damage in consequence. Justice, in my opinion,
requires that this should be done; and I, for my part, cannot see any reason
in policy why that justice should be denied.

For these reasons I would allow the appeal; but I would nevertheless
remit the matter to the Court of Appeal to consider the issue of the extent to
which the damage suffered by the appellant was caused by the breach of duty
of the respondents.

LORD LOWRY

My Lords.

I have had the advantage of reading in draft the speech of my noble
and learned friend Lord Keith of Kinkel and I gratefully adopt his review of
the facts and of the issues in dispute. I have also had the advantage of reading
the speeches of my noble and learned friends Lord Goff of Chieveley, Lord
Slynn of Hadley and Lord Woolf and, so far as concerns the issue of



- 22 -

negligence, I entirely agree with both their analysis of the cases which provide
or have been thought to provide guidance on the main disputed question and
their conclusions. I also agree with my noble and learned friend Lord Goff's
interpretation of the Hedley Byrne case. While I would ordinarily be content
simply to concur in the conclusion reached by my noble and learned friends,
I wish, since the result of your Lordships' deliberations will be to reverse the
decision of the Court of Appeal, to state as succinctly as I may my reasons for
so concurring.

The defendants have two main arguments. The first is that to confer
on the plaintiff a cause of action in negligence would distort and subvert the
law of defamation in cases where the defence relied on is one of qualified
privilege, that is, where, on an occasion when he has either a duty to
communicate information or a legitimate interest of his own to protect, the
defendant in good faith and without malice defames the plaintiff. I believe
that the answer to this argument is that a person owes a general duty, subject
to the principles governing the law of defamation and to the relationship, if
any, between the defamer and the defamed, not to defame any other person,
whereas a liability based on negligent misstatement can exist only if (1)
damage is foreseeable (and damage occurs) and (2) there is such proximity
between the maker and the subject of the misstatement as will impose a duty
of care on the former for the protection of the latter. The existence of that
foreseeability and that proximity between the plaintiff and the defendant is a
justification, not for extending the liability for defamation by dispensing with
the need for malice, but for bringing into play a different principle of liability
according to which, in a restricted class of situations, a plaintiff can rely on
negligence as the ingredient of the defendant's conduct which is essential to
the existence of that liability. I consider that in the instant case damage
stemming from the defendants' careless misstatement when giving a reference
was foreseeable and that the proximity between the defendants and the plaintiff
imposed a duty of care on the former for the protection of the latter.

The defendants' second argument (which in order that it may prevail,
must be made to stand independently on its own feet) is that, even if one
concedes foreseeability and proximity and even if it would otherwise be just
and reasonable for the plaintiff to recover under the head of negligence, public
policy dictates that the person who has been the subject of a negligent
misstatement shall not recover. The argument is grounded on the proposition
that the maker of the misstatement, provided he has acted in good faith, must,
even if he has been negligent, be free to express his views in the kind of
situation (including the giving of any reference) which is contemplated by the
doctrine of qualified privilege which is part of the law of defamation.

This argument falls to be considered on the assumption that, but for the
overriding effect of public policy, a plaintiff who is in the necessary proximate
relation to a defendant will be entitled to succeed in negligence if he proves
his case. To assess the validity of the argument entails not the resolution of
a point of law but a balancing of moral and practical arguments. This



- 23 -

exercise could no doubt produce different answers but, for my own part, I
come down decisively on the side of the plaintiff.

On the one hand looms the probability, often amounting to a certainty,
of damage to the individual, which in some cases will be serious and may
indeed be irreparable. The entire future prosperity and happiness of someone
who is the subject of a damaging reference which is given carelessly but in
perfectly good faith may be irretrievably blighted. Against this prospect is set
the possibility that some referees will be deterred from giving frank references
or indeed any references. Placing full reliance here on the penetrating
observations of my noble and learned friend Lord Woolf, I am inclined to
view this possibility as a spectre conjured up by the defendants to frighten
your Lordships into submission. I also believe that the courts in general and
your Lordships' House in particular ought to think very carefully before
resorting to public policy considerations which will defeat a claim that ex
hypothesi is a perfectly good cause of action. It has been said that public
policy should be invoked only in clear cases in which the potential harm to the
public is incontestable, that whether the anticipated harm to the public will be
likely to occur must be determined on tangible grounds instead of on mere
generalities and that the burden of proof lies on those who assert that the court
should not enforce a liability which prima facie exists. Even if one should put
the matter in a more neutral way. I would say that public policy ought not to
he invoked if the arguments are evenly balanced: in such a situation the
ordinary rule of law. once established, should prevail.

In marshalling my thoughts on public policy I have drawn freely upon
the argument in Rondel v. Worsley [1969] 1 AC 191 of Mr. Louis Blom-
Cooper (now Sir Louis Blom-Cooper, Q.C.) whose submissions at p. 203.
although not rewarded with success in that appeal, strike me as particularly
appropriate in the context of the present case.

As in so many situations in which a deterrent sanction is envisaged for
something which may be said or written, your Lordships were predictably
reminded of Article 10 of the European Convention for the Protection of
Human Rights and Fundamental Freedoms. But, assuming that an action
would otherwise lie for damages for negligent misstatement. I do not think
that Article 10, a paramount and proper guardian of free speech, was intended
to shield a negligent defendant in an action based on negligence any more than
it would protect a malicious defendant from a well grounded claim in
defamation. Freedom of speech, rightly prized in all civilised societies, is not
to be identified with freedom to defame maliciously or to damage negligently.

When I look again at Lautro Rules 3.5(2), it does not seem to me that
the obligation of a referee to make "full and frank disclosure of all relevant
matters which are believed to be true" is in any way incompatible with the
existence of an obligation, owed to the referee's employee or agent, to
exercise reasonable care in the giving of a reference. Indeed, it might without
difficulty be implied that, in the interests of the recipient, a reference should



- 24 -

be a careful one as well as being full and frank. Rule 3.5(2) cannot be
determinative of the existence of a duty owed by the referee to the subject of
a reference or of the nature of that duty, if one exists.

It is in the tradition of the English case-law method to decide this
appeal on its facts and not to be deterred by reflecting on all the possible
situations in which a reference might be called for. Even if it is debatable
where the line should be drawn, I am confident that from the plaintiff's point
of view this case falls on the right side of it. It is not asking too much to
expect the referee to exercise reasonable care; to hold for the plaintiff in this
appeal does not mean that the referee must guarantee the accuracy of a
reference.

So far as concerns other matters which have been discussed, including
in particular the defendants' liability in contract, I will be content, having
regard to my conclusion on the negligence issue, to remind myself of the
felicitous reference to obiter dicta and the proverbial chickens of destiny made
by Bowen L.J. in Cooke v. New River Company (1888) 38 Ch D 56 at p.
71.

For these reasons, and for the reasons in regard to negligence given by
my noble and learned friends. I would allow this appeal and would remit the
case to the High Court in order that damages may be assessed.

I prefer this course to the alternative of sending the case back to the
Court of Appeal, where Glidewell, L.J., delivering the judgment of the court
said:

"Mr Eady Q.C. argues that, even if negligence were established, it did
not cause the damage alleged to the plaintiff. In the light of our
decision to the effect that the defendants owed no duty of care, it is
unnecessary to consider this argument further. We comment only that
we would have been reluctant to disagree with the judge on this issue."

Once the duty of care is held to exist and the defendants' negligence
is proved, the plaintiff only has to show that by reason of that negligence he
has lost a reasonable chance of employment (which would have to be
evaluated) and has thereby sustained loss: McGregor on Damages 14th ed.
paras. 276-278 and Chaplin v. Hicks [1911] 2 KB 786. He does not have
to prove that, but for the negligent reference, Scottish Amicable would have
employed him. In fact, the trial judge said:

"I turn, finally, to the question of causation. On the face of it,
causation seems plain. Because of the reference, which I have held
constitutes a negligent misstatement, not only Scottish Amicable but
Irish Life and National Financial Management refused to employ the
plaintiff.

- 25 -

"Mr. Eady, however, argues that this is not the full story. The
plaintiff, he points out, must prove that had Scottish Amicable received
a reference which was not a negligent misstatement but one prepared
with all reasonable care, then, on the facts of the case, they would
have employed him. To this end he called further evidence from Mrs.
Ruth Evans, Compliance officer at Scottish Amicable, who stated, on
what Mr. Eady postulated as a hypothesis of the agreed facts in the
case, that they would, in all probability, not have employed him.

"This attempt to breach the chain of causation was, in my
judgment, ingenious but flawed. The postulates were of the defendants'
or Mr. Eady's own selection and excluded many other facts as were
agreed or as I find proved in the case. To take a simple example,
Mrs. Evans stated that the most serious factor was of the plaintiff
attempting to advise on investments he was not fully familiar with.
She was not asked to postulate what her conclusion might have been
if, for example, as Mr. Livesey went to such pains to establish, the
further fact was added that he had been given blanket authorisation to
sell the defendants' products and was, of course, urged by the
defendants so to do when, as I find, he had had only the sketchiest of
training.

"As I observed in argument, the only person capable of giving
an authoritative answer to the hypothetical question posed would have
been somebody in Mrs. Evans' position who had sat in this courtroom
throughout the many days of evidence and heard all the facts about the
plaintiff and his career at Corinium.

"As it is, having done so myself, I can only say that, in my
judgment, on balance, had the plaintiff received the careful and
accurate reference he was entitled to, he would probably have obtained
employment with one of these companies."

