Spring (A.P.) v Guardian Assurance Plc and Others

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Keith of Kinkel,Lord Goff of Chieveley,Lord Lowry,Lord Slynn of Hadley,Lord Woolf
Judgment Date07 July 1994
Docket NumberParliamentary Archives, HL/PO/JU/18/254

[1994] UKHL J0707-1

House of Lords

Lord Keith of Kinkel

Lord Goff of Chieveley

Lord Lowry

Lord Slynn of Hadley

Lord Woolfs

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

Spring (A.P.)
(Appellant)
and
Guardian Assurance plc and others
(Respondents)
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.

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.

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] A.C. 465 such liability 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] A.C. 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."

"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 A.C. 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...

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