There is, in my view, much to be said for the proposition that the
judge's finding of fact on the issue of causation cannot be reversed. But I will
not proceed on that basis, since the point was not the subject of argument
before your Lordships.

If the case is remitted to the trial judge and if, as appears likely, he
awards damages (assuming of course that the plaintiff can prove loss), then
his judgment can be appealed and the issue of causation, as well as that of
amount, will remain open in the Court of Appeal.

If, on the other hand, your Lordships were to send the case back to the
Court of Appeal and that court were to decide causation in favour of the
plaintiff, the case would then have to be sent back to the trial judge and he
would have to evaluate the plaintiffs chances of employment in the event that
the reference had been a proper one and assess the plaintiffs damages. His



- 26 -

judgment on damages could then be appealed by either side to the Court of
Appeal.

The argument in favour of now remitting this case to the Court of
Appeal is, no doubt, that the proceedings could be terminated against the
plaintiff without any assessment of damages if that court were to hold the trial
judge's finding on causation to be perverse and were to decide that on no
reasonable view couid the plaintiff be regarded as having suffered any loss by
reason of the defendants' negligence. I consider such a result to be most
unlikely and that is another reason in favour of sending the case directly to the
trial judge, particularly since causation of damage is so closely linked to the
issue of damages.

LORD SLYNN OF HADLEY

My Lords

The facts of this case, the relevant statutory provisions relating to the
sale of long term insurance and the self-regulatory scheme adopted by the Life
Assurance and Unit Trust Regulatory Organisation ("Lautro") are fully and
clearly set out in the judgment of Glidewell L.J. I do not therefore repeat
them other than is necessary for the statement of my conclusions. I adopt the
terminology of the Court of Appeal referring to the first defendant as
"Guardian Assurance" and to the fourth defendant as "Gre Assurance". I
accept, as did the judge and the Court of Appeal, that no distinction need be
made between the second and third defendants (which were both subsidiaries
of Guardian Assurance, itself a subsidiary of Gre Assurance) and I refer to the
second and third defendants collectively as "Corinium."

The Court of Appeal said that the issue "does the giver of a reference
owe a duty of care to the subject of the reference (i) in giving or compiling
the reference or (ii) in obtaining the information on which it is based'" was
"the most difficult and controversial question in this appeal." That was no
exaggeration. The Court of Appeal concluded that the question should be
answered in the negative.

The Court of Appeal began its reasoning by saying:

"It is a commonplace that, if A (a former or present employer)
gives B (a possible future employer a written or oral reference
concerning C (an employee), [which] contains some untrue statement
about C which damages his reputation, C can only succeed in an action
against A in defamation if he can prove that A was actuated by malice.
This has been the law for over 200 years because the courts have held
it to be in the public interest that, in giving such a reference, A should



- 27 -

be encouraged to express his honest opinion, fully and frankly, about
C without fear that he will be liable to C if something which he
honestly believes to be true nevertheless is proved not to be true.
Moreover, if A makes an untrue statement to B about C which
damages C's business but not his reputation, C can sue A for damages
for financial loss only if he can prove that A in making the statement
was actuated by malice."

One reason for this approach was said by Erle C.J. in Whiteley v.
Adams [1863] 15 C.B.(N.S.) 392, 418, 143 E.R. 838 to be "that it is to the
general interest of society that correct information should be obtained as to the
character of persons in whom others have an interest. If every word which
is uttered to the discredit of another is to be the ground of an action, cautious
persons will take care that all their words are words of praise only, and will
cease to obey the dictates of truth."

To this end, as Lord Diplock stressed in Horrocks v. Lowe [1975]
A.C. 135. 149-151, for the publisher of defamatory matter to lose his
qualified privilege, where the law recognises that he has a duty to speak,
"express malice" must be shown. The burden on the plaintiff to establish
malice on the part of the defendant is a heavy one. It must be shown that he
did not have a positive or honest belief in the truth of what he published, or,
if he did believe it when uttered on a privileged occasion, that he "misused the
occasion for some purpose other than that for which the privilege is accorded
by the law" or was guilty of personal spite. As to a reckless publication Lord
Diplock said:

"If he publishes untrue defamatory matter recklessly, without
considering or caring whether it be true or not, he is in this, as in
other branches of the law, treated as if he knew it to be false. But
indifference to the truth of what he publishes is not to be equated with
carelessness, impulsiveness or irrationality in arriving at a positive
belief that it is true." (page 150 B-C).

It is thus clear that if a claim is made that a statement is defamatory
it is only express malice which removes the protection of qualified privilege
in a situation where the law recognises that the duty to speak frankly is, in the
absence of malice, paramount.

Does it follow, as the Court of Appeal considered, that no one can
ever sue in negligence for a statement, written or oral and whatever the
circumstances?

Apart from the Court of Appeal's judgment the question is not without
judicial decision. Thus in Lawton v. B.O.C. Transhield Ltd. [1987] 2 All
E.R. 608, Tudor Evans J. held that an employer, who gave an employee on
leaving an unfavourable reference, owed him a duty of care in compiling and
giving the reference, but neither in the judgment, nor it seems in argument,



- 28 -

was anything said about the principle established in regard to defamation. In
Foaminol Laboratories Ltd v. British Artid Plastics Ltd [1942] 2 All E.R. 393
at page 399. Hallett J. said:

"A claim for mere loss of reputation is the proper subject of an
action for defamation, and cannot ordinarily be sustained by means of
any other form of action."

This, however, does not deal with the real issue in the present case. Of more
direct relevance are two decisions of the Court of Appeal of New Zealand in
Bell-Booth Group Ltd v. Attorney-General [1989] 3 N.Z.L.R. 148 and Balfour
v. Attorney-General [1991] 1 N.Z.L.R. 519.

In Bell-Booth the claim arose out of a television programme which
described the company's product as being ineffective for the purpose for
which it was sold. The claim was based primarily on an alleged defamation.
The claim failed when the judge found that the statements were justified.
There was. however, an alternative claim that the statements had been made
negligently, arising from a failure to disclose the result of certain trials of the
relevant product or to give the company an opportunity to comment. The trial
judge upheld this claim. Sir Robin Cooke P., giving the judgment of the
Court of Appeal setting aside the findings of a duty of care and of a breach
of that duty, said, at p. 155:

"The elaboration with which the duty has been defined, both by the
judge and by counsel for the appellant, is more suggestive of contract
than of tort. That may not be fatal. The suggested duty could
possibly be refined as simply a duty to take reasonable care to
safeguard the interests of the plaintiff. But where there is no authority
in point, as is the position, it is of course material to consider whether
it is just and reasonable that a duty of care of particular scope should
he incumbent upon the defendant."

The court concluded, at pp. 156-157:

"The common law rules, and their statutory modifications,
regarding defamation and injurious falsehood represent compromises
gradually worked out by the courts over the years, with some
legislative adjustments, between competing values. Personal reputation
and freedom to trade on the one hand have to be balanced against
freedom to speak or criticise on the other.

"In the result the present rules are in broad terms well-known and
reasonably clear. To an action for defamation truth is an absolute
defence. Privilege, where applicable, is in a few areas an absolute but
in most a qualified defence. Fair comment is a qualified defence
subject to rather different rules. In injurious falsehood, on the other
hand, the plaintiff has the burden of proving both falsity and malice.



- 29 -

These evolved compromises may not draw the lines in places that will
always be found generally acceptable in the community. Some argue,
for instance, for greater media freedom or licence; statutory changes
have been recommended but not enacted. It is a controversial area.
The important point for present purposes is that the law as to injury to
reputation and freedom of speech is a field of its own. To impose the
law of negligence upon it by accepting that there may be common law
duties of care not to publish the truth would be to introduce a
distorting element.

The duty in defamation may be described as a duty not to defame
without justification or privilege or otherwise than by way of fair
comment. The duty in injurious falsehood may be defined as a duty
not to disparage goods untruthfully and maliciously. In substance the
appellant would add to these duties a duty in such a case as this to take
care not to injure the plaintiff's reputation by true statements. All the
arguments for the appellant, though put skilfully in various ways by
counsel, reduce to that proposition. In our opinion, to accept it would
be to introduce negligence law into a field for which it was not
designed and is not appropriate.

"For these reasons in our opinion justice does not require or warrant
an importation of negligence law into this class of case. Where
remedies are needed they are already available in the form of actions
for defamation, injurious falsehood, breach of contract or breach of
confidence. Accordingly the cross-appeal must be allowed, and the
findings of duty of care and breach and the award of damages for
negligence set aside."

That decision was followed in Balfour which concerned the alleged
duty of a government department to record information about a school teacher
It is sufficient to quote from the headnote.

"(ii). The allegation that there was a special relationship of proximity
which imposed a duty to exercise care as to the accuracy of
information recorded by the Department was in part perilously close
to an allegation of defamation. Any attempt to merge that tort with
negligence was to be resisted.

(iii). Assuming that the necessary proximity existed, the question was
whether in a particular circumstance such duty of care ought to be
recognised. Whether one applied an incremental approach or a policy
approach, there was no acceptable basis for recognising such a duty."

The Court of Appeal in the present case concluded that:

"In our view the decision in Bell-Booth Group Ltd v. Attorney -
General represents the law of England. As a general proposition, in

- 30 -

our judgment the giver of a reference owes no duty of care in the tort
of negligence to the subject of the reference. His duty to the subject
is governed by and lies in the tort of defamation. If it were otherwise,
the defence of qualified privilege in an action for defamation where a
reference was given, or the necessity for the plaintiff to prove malice
in an action for malicious falsehood, would be bypassed. In effect, a
substantial section of the law regarding these two associated torts
would be emasculated. It follows that in our judgment Tudor Evans J.
was wrong in Lawton v. B.O.C. Transhield Ltd. to hold that the
defendants in that case owed a duty of care. It appears from the report
of that decision that there was no discussion during the hearing of the
relationship between the torts of negligence and defamation."

The rule in defamation has been, as the Court of Appeal said, long
established. It is, however, no less clear that the rule was established before
modern developments in the law of negligence following the decision of your
Lordships' House in Donoghue v. Stevenson [1932] AC 562. A duty of care
has been held to exist in a wide variety of situations which previously would
not have been contemplated. There is, thus, no doubt that liability may arise
for economic loss arising from a negligently made mis-statement where the
statement is given to someone who relies on it and suffers loss, though this
will usually arise where the giver of the statement knows that the person to
whom it is given or some other person will rely on it for a specific purpose.
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465: Caparo
Industries Plc. v. Dickman [1990] 2 AC 605; Ministry of Housing and
Local Government v. Sharp [1970] 2 Q.B. 223; Smith v. Eric S. Bush [a
firm] Harris v. Wyre Forest District Council [1990] 1 AC 831. These
decisions do not directly cover the present case but they are a pointer as to
what the principle should be. The position in English law being that there is
no authority of your Lordships' House directly in point, it is open to your
Lordships to decide the question as one of principle on an analysis of the tort
of defamation and of the proper approach to considering whether a duty of
care may exist when it has not been recognised before.

As to this approach Lord Keith of Kinkel said in Governors of the
Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [1985] A.C.
210, 240:

"The true question in each case is whether the particular defendant
owed to the particular plaintiff a duty of care having the scope which
is contended for, and whether he was in breach of that duty with
consequent loss to the plaintiff."

That leads to a narrowing of the issue as initially defined in the Court
of Appeal. I do not think that one can or should ask: "Is it the law that the
giver of a reference is always subject to a duty of care, actionable in



- 31 -

negligence if he breaches it?" Nor: "Is it the law that the giver of such a
reference is never subject to such a duty of care?"

On the approach indicated by Lord Keith it seems to me that the
answer to both questions has to be in the negative and the answers do not
resolve the real questions posed by him.

The proper approach is further defined in Caparo Industries Plc. v.
Dickman (supra) where the question was whether the auditors of a company
owed a duty of care towards intending purchasers of shares in a company.

Lord Bridge of Harwich said, at pp. 617-618:

"... since the Anns case a series of decisions of the Privy Council
and of your Lordships' House, notably in judgments and speeches
delivered by Lord Keith of Kinkel, have emphasised the inability of
any single general principle to provide a practical test which can be
applied to every situation to determine whether duty of care is owed
and. if so. what is its scope... What emerges is that, in addition to the
foreseeability of damage, necessary ingredients in any situation giving
rise to a duty of care are that there should exist between the party
owing the duty and the party to whom it is owed a relationship
characterised by the law as one of 'proximity' or 'neighbourhood' and
that the situation should be one in which the court considers it fair,
just and reasonable that the law should impose a duty of a given scope
upon the one party for the benefit of the other. But it is implicit in the
passages referred to that the concepts of proximity and fairness
embodied in these additional ingredients are not susceptible of any
such precise definition as would be necessary to give them untility as
practical tests, but amount in effect to little more than convenient
labels to attach to the features of different specific situations which, on
a detailed examination of all the circumstances, the law recognises
pragmatically as giving rise to a duty of care of a given scope. Whilst
recognising, of course, the importance of the underlying general
principles common to the whole field of negligence, I think the law has
now moved in the direction of attaching greater significance to the
more traditional categorisation of distinct and recognisable situations
as guides to the existence, the scope and the limits of the varied duties
of care which the law imposes. We must now, I think, recognise the
wisdom of the words of Brennan J. in the High Court of Australia in
Sutherland Shire Council v. Heyman (1985) 60 A.L.R. 1, 43-44,
where he said: 'It is preferable, in my view, that the law should
develop novel categories of negligence incrementally and by analogy
with established categories, rather than by a massive extension of a
prima facie duty of care restrained only by indefinable "considerations
which ought to negative, or to reduce or limit the scope of the duty or
the class of person to whom it is owed."'

- 32 -

Lord Jauncey of Tullichettle in the same case said :

"Once foreseeability of likely harm from a careless statement
has been established, it becomes necessary to examine the
circumstances in and the purposes for which the statement was made
in order to determine whether there are also present the further
ingredients necessary to establish the requisite proximity of relationship
between the maker of the statement and the person who has acted upon
it."

It has also to be borne in mind that in Downsview Nominees Ltd. v. First City
Corporation Ltd. [1993] AC 295, 316 Lord Templeman said:

"The House of Lords has warned against the danger of
extending the ambit of negligence so as to supplant or supplement
other torts, contractual obligations, statutory duties or equitable rules
in relation to every kind of damage including economic loss. ..."

It seems to me that on the basis of these authorities two questions
therefore arise. The first is whether the nature of the tort of defamation and
the tort of injurious falsehood is such that it would be wrong to recognise the
possibility of a duty of care in negligence for a false statement. The second
question is whether, independently of the existence of the other two torts, and
taking the tests adopted by Lord Bridge of Harwich in Caparo, a duty of care
can in any event arise in relation to the giving of a reference. If the answer
to the first is no, and to the second yes, then it remains to consider whether
in all the circumstances such a duty of care was owed in this case by an
employer to an ex-employee.

As to the first question the starting point in my view is that the
suggested claim in negligence and the torts of defamation and injurious and
malicious falsehood do not cover the same ground, as Mr. Tony Weir shows
in his note in [1993] C.L.J. 376. They are separate torts, defamation not
requiring a proof by the plaintiff that the statement was untrue (though
justification may be a defence) or that he suffered economic damage, but
being subject to defences quite different from those in negligence, such as the
defence of qualified privilege which makes it necessary to prove malice.
Malicious falsehood requires proof that the statement is false, that harm has
resulted and that there was express malice. Neither of these involves the
concept of a duty of care. The essence of a claim in defamation is that a
person's reputation has been damaged; it may or not involve the loss of a job
or economic loss. A claim that a reference has been given negligently is
essentially based on the fact, not so much that reputation has been damaged,
as that a job, or an opportunity, has been lost. A statement carelessly made
may not be defamatory - a statement that a labourer is "lame," a secretary
"very arthritic," when neither statement is true, though they were true of some
other employee mistakenly confused with the person named.

- 33 -

I do not consider that the existence of either of these two heads of
claim, defamation and injurious falsehood, a priori prevents the recognition
of a duty of care where, but for the existence of the other two torts, it would
be fair, just and reasonable to recognise it in a situation where the giver of a
reference has said or written what is untrue and where he has acted
unreasonably and carelessly in what he has said.

The policy reasons underlying the requirement that the defence of
qualified privilege is only dislodged if express malice is established do not
necessarily apply in regard to a claim in negligence. There may be other
policy reasons in particular situations which should prevail. Thus, in relation
to a reference given by an employer in respect of a former employee or a
departing employee (and assuming no contractual obligation to take care in
giving a reference) it is relevant to consider the changes which have taken
place in the employer/employee relationship, with far greater duties imposed
on the employer than in the past, whether by statute or by judicial decision,
to care for the physical, financial and even psychological welfare of the
employee.

As to the second question it is a relevant circumstance that in many
cases an employee will stand no chance of getting another job, let alone a
better job. unless he is given a reference. There is at least a moral obligation
on the employer to give it. This is not necessarily true when the claim is laid
in defamation even if on an occasion of qualified privilege. In the case of an
employee or ex-employee the damage is clearly foreseeable if a careless
reference is given; there is as obvious a proximity of relationship in this
context as can be imagined. The sole question therefore, in my view, is
whether balancing all the factors (Lord Bridge in Caparo) as to whether "the
situation should be one in which the court considers it fair, just and reasonable
that the law should impose a duty of a given scope upon the one party for the
benefit of the other."

Hedley Byrne does not decide the present case, but I find it
unacceptable that the person to whom a reference is given about an employee
X should be able to sue for negligence if he relies on the statement (and, for
example, employs X who proves to be inadequate for the job) as it appears to
be assumed that he can; but that X who is refused employment because the
recipient relies on a reference negligently given should have no recourse
unless he can prove express malice as defined by Lord Diplock in Horrocks
v. Lowe [1975] A.C. 135, 149-151.

In Balfour (supra) the Inspector who wrote the comment on the teacher
'entirely unsuitable," giving detailed reasons, concluded "check file to make
absolutely sure I have the right person then ring Mrs. Brocklesby and inform
her." It seems to me extraordinary that, if the remarks were untrue about the
named individual and written without malice (so that no claim lay in
defamation) but that the teacher lost a job as a result, there should be no
possibility for the employee to claim in negligence.

- 34 -

In Bell-Booth the New Zealand Court of Appeal emphasised that "to
impose the law of negligence upon [the law as to injury to reputation and
freedom of speech] by accepting that there may be common law duties of care
not to publish the truth would be to introduce a distorting element" (emphasis
added page 156 at line 40; see also at line 50 "true statements" and at page
157 line 15 "this class of case" which seems to have the same element of a
truthful statement in mind). This, however, in my view is not the issue. The
question is whether there should be a liability where the statements negligently
made are untrue or the opinions are unfounded even if honestly believed to be
true or honestly held. If the statements alleged to have been carelessly given
are true then the considerations adverted to by the New Zealand Court of
Appeal would seem plainly to be right. They do not, however, to my mind
apply in a situation where the statements are untrue.

I do not accept the in terrorem arguments that to allow a claim in
negligence will constitute a restriction on freedom of speech or that in the
employment sphere employers will refuse to give references or will only give
such bland or adulatory ones as is forecast. They should be and are capable
of being sufficiently robust as to express frank and honest views after taking
reasonable care both as to the factual content and as to the opinion expressed.
They will not shrink from the duty of taking reasonable care when they realise
the importance of the reference both to the recipient (to whom it is assumed
that a duty of care exists) and to the employee (to whom it is contended on
existing authority there is no such duty). They are not being asked to warrant
absolutely the accuracy of the facts or the incontrovertible validity of the
opinions expressed but to take reasonable care in compiling or giving the
reference and in verifying the information on which it is based. The courts
can be trusted to set a standard which is not higher than the law of negligence
demands. Even if it is right that the number of references given will be
reduced, the quality and value will be greater and it is by no means certain
that to have more references is more in the public interest than to have more
careful references.

Those giving such references can make it clear what are the parameters
within which the reference is given such as staling their limited acquaintance
with the individual either as to time or as to situation. This issue does not
arise in the present case but it may be that employers can make it clear to the
subject of the reference that they will only give one if he accepts that there
will be a disclaimer of liability to him and to the recipient of the reference.

Nor does it follow that if a duty of care is recognised in some
situations it must exist in all situations. It seems to me that for the purposes
of deciding whether the law recognises the duty as being fair, just and
reasonable there may be a difference between the situation where it is an
employer or ex-employer who gives a reference and the situation where a
reference is given by someone who has only a social acquaintance with the
person the subject of the reference. There may be difficult situations in
between but these will, as is the common practice, have to be worked out in



- 35 -

particular situations. That is really the purpose of the approach indicated by
Lord Keith of Kinkel which I have set out above.

In his article, to which the Court of Appeal in the present case ([1993]
1 C.R. 412, 436) referred and with which they agreed, "Misleading
References and Qualified Privilege" (1988) 104 L.Q.R. 191. 194
Dr. Andrew Demopoulos writes that to have recourse to the "typical concepts
employed in some of the leading cases on negligently caused economic and
other loss ... for the purposes of establishing a duty of care in circumstances
similar to those of Lawton v. B.O.C. Transhield Ltd. involves an extension of
the law of negligence which flies in the teeth of express statements that
anything less than malice in the making of a privileged statement cannot
engage liability."

I do not for my part consider that to recognise the existence of a duty
of care in some situations when a reference is given necessarily means that the
law of defamation has to be changed or that a substantial section of the law
relating to defamation and malicious falsehood is "emasculated" (Court of
Appeal [1993] 2 All E.R. p. 294j). They remain distinct torts. It may be that
there will be less resort to these torts because a more realistic approach on the
basis of a duty of care is adopted. If to recognise that such a duty of care
exists means that there have to be such changes - either by excluding the
defence of qualified privilege from the master/servant situation or by
withdrawing the privilege where negligence as opposed to express malice is
shown - then I would in the interests of recognising a fair, just and reasonable
result in the master/servant situation accept such change.

The precise relationship between the plaintiff and the four defendants
has led to much argument. The judge accepted that the plaintiff had a contract
with Corinium initially from 1987 as a self-employed salesman. By January
1989 he had become an Assistant Branch Manager and in April 1989 he
became Sales Director (Designate) and Office Manager, though the judge
treated this as being under a contract for services rather than of service. The
judge found that all four defendants were subject to the Lautro Rules but that
Mr. Spring had no contract with either of the two Guardian companies, the
first and fourth defendants, though when Corinium in 1988 became an
appointed representative of Guardian Assurance for the purpose of the
Financial Services Act 1986, the plaintiff as a self-employed representative of
Corinium (as the judge found) became a company representative of Guardian
Assurance, selling exclusively the insurance contracts of Guardian Assurance.
The appellant in the Court of Appeal contended that the judge was wrong to
hold that there was no contract between him and Guardian Assurance. The
Court of Appeal found it unnecessary to decide that issue.

For the purposes of the claim in negligence it does not seem to me
necessary to consider the precise contractual relationship between the plaintiff
and the four defendants. What is quite plain is that the four companies were
working very closely together in relation to Mr. Spring's activities. It is a fact



- 36 -

that the plaintiff as a company representative of Guardian Assurance for the
purpose of the Scheme, and as a person contractually bound to provide
services for Corinium as Guardian Assurance's authorised representative, was
performing services for Guardian Assurance whether as a matter of contract
or of status. The trial judge accepted that the legal framework created in this
case by the Lautro Rules consisted of five principles. He said they were:

"1. No one can sell life assurance products without authorisation
from a self-regulating organisation;

2. Gre, all its subsidiaries and all its sales consultants are bound
   by the LAUTRO Rules; and

3. Everybody knows that everybody else involved is also so
   bound;

4. A company representative can act as such for only one
   company at a time;

5. If he leaves that company he is unemployable in the industry
   without a reference which must be obtained from his former
   employers."

A member of Lautro cannot appoint a person as a company
representative unless he has, inter alia, taken up "references relating to
character and experience" (rule 3.5(1)). By rule 3.5(2) "A member who
receives an enquiry for a reference in respect of a person whom another
member is proposing to appoint shall make full and frank disclosure of all
relevant matters which are believed to be true to the other member." The
judge further found that "the prime criterion by which the plaintiff's integrity
and ethical standards would be judged would patently be the professional code
of conduct set out in schedule 2 of the Lautro Rules." He was also satisfied
that all the parties to the present case and Scottish Amicable to whom the
reference was given knew of the legal framework created by these fives
principles; they also knew of the provisions of rule 3.5.

The reference asked for by Scottish Amicable and given by Guardian
Assurance was written by a Mrs. Lee-Moore as an employee of Gre
Assurance. It was based on information from other Gre Assurance
employees, from the former Chief Executive of the Corinium companies,
from Corinium's records, from a senior sales consultant and from a member
of the compliance team of Gre Assurance. The reference given is set out in
the Court of Appeal's judgment [1993] 2 All E.R. 297. The judge was
satisfied that neither the writer of the reference nor those who gave the
information were guilty of malice. Mrs. Lee-Moore was not negligent. As
to parts of the reference the Judge said (p.49 of the transcript of his
judgment):

- 37 -

"The statement about the lapse ratio is an accurate answer to a simple
question: the statement about funding was accurate up to a point even
though perhaps it did not tell the full story; the statement that the
plaintiff had kept the best leads to himself was not justified by the
evidence.

"None of these elements, taken singly or together, would, in my
judgment have precluded Scottish Amicable from appointing the
plaintiff as its company representative in any event."

The judge found, however, that the statement in the reference about the
appellant's honesty and integrity were, even if believed to be true, given
without there being the careful and accurate assessment of his qualities to
which the plaintiff was entitled. "In my judgment, it was motivated by a
leaping to a conclusion - of dishonesty and lack of integrity - careless of the
true facts of the case."

After a review of the authorities, the learned judge concluded that on
the facts of the case a duty of care was owed to the plaintiff when the
reference was given and that that duty had been broken. The reference was
given in the name of Guardian Assurance but the judge accepted that the four
companies were so closely associated that all were to be treated as owing a
duty and as being responsible lor the reference. It was inevitable that the
appellant would not be offered a job by the other insurance companies to
whom such reference was given. In my opinion the learned judge was entitled
to find, as he did. that there was here a sufficiently approximate relationship
between the companies on whose behalf the reference was given; the damage
was clearly foreseeable: and it is fair, just and reasonable in such an
employment situation for the law to recognise a duty on the part of the giver
of the reference, and the person who within the employer's organisation
collates or provides information for the purpose of preparing the reference,
to take reasonable care that the information was obtained and passed on with
reasonable care. On this aspect of the case I think the judge was right: duty
and breach were established.

There was a further ground of appeal on the basis that even if
negligence were established it did not cause the damage alleged by the
plaintiff. The Court of Appeal in view of their decision did not consider this
argument. They said, "We comment only that we would have been reluctant
to disagree with the judge on this issue." the judge having found that there
was the necessary causation.

I think it would not be appropriate for your Lordships to decide this
issue and the matter should be remitted to the Court of Appeal for them to
reconsider it if, as I accept, the appeal on the issue of negligence otherwise
succeeds.

- 38 -

There remains the question as to where there was a breach of duty in
contract. Although the learned judge found that there was no contract
between the appellant and Guardian Assurance, he really decided the claim in
contract on the basis that no term to exercise reasonable care in the giving of
a reference could be implied. Such a term was not necessary for the business
efficacy of the contract (The Moorcock (1889) 14 PD 64 and Liverpool City
Council v. Irwin [1977] AC 239, 266). It is not necessary in this case to
decide the general question as to whether an employer has an implied duty to
give a reference, though even if there is no universal duty to do so it would
seem to me that contracts may exist when it is necessary to imply such a duty.
That question does not arise because here there was an express duty under the
Lautro Rules to give a reference, if the employer was asked by another
member of Lautro, but, more importantly a reference was in fact given. The
question is, thus, whether if a reference is given there is a duty to exercise
reasonable care in giving it.

It was known by all parties that a reference would have to be given
under paragraph 3.5(2) of the rules. As between the members or persons
subject to the Lautro Rules that requirement was to make, "full and frank
disclosure of all relevant matters which are believed to be true to the other
member or the [appointed] representative." There is no provision in that rule
that reasonable care shall be taken in the making of such disclosure and it is
not necessary to decide whether such a duty of reasonable care is to be
implied as between the members of Lautro. The terms of the obligation in
rule 3.5(2) as between members of Lautro do not exclude the possibility of a
duty of care existing in the contract between the appellant and one or other of
the companies by which he was employed. Accepting fully that the test is
"necessity" rather than "reasonableness," it seems to me that in view of the
fact that an employee could never get a job with another member or
representative without a reference and that there was an obligation on the
prospective employer to ask for one and for the former employer to give one
that there was a duty to take reasonable care in giving the reference.

There was undoubtedly a contract with Corinium as the judge found.
Whether that was a contract of service or for services for present purposes in
my view does not matter, though the title of the posts after the first
appointment suggests that it was a contract of service. In the light of the
relationship between these four companies I consider, on the judge's findings.
(a) that it was an implied term of the contract of employment between the
appellant and Corinium that Corinium would ensure that reasonable care was
taken in the group of associated companies in the compiling and giving of the
reference if it was asked for by a potential employer and (b) that Corinium
was in breach of that implied term.

The Court of Appeal did not express a view as to whether a contract
also existed with Guardian Assurance although they found the argument that
it did to be "persuasive." Since the issue of causation has to be remitted to
the Court of Appeal, I would remit this question also on the basis that if there

- 39 -

is found to be a contract with Guardian Assurance a term is to be implied into
it that reasonable care would be taken in the giving of the reference.

I would accordingly allow the appeal and remit the case to the Court
of Appeal for these two matters to be considered.

LORD WOOLF

My Lords.

I have had the advantage of reading the speech of Lord Keith of
Kinkel. It is my misfortune not to agree with his conclusion as to the
outcome of this appeal. However. I gratefully adopt his description of the
facts giving rise to this appeal and. like Lord Keith, I rely on the careful
description of the facts which is contained in the judgment of the Court of
Appeal given by Glidewell L.J. ([1993] 2 All E.R. 273).

I am therefore able, from the outset, to focus on the important issues
of principle to which this appeal gives rise. They are:

1. Whether a person who suffers loss as a result of being the subject of
   an inaccurate reference is ever able to recover damages for that loss in an
   action for negligence or whether he is confined to seeking damages for
   defamation or injurious falsehood. (The difference in practice between an
   action for negligence and an action for defamation or injurious falsehood is
   that in an action based on defamation or injurious falsehood it will be
   necessary to establish that the person responsible for giving the reference was
   motivated by malice, while in the case of an action based on negligence it will
   he sufficient to establish that it was due to a lack of care in ascertaining the
   facts on which the reference is based on the part of the person giving the
   reference or those for whom he is responsible.)

2. Whether, in the appropriate circumstances, in a contract for service or
   services a term can be implied requiring an employer to exercise due care in
   the preparation of a reference relating to a person who is, or has been, in his
   service.

I do not consider it is of any significance whether Mr. Spring was
employed by or acting under a contract for services with Corinium. Certain
of the documents suggest he was self-employed and the judge held he was
acting under a contract for service. However, this is wholly inconsistent with
the nature of his role with the company, which was that of a sales director
(designate) and office manager. However, whether he was a servant or self-
employed, his activities in selling insurance policies would be as a company
representative, subject to the Lautro Rules; and the person who was



- 40 -

responsible for compiling the reference. Mrs. Debra Lee-Moore, had
delegated to others the task of collecting the information on which the
reference was based. As a matter of convenience, I will treat him as an
employee, but it should be appreciated that my views would be the same if he
was acting under a contract for services.

In order to determine these issues, it is not necessary to distinguish
between the position of the two Guardian companies (the first and fourth
respondents) or the two Corinium companies (the second and third
respondents). Nor is it necessary, on my view of the outcome of this appeal,
to make any distinction between the different relations which Mr. Spring had
with the different respondents since all the respondents at the material time
were part of a single group of companies and can be regarded as acting on
behalf of each other.

There is also an issue of causation as to Mr. Spring's alleged loss.
However, as Mr. Eady Q.C. contends on behalf of the respondents, this is
more appropriately determined by the Court of Appeal, by whom it has not,
as yet, been considered.

On 12 November 1989 when the reference was given. Mr. Spring was
no longer engaged by Corinium. However, as his relationship with all the
respondents arose out of his previous engagement with Corinium, the primary
source of any liability is contractual rather than tortuous. This is a point made
forcefully by Lord Bridge of Harwich in Scally and Others v. Southern Health
and Social Services Board and Another [1992] 1 A.C. 294. at p. 302-304.
Furthermore, in the employment field, there has always been a considerable
overlap between claims based on an alleged breach of duty in contract and in
tort, as is stated in Charlesworth and Percy on Negligence (8th ed.. para. 10-
06):

The relationship itself of master and servant is necessarily based upon
contract but it has been the subject of some controversy in the past
whether the common law duties, regarding the servant's safety, are
contractual duties or lie in tort. Because of the closeness of the
relationship between master and servant, as well as its very nature,
there really can be no doubt today that a duty of care does arise under
the law of tort, as expressed in Donoghue v. Stevenson [1932] A.C.
562. In Davie v. New Merton Board Mills Ltd., Viscount Simonds
considered that, although liability primarily was to be regarded as
having arisen in tort, it could also be based on implied terms contained
in the contract of employment."

That statement was made in relation to the "servant's safety." It is equally
applicable to duties owed in respect of a servant's welfare, which is what this
appeal concerns. Nonetheless, in the circumstances of this case, it is more
convenient to consider the position in negligence first, which is the order

- 41 -

adopted in the courts below. I therefore turn now to consider the possible
cause of action in negligence.

The claim based on negligence

The claim here is in respect of economic loss. Before there can be a
duty owed in respect of economic loss, it is now clearly established that it is
important to be able to show foreseeability of that loss, coupled with the
necessary degree of proximity between the parties. It is also necessary to
establish that in all the circumstances it is fair, just and reasonable for a duty
to be imposed in respect of the economic loss. Deferring for the moment
consideration of the consequences of there being possible alternative causes
of action of defamation and injurious falsehood and the related public policy
considerations, there can really be no dispute that Mr. Spring can establish the
necessary foreseeability and proximity.

It is clearly foreseeable that if you respond to a request for a reference
by giving a reference which is inaccurate, the subject of the reference may be
caused financial loss. Where the reference is required by a prospective
employer, the loss will frequently result from a failure to obtain that
employment. The prospect of such loss is considerably increased if the
reference relates to an applicant, like Mr. Spring, for a position as a company
representative in an industry which is subject to a rule which is in equivalent
terms to rule 3.5 of the Lautro Rules. That rule provides:

"(1) A person shall not be appointed as a company representative of
a member unless the member has first taken reasonable steps
to satisfy itself that he is of good character and of the requisite
aptitude and competence, and those steps shall . . . include . .
. taking up of references relating to character and experience.

"(2) A member which receives an inquiry for a reference in respect
of a person whom another member or appointed representative
is proposing to appoint shall make full and frank disclosure of
all relevant matters which are believed to be true to the other
member or the representative."

His Honour Judge Lever, at first instance, accepted Mr. Spring's
counsel's description of the reference as being "the kiss of death" to Mr.
Spring's career in insurance. This was the inevitable consequence of the
reference. The reference related to a time and was based upon events which
occurred while Mr. Spring was working for Corinium and was engaged in
selling policies issued by Guardian. The relationship between Mr. Spring and
the respondents could hardly be closer. Subject to what I have to say
hereafter, it also appears to be uncontroversial that if an employer, or former
employer, by his failure to make proper inquiries, causes loss to an employee,
it is fair, just and reasonable that he should be under an obligation to
compensate that employee for the consequences. This is the position if an



- 42 -

employer injures his employee physically by failing to exercise reasonable
care for his safety and I find it impossible to justify taking a different view
where an employer, by giving an inaccurate reference about his employee,
deprives an employee, possibly for a considerable period, of the means of
earning his livelihood. The consequences of the employer's carelessness can
be as great in the long term as causing the employee a serious injury.

However, while the requirements which I have been considering are
of importance, that importance should not be exaggerated for the reasons
which were elegantly explained by Lord Oliver of Aylmerton in Carparo
Industries Plc. v. Dickman [1990] 2 AC 605, 632-633, when he said:

"The extension of the concept of negligence since the decision of this
House in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964]
A.C. 465 to cover cases of pure economic loss not resulting from
physical damage has given rise to a considerable and as yet unsolved
difficulty of definition. The opportunities for the infliction of
pecuniary loss from the imperfect performance of everyday tasks upon
the proper performance of which people rely for regulating their affairs
are illimitable and the effects are far-reaching. A defective bottle of
ginger beer may injure a single consumer but the damage stops there.
A single statement may be repeated endlessly with or without the
permission of its author and may be relied upon in a different way by
many different people. Thus the postulate of a simple duty to avoid
any harm that is, with hindsight, reasonably capable of being foreseen
becomes untenable without the imposition of some intelligible limits to
keep the law of negligence within the bounds of common sense and
practicality. Those limits have been found by the requirement of what
has been called a 'relationship of proximity' between plaintiff and
defendant and by the imposition of a further requirement that the
attachment of liability for harm which has occurred be 'just and
reasonable.' But although the cases in which the courts have imposed
or withheld liability are capable of an approximate categorisation, one
looks in vain for some common denominator by which the existence
of the essential relationship can be tested. Indeed it is difficult to
resist a conclusion that what have been treated as three separate
requirements are, at least in most cases, in fact merely facets of the
same thing, for in some cases the degree of foreseeability is such that
it is from that alone that the requisite proximity can be deduced, whilst
in others the absence of that essential relationship can most rationally
be attributed simply to the court's view that it would not be fair and
reasonable to hold the defendant responsible. 'Proximity' is. no doubt,
a convenient expression so long as it is realised that it is no more than
a label which embraces not a definable concept but merely a
description of circumstances from which, pragmatically, the courts
conclude that a duty of care exists.

- 43 -

"There are, of course, cases where, in any ordinary meaning
of the words, a relationship of proximity (in the literal sense of
'closeness') exists but where the law, whilst recognising the fact of the
relationship, nevertheless denies a remedy to the injured party on the
ground of public policy. Rondel v. Worsley [1969] 1 AC 191 was
such a case, as was Hill v. Chief Constable of West Yorkshire [1989]
A.C. 53, so far as concerns the alternative ground that decision.
But such cases do nothing to assist in the identification of those
features from which the law will deduce the essential relationship on
which liability depends and, for my part, I think that it has to be
recognised that to search for any single formula which will serve as a
general test of liability is to pursue a will-o'-the-wisp. The fact is that
once one discards, as it is now clear that one must, the concept of
foreseeability of harm as the single exclusive test - even a prima facie
test - of the existence of the duty of care, the attempt to state some
general principle which will determine liability in an infinite variety of
circumstances serves not to clarify the law but merely to bedevil its
development in a way which corresponds with practicality and common
sense." (at p. 632)

Lord Oliver of Aylmerton added, at pp. 635-636:

"The damage which may be occasioned by the spoken or
written word is not inherent. It lies always in the reliance by
somebody upon the accuracy of that which the word communicates and
the loss or damage consequential upon that person having adopted a
course of action upon the faith of it. In general, it may be said that
when any serious statement, whether it takes the form of a statement
of fact or of advice, is published or communicated, it is foreseeable
that the person who reads or receives it is likely to accept it as
accurate and to act accordingly. It is equally foreseeable that if it is
inaccurate in a material particular the recipient who acts upon it may
suffer a detriment which, if the statement had been accurate, he would
not have undergone. But it is now clear that mere foreseeability is not
of itself sufficient to ground liability unless by reason of the
circumstances it itself constitutes also the element of proximity (as in
the case of direct physical damage) or unless it is accompanied by
other circumstances from which that element may be deduced. One
must, however, be careful about seeking to find any general principle
which will serve as a touchstone for all cases, for even within the
limited category of what for the sake of convenience, I may refer to
as 'the negligent statement cases,' circumstances may differ infinitely
and, in a swiftly developed field of law. there can be no necessary
assumption that those features which have served in one case to create
the relationship between the plaintiff and the defendant on which
liability depends will necessarily be determinative of liability in the
different circumstances of another case."

- 44 -

I therefore recognise that in a situation, such as this, where their
Lordships are being asked to make a measured extension to the ambit of the
law of negligence, the requirements to which both Lord Oliver and I have
referred must be kept in proper perspective. I also agree and accept that it is
preferable to define as precisely as possible the relevant circumstances before
deciding whether a duty exists. Nonetheless, that the required degree of
foreseeability and proximity undoubtedly exists in this case is of considerable
significance in deciding the proper outcome of this appeal.

In Hedley Byrne, their Lordships extended the circumstances giving
rise to a duty of care so as to protect the recipient from an inaccurate
reference in those situations where the relationship between the person giving
and receiving the reference is " 'equivalent to contract,' that is, where there
is an assumption of responsibility in circumstances in which, but for the
absence of consideration, there would be a contract." In such a situation it is
necessary to distinguish "between social and professional relationships and
between those which are of a contractual character and those which are not."
It may also "be material to consider whether the adviser is acting purely out
of good nature or whether he getting his reward in some indirect form." (Per
Lord Devlin [1964] A.C. at p. 529) Applying that guidance to the different
situation of the relationship between the person giving and the person who is
the subject of the reference, it is immediately clear that a distinction can be
drawn between cases where the subject of the reference is an employee (I use
that term hereafter to include a person engaged on a contract for services as
well as a contract of service) or an ex-employee and where the relationship is
social and has never been contractual. In the latter situation all that the person
who is the subject of the reference may be able to rely on is the fact that the
referee gave the reference. That I can well understand may not be considered
sufficient to create the required degree of proximity. The proximity would be
closer to that in Hedley Byrne, if the reference had been given by a purely
social acquaintance at the request of the subject of the reference. While the
request may or may not be sufficient to create the required proximity it can
still be distinguished from the present class of case. Here the relationship is
of a different order because there is or has been a contract of employment or
services. Of course the period which elapses between the end of the
engagement and the giving of the reference is capable of reducing the degree
of proximity.

In addition, the relationship is one where the employer should, as I
have already indicated, appreciate that the terms of any reference which he
gives could materially affect the ability of the subject of the reference to find
alternative employment. Furthermore, in a contemporary employment context
it is appropriate to regard the employer as obtaining an indirect benefit from
giving a reference. Employers in industry, commerce and the professions are
all dependent on the reciprocity which exists among employers as to the
giving of references on prospective recruits. Without that reciprocity
recruitment of staff would be more difficult. It would also directly affect an
employer's ability to recruit staff if it became known that he was not prepared



- 45-

to assist those he has previously engaged by giving them references.
Employees are unlikely to regard as attractive employment at the end of which
they would find themselves without a reference.

The duty imposed by the Lautro Rules is not for the protection of
employees. It is for the protection of the public. An employee cannot
therefore rely on the rules directly. However, they nonetheless demonstrate
the importance now attached in the insurance industry to references being
given and obtained. To be of value they need to be full, frank and. by
implication, accurate references.

Finally, no difficulty is created by the fact that before the reference
was given the employment had come to an end. Mr. Spring was dismissed
on 26 July 1989 and the reference which has resulted in these proceedings was
the consequence of his seeking an appointment as a representative almost
immediately thereafter on 2 August 1989. The reference was sent on 21
November 1989 and, as Judge Lever said, "the inevitable happened." Mr.
Spring was rejected first by Scottish Amicable and then by two other
insurance companies. This all occurred within a reasonable time of the
employment ending.

I therefore now turn to examine the two factors which make the issues
in this case difficult to resolve. The first of those factors is the existence of
the alternative causes of action in defamation and injurious falsehood which
are available to a person in Mr. Spring's position who believes he has been
caused damage by an inaccurate reference. (I will treat both those alternative
causes of action under the heading of defamation since it is their common
characteristic that to succeed a plaintiff must prove malice which creates the
difficulty.) The second factor is closely related to the first. It is the public-
policy consequences which would follow from there being a remedy in
negligence.

The Defamation Issue

There would be no purpose in extending the tort of negligence to
protect the subject of an inaccurate reference if he was already adequately
protected by the law of defamation. However, because of the defence of
qualified privilege, before an action for defamation can succeed (or. for that
matter, an action for injurious falsehood) it is necessary to establish malice.
In my judgment the result of this requirement is that an action for defamation
provides a wholly inadequate remedy for an employee who is caused damage
by a reference which due to negligence is inaccurate. This is because it places
a wholly disproportionate burden on the employee. Malice is extremely
difficult to establish. This is demonstrated by the facts of this case.
Mr Spring was able to establish that one of his colleagues, who played a part
in compiling the information on which the reference was based, had lied about
interviewing him, but this was still insufficient to prove malice. Without an
action for negligence the employee may, therefore, be left with no practical

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prospect of redress, even though the reference may have permanently
prevented him from obtaining employment in his chosen vocation.

If that the law provides a remedy for references which are inaccurate
due to carelessness this would be beneficial. It would encourage the adoption
of appropriate standards when preparing references. This would be an
important advantage as frequently an employee will be ignorant that it is
because of the terms of an inaccurate reference, of the contents of which he
is unaware, that he is not offered fresh employment.

The availability of a remedy without having to prove malice will not
open the floodgates. In cases where the employee discovers the existence of
the inaccurate reference, he will have a remedy if, but only if, he can
establish, instead of malice, that the reason for the inaccuracy is the default
of the employer, in the sense that he has been careless. To make an employer
liable for an inaccurate reference, but only if he is careless, is, I would
suggest, wholly fair. It would balance the respective interests of the employer
and employee. It would amount to a development of the law of negligence
which accords with the principles which should control its development. It
would, in addition, avoid a rather unattractive situation continuing of a
recipient of a reference, but not the subject of a reference, being able to bring
an action for negligence. It would also recognise that while both in
negligence and defamation it is the untrue statement which causes the damage,
there is a fundamental difference between the torts. An action for defamation
is founded upon the inaccurate terms of the reference itself. An action for
negligence is based on the lack of care of the author of the reference.

Notwithstanding the distinction between the two causes of action, it
was the different principles which govern an action for damages for
defamation which the Court of Appeal found to be fatal to the attempt of the
appellant to establish that the respondents owed him a duty of care in respect
of the accuracy of the contents of a reference. Glidewell L.J. expressed the
Court of Appeal's approach by saying:

"As a general proposition, in our judgment the giver of a reference
owes no duty of care in the tort of negligence to the subject of the
reference. His duty to the subject is governed by and lies in the tort
of defamation. If it were otherwise, the defence of qualified privilege
in an action for defamation where a reference was given, or the
necessity for the plaintiff to prove malice in an action for malicious
falsehood, would be bypassed. In effect, a substantial section of the
law regarding these two associated torts would be emasculated."

In coming to this conclusion the Court of Appeal were greatly
influenced by the decision of the Court of Appeal of New Zealand in Bell-
Booth Group Ltd. v. Attorney-General [1989] 3 N.Z.L.R. 148. That case did
not involve the giving of a reference. It concerned a broadcast of a
programme which was highly critical of the effectiveness of the principal

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product marketed by the plaintiffs business and therefore of the plaintiff. At
first instance the claim in defamation failed because a plea of justification
succeeded. However, notwithstanding the truth of the alleged libel the
plaintiff succeeded in its action against the Ministry of Agriculture and
Fisheries on an alternative claim for negligence because of the Ministry's
failure to disclose all the results of trials which it had conducted and because
the Ministry had published its findings in an unreasonable and unfair manner.
The Court of Appeal allowed the appeal and decided that the Ministry was not
liable.

The facts of the present case can be distinguished from those in the
Bell-Booth case and I accept that the outcome of that case was correct. In
particular, I agree with what was said in that case about it being inappropriate
that there should be an action for damages for the publication of a true
statement. The importance of the case arises, however, because of certain
broad statements of principle which Sir Robin Cooke P. made in giving the
judgment of the court which were followed by the Court of Appeal in this
case. One of those statements, that is. that an action for negligence would act
as a fetter on tree speech. I will deal with later. Now I have to address the
following passage of the judgment of Sir Robin Cooke P.:

"As tar at least as the law of torts is concerned, the common
understanding is almost certainly as expressed by Hallett J. in
Foaminal Laboratories Ltd. v. British Artid Plastics Ltd. [1941] 2 All
F.R 393. 399: 'a claim for mere loss of reputation is the proper
subject of an action for defamation, and cannot ordinarily be sustained
by means of any other form of action.'

"The closest reported cases which counsel for the appellant
were able to find were two. First. Thurston v. Charles (1905) 21
T.L.R. 659. where Walton J. gave damages for the tort of conversion
on the basis that the conversion of a letter had resulted in damage to
the plaintiffs reputation. (See further Gatley on Libel and Slander.
8th ed. (1981), para. 895, pp. 392-393.) That case deals with the
scope of damages for a tort that has undoubtedly been committed and
does not touch the issue of judicial creation of a duty of care.

"Second. Lawton v. B.O.C. Transhield Ltd. [1987] 2 All E.R.
608. where Tudor Evans J. held that a former employer owed to its
former employee a duty of care in giving a reference. That action
failed, however, because the reference was honest, accurate and not
negligently written. The bearing of defamation law is not discussed in
the judgment and the case is a difficult one: see notes by Mr. Philip
Lewis (the editor of Gatley) in (1988) 17 I.L.J. (Recent Cases) 108
and Mr. Andrew Demopoulos in (1988) 104 L.Q.R. 191. The latter
writer is of the opinion, citing Horrocks v. Lowe [1975] A.C. 135, that
Lawton 'involves an extension of the law of negligence which flies in



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the teeth of express statements that anything less than malice in the
making of a privileged statement cannot engage liability.' Similar
comments could be made in cases of justification or fair comment.

"The common law rules, and their statutory modifications,
regarding defamation and injurious falsehood represent compromises
gradually worked out by the courts over the years, with some
legislative adjustments, between competing values. Personal reputation
and freedom to trade on the one hand have to be balanced against
freedom to speak or criticise on the other.

"In the result the present rules are in broad terms well-known
and reasonably clear. To an action for defamation truth is an absolute
defence. Privilege, where applicable, is in a few areas an absolute but
in most a qualified defence. Fair comment is a qualified defence
subject to rather different rules. In injurious falsehood, on the other
hand, the plaintiff has the burden of proving both falsity and malice.
These evolved compromises may not draw the lines in places that will
always be found generally acceptable in the community. Some argue,
for instance, for greater media freedom or licence: statutory changes
have been recommended but not enacted. It is a controversial area.
The important point for present purposes is that the law as to injury to
reputation and freedom of speech is a field of its own To impose the
law of negligence upon it by accepting that there may be common law
duties of care not to publish the truth would be to introduce a
distorting element.

"It was argued for the appellant, inter alia, that neither
defamation nor slander of goods requires a background duty or breach;
and if injury does or may involve those separate elements, there is no
ground for depriving the plaintiff of a separate cause of action. That
is really no more than a semantic point. The duty in defamation may
he described as a duty not to defame without justification or privilege
or otherwise than by way of fair comment. The duty in injurious
falsehood may be defined as a duty not to disparage goods untruthfully
and maliciously. In substance the appellant would add to these duties
a duty in such a case as this to take care not to injure the plaintiffs
reputation by true statements. All the arguments for the appellant,
though put skilfully in various ways by counsel, reduce to that
proposition. In our opinion, to accept it would be to introduce
negligence law into a field for which it was not designed and is not
appropriate." (Emphasis added.)

Since the Court of Appeal's decision in this case, two articles, in addition to
those referred to by the President in the passage from his judgment which I
have cited, have been published. Like the earlier articles I find them of
considerable benefit. They are respectively by Tony Weir ([1993] C.L.J. 376)
and Thomas Allen ((1994) 57 M.L.R. 111). While this is a gross over-



- 49 -

simplification of their careful consideration of the subject, it can be said in
general that the earlier articles were in favour of the decisions in both Courts
of Appeal and the more recent articles are more favourable to the appellant.
The academic honours are therefore about even. However, I consider that a
possible explanation for the difference of approach is that the later articles
were dealing primarily with the facts of this case while the first two were
dealing with the earlier authorities.

The principal point which the appellant has to overcome in respect of
the reasoning of the President is the fact that to allow an action for negligence
would be to introduce a "distorting element" into the law of defamation, that
is, into the area of law which deals with unjustified injury to reputation, which
is an area of the law which up to now defamation has had to itself. I can well
understand why the President should have made the comment that he did about
the case which was before him where there was publication on television, but
in the case of a reference there is unlikely to be other than limited publication.
If there is any re-publication this is unlikely to give rise to an action for
negligence since the recipient of the reference will neither owe a duty of care
to the subject of the reference or. normally, be guilty of any lack of care in
re-publishing the reference. The extent of any intrusion into the area of the
law covered by defamation will therefore be circumscribed. The case is also
very different in that the contents of the publication were true and I
unreservedly accept that there can be no action for negligence if the statement
is true.

In the later cases of South Pacific Manufacturing Co. Ltd. v. New
Zealand Security Consultants & Investigations Ltd. and Mortensen v. Laing
[1992] 2 N.Z.L.R. 282, the President again considered the relationship
between an action for defamation and negligence. These cases involved
actions for negligence against fire-loss investigators, whose reports to the
insurers had resulted in the rejection of claims by the plaintiffs whose
premises were damaged by fire. To give an action for negligence in that
situation the President considered would mean "by a side-wind the law of
defamation would be overthrown" (at p. 302). Again, I would not quarrel
with the decision to strike out these claims because as the President indicated
"the report of the investigators [is] made pursuant to their contractual duty to
the insurer. ... I would therefore have reservations as to whether there
would be any duty owed to the plaintiffs in those cases. There is not the same
proximity between the parties as there is in the case of a reference given by
an employer concerning an employee. I therefore do not give the same weight
to the President's comments as I would if they had been made in a context
which was the same as or more analogous to the context which is being
considered here. The President's approach is, however, a reminder of the
importance of not readily extending the law of negligence into an area of law
already covered by another tort. It would not, however, be right to treat his
remarks as preventing the law of negligence in any circumstances overlapping
the law of defamation. To do so would be to inject an undesirable rigidity
into the law. Instead, in a case where an action in negligence would



- 50 -

otherwise be available, the approach should be to inquire whether justice
requires that the additional cause of action in negligence should be available.
In the Bell-Booth case the President said, at p. 517:

"For these reasons in our opinion justice does not require or warrant
an importation of negligence law into this class of case. Where
remedies are needed they are already available in the form of action
for defamation, injurious falsehood, breach of contract or breach of
confidence."

This statement is appropriately limited to the "class of case" with
which the Court of Appeal in New Zealand was then concerned. As I have
already indicated, I regard this case as being in a different class. The
distinction between the class of cases is also important in relation to the
comment of Hallett J. in Foaminol Laboratories Ltd. v. British Artid Plastics
Ltd. [1941] 2 All E.R. 393, 399: "A claim for mere loss of reputation is the
proper subject of an action for defamation, and cannot ordinarily be sustained
by means of any other form of action . . . ," which the President cited. This
appeal is not concerned with a claim for mere loss of reputation. What
concerns Mr. Spring is his loss of an opportunity to obtain employment due
to the negligence, as the judge found, in the preparation of the reference. I
am afraid I do not accept the logic of the argument that to have an action for
negligence will undermine the law of defamation. If this appeal is allowed,
this will leave the law of defamation in exactly the same state as it was
previously. Mr. Spring would not have succeeded in an action for
defamation. Negligence has always been an irrelevant consideration (I am not
referring to quantum of damages) and it will remain irrelevant in an action for
defamation. In the present context the two causes of action are not primarily
directed at the same mischief although they, admittedly, overlap. I have
already indicated that an action for negligence is concerned with the care
exercised in ascertaining the facts and defamation with the truth of the
contents of what is published.

This is also demonstrated by what would be the respective approaches
to damages in an action based on defamation and negligence. In the case of
defamation the primary head, but not the only head, of damages is as to the
loss of reputation. In an action for negligence, on the other hand, the subject
of the reference will be primarily interested in and largely limited to his
economic loss. To prevent the law of negligence applying to the present
situation, when it is otherwise fair and just that it should apply, by the
imposition of a requirement to prove malice in effect amounts to transferring
a defence which has been developed for one tort to another tort to which it has
never been previously applied when it is inappropriate to do so.

The historic development of the two actions has been quite separate.
Just as it has never been a requirement of an action for defamation to show
that the defamatory statement was made negligently, so, if the circumstances
establish that it fair and just that a duty of care should exist, the person who

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suffers harm in consequence of a breach of that duty should not have to
establish malice, merely because that would be a requirement in an action for
defamation. I can see no justification for erecting a fence around the whole
of the field to which defamation can apply and treating any other tort, which
can beneficially from the point of view of justice enter into part of that field,
as a trespasser if it does so. The conclusive answer in the present context to
applying the approach of the President is that it will, here, result in real
injustice. It would mean that a plaintiff who would otherwise be entitled to
succeed in an action for negligence would go away empty-handed because he
could not succeed in an action for defamation. This cannot be a desirable
result.

Public Policy

It would alter the situation, if it would be contrary to some identifiable
principle of public policy for there to be a liability for negligence imposed on
the giver of a negligent reference. If there were to be such a principle it
would be an unusual one since, unless Hedley Byrne was wrongly decided, it
would apparently apply to the negligent provider of a bad but not a good
reference.

The Courts of Appeal in New Zealand and in this country both
considered that the necessary justification for excluding liability for negligence
could be found in the defence of qualified privilege. In support of the
importance of that defence Glidewell L.J. cited the powerful language of Lord
Diplock in Horrocks v. Lowe [1975] A.C. 135, 150, and I would not seek to
qualify that language in a case where a plaintiff is not in a position to establish
that subject to questions of public policy the defendant would be liable to him
for breach of a duty of care. When the defence of qualified privilege was
established such a duty of care was not in contemplation. As Mr. Livesey
Q.C. forcefully argued, it by no means follows that so far as references are
concerned the same view should be taken of public policy as was taken when
Whiteley v. Adams (1863) 15 C.B.(N.S.) 392 was decided.

It is obviously in accord with public policy that references should be
full and frank. It is also in accord with public policy that they should not be
based upon careless investigations. In the case of references for positions of
responsibility this is particularly important. That is confirmed by the Lautro
Rules. It has also to be accepted that some referees may be more timid in
giving full and frank references if they feel there is a risk of their being found
liable for negligence. However, there is already such a possible liability in
respect of a negligently favourable reference, so all that needs to be
considered is the possible adverse consequences of a negligently unfavourable
reference. For reasons to which I have already referred I consider there is
little practical likelihood of no reference at all being given nowadays.
Certainly this could not happen in the case of appointments to which the
Lautro Rules apply.

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However, the real issue is not whether there would be any adverse
effect on the giving of references. Rather the issue is whether the adverse
effects when balanced against the benefits which would flow from giving the
subject a right of action sufficiently outweigh the benefits to justify depriving
the subject of a remedy unless he can establish malice. In considering this
issue it is necessary to take into account contemporary practices in the field
of employment; the fact that nowadays most employment is conditional upon
a reference being provided. There are also the restrictions on unfair dismissal
which mean that an employee is ordinarily not capable of being dismissed
except after being told of what is alleged against him and after he has been
given an opportunity of giving an explanation. This is also the widespread
practice, especially in the Civil Service, of having annual reports which the
subject is entitled to see - which practice, apparently even in an ongoing
employment situation, is not defeated by any lack of candour. There is now
an openness in employment relationships which did not exist even a few years
ago.

There is also the advantage, already referred to. of it being appreciated
that you cannot give a reference which could cause immense harm to its
subject without exercising reasonable care.

A further consideration mentioned by the President is the undesirability
of infringing freedom of speech. This is a consideration as least as important
to the common law as it is under the international coventions by which it is
also protected. Here it is necessary to bear in mind that, as is the case with
all fundamental freedoms, the protection is qualified and not absolute.
Freedom of speech does not necessarily entitle the speaker to make a
statement without exercising reasonable care. Freedom of speech has to be
balanced against the equally well recognised freedom both at common law and
under the conventions that an individual should not be deprived of the
opportunity of earning his livelihood in his chosen occupation. A
development of the law which does no more than protect an employee from
being deprived of employment as a result of a negligent reference would fully
justify any limited intrusion on freedom of speech.

When I weigh these considerations I find that public policy comes
down firmly in favour of not depriving an employee of a remedy to recover
the damages to which he would otherwise be entitled as a result of being a
victim of a negligent reference.

Under this head there remains to be considered whether it is preferable
for the law in this area to be developed by Parliament or by the courts. It is
an area of law where previous decisions of the courts have already clearly
identified the tests which should be applied in deciding whether the law should
be developed. It is also an area where a case-by-case approach is particularly
appropriate and so as happened in Hedley Byrne it appears to me desirable for
the courts to provide the remedy which I believe is clearly required.

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The Claim Based on the Breach of Contract

As I indicated earlier it is possible to approach this appeal as being
primarily one involving a contractual issue. This was the preferred approach
of Lord Bridge of Harwich in Scally v. Southern Health and Social Services
Board [1992] 1 A.C. 294, in a speech, with which other members of the
House agreed, from which I obtained singular assistance. In that case. Lord
Bridge stated the obverse of the proposition that I have previously advanced
when he said "if a duty of the kind in question was not inherent in the
contractual relationship, I do not see how it could possibly be derived from
the tort of negligence" (at p. 303). In Scally it was decided that where a
contract of employment negotiated between employers and a representative
body contained a particular term conferring on an employee a valuable
contingent right to a pension of the benefit of which he could not be expected
to be aware unless the term was brought to his attention, there was an implied
obligation on the employer to take reasonable steps to publicise that term.
Accordingly, when the employer failed to notify the employee of his pension
rights, which were therefore lost, he was entitled to recover damages for
breach of contract in respect of that loss.

In the course of his speech. Lord Bridge drew a distinction "between
the search for an implied term necessary to give business efficacy to a
particular contract and the search, based on wider considerations, for a term
which the law will imply as a necessary incident of a definable category' of
contractual relationship." He also referred to the difficulty which would arise
if the implied term "must necessarily be too wide in its ambit to be acceptable
as of general application". He indicated that he believed that "this difficulty
is surmounted if the category of contractual relationship in which the
implication will arise is defined with sufficient precision." (at p. 307)

Lord Bridge then proceeded to define the situation on the basis of the
relationship of employer and employee where the circumstances he specified
existed. As 1 understand the Scally case, it recognises that, just as in the
earlier authorities the courts were prepared to imply by necessary implication
.1 term imposing a duty on an employer to exercise due care for the physical
well being of his employees, so in the appropriate circumstances would the
court imply a like duty as to his economic well being, the duty as to his
economic well being giving rise to an action for damages if it is breached.

Here, it is also possible to specify circumstances which would enable
a term to be implied. The circumstances are:

(i) The existence of the contract of employment or services.

(ii) The fact that the contract relates to an engagement of a class
where it is the normal practice to require a reference from a
previous employer before employment is offered.

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(iii) The fact that the employee cannot be expected to enter into that
class of employment except on the basis that his employer will,
on the request of another prospective employer made not later
than a reasonable time after the termination of a former
employment, provide a full and frank reference as to the
employee.

This being the nature of the engagement, it is necessary to imply a
term into the contract that the employer would, during the continuance of the
engagement or within a reasonable time thereafter, provide a reference at the
request of a prospective employer which was based on facts revealed after
making those reasonably careful inquiries which, in the circumstances, a
reasonable employer would make.

In this case Mr. Spring's employers were in breach of that implied
term. Although the person actually writing the reference was not negligent,
she delegated the task of ascertaining the facts to others, and as is the case
with the employer's duty to exercise reasonable care for the safety of his
employee, the employer cannot escape liability by so delegating his
responsibility.

It only remains for me to underline what I anticipate is already clear,
that is. that the views which I have expressed are confined to the class of case
with which I am now dealing. Some of the statements I have made I
appreciate could be applied to analogous situations. However. I do not intend
to express any view either way as to what will be the position in those
analogous situations. I believe that they are better decided when, and if, a
particular case comes before the court. This approach can lead to uncertainty
which is undesirable. However, that undesirable consequence is in my view
preferable to trying to anticipate the position in relation to other situations
which are not the subject matter of this appeal.

1 would allow this appeal and remit the case to the Court of Appeal so
that that court can deal with the question of causation.

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