The Negligence Liability of Statutory Bodies: Dutton Reinterpreted

AuthorNicholas Seddon
Date01 September 1978
DOI10.1177/0067205X7800900303
Published date01 September 1978
Subject MatterArticle
THE
NEGLIGENCE LIABILITY
OF
STATUTORY
BODIES: DUTTON REINTERPRETED
By
NICHOLAS
SEDDON*
The
relationship
between
ultra vires and negligence in astatutory
body
has
become
important
as aresult
of
recent House
of
Lords
decisions.
In
this article this relationship is
examined
and
found
to
contain
some
serious difficulties. Asolution to these difficulties is
proposed.
INTRODUCTION
This article
is
concerned with the impact of the House of Lords
decision in
Anns
v.
Merton
London
Borough
CounciP upon the law of
negligence and upon that aspect of administrative law which deals with
the negligence liability of statutory bodies.
As
is
well known, Hedley
Byrne
&Co.
Ltd
v.
Heller &Partners
LttP
was concerned with two relatively unexplored areas in the law of torts.
The defendant's conduct complained of was anegligent statement. The
harm suffered by the plaintiff was economic loss.
It
was with the former
that the House of Lords was primarily concerned.
In
their speeches the
Law Lords focussed on the necessary limits on liability which must be
imposed in relation to statements for the very good policy reason stated
in that oft-quoted passage of Cardozo C.J. in Ultramares Corporation
v.
ToucheS that, unless atest of proximity narrower than the neighbour
principle
is
applied in cases of negligent statements, aplaintiff would be
exposed to "liability in an indeterminate amount for an indeterminate
time to an indeterminate class".4 Or, as Barwick C.J. put it in
Mutual
Life
&Citizens' Assurance Co.
Ltd
v.
Evatt:li "The necessary relation-
ship
...
must needs be more specific."6
Very little was said in the Hedley
Byrne
decision about the limits to
recovery which may need to be imposed because the harm claimed for
was economic rather than physical
loss.1
There was no need to define
*LL.B. (Hons.) (Melbourne), B.Phil. (Oxon.); Lecturer, Law School, Australian
National University.
1[1977] 2W.L.R. 1024.
2[1964] A.C. 465.
3(1931) 174 N.E. 441.
4Id.444.
0(1968) 122 C.L.R. 556.
6Id.566.
'1
Although their Lordships concentrated
on
defining the special relationship
that must exist as aprerequisite to liability for negligent statements, the fact that
the claim was for economic loss must have
had
its influence.
It
has
not
been said
that
there needs to be aspecial relationship in relation to negligent statements
leading to physical loss: Clayton
v.
Woodman &Son (Builders)
Ltd
[1962] 2
Q.B. 533.
326
1978] The Negligence Liability
of
Statutory Bodies 327
the limits which should be imposed arising out of the type of harm
suffered (economic loss) because adequate safeguards had already been
laid down due to the nature of the conduct complained of (negligent
statement).
Therefore it fell to later decisions to explore the tests of proximity
that are appropriate to claims for economic loss. The little that was said
inHedley Byrne, and indeed in the dissenting judgment of Lord Denning
in Candler
v.
Crane, Christmas &Co.8in relation to economic loss can
be
summarised in the words of Lord Hodson.
"It
is
difficult to see why
liability
as
such should depend on the nature of the damage."9 This
reasoning may be superficially attractive but it
is
clear that economic
loss
as
atype of harm for which the law of torts provides compensation
does need to be treated differently for reasons which are very similar to
those expressed by Cardozo C.J. in relation to the need for caution
when dealing with liability for statements.
It
is
also clear that different
types of economic loss need to be treated differently.
In
England
ther\e
have been what might be termed schizophrenic
developments in relation to economic loss. On the one hand, the cases
of
Dutton
v.
Bogn,or Regis Urban District Council
10
and Ministry
of
Housing
v.
Sharp11
show aboldness which has caused alarm in some
quarters.
12
On the other hand, cases like S.C.M. (United Kingdom)
Ltd
v.
W.!. Whittall &Son LttP3and Spartan Steel &Alloys
Ltd
v.
Martin
&Co. (Contractors) LttP4have shown acautious approach. Curiously,
Lord Denning M.R. has played a part on both sides.
In
Australia, the New South Wales Supreme Court in Hull
v.
Canter-
buryMunicipal CounciPs and G.J. Knight Holdings Pty
Ltd
v.
Warringah
Shire
Counci[16
has held in each case alocal council liable for the losses
suffered by adeveloper who obtained development consent which was
subsequently found to be invalid. The High Court, too, has not been
reluctant to explore the boundaries of negligence liability for economic
loss in
ealtex
Oil (Australia) Pty
Ltd
v.
The Dredge HWiliemstad".17
The House of Lords has now joined this adventure in the
Anns
case.
One commentator, in looking forward to the
Anns
case in the House of
Lords, wrote that it "may live to rank
as
perhaps the most important
8[1951] 2K.B. 164, 184.
9[1964] A.C. 465, 509.
10
[1972] 1Q.B. 373.
11
[1970] 2Q.B. 223.
12
Craig, "Negligent Misstatements, Negligent Acts and Economic Loss" (1976)
92 L.Q.R. 213, 223.
--
13
[1971] 1Q.B. 337.
14
[1973] Q.B. 27.
15
[1974] 1N.S.W.L.R. 300.
16
[1975] 2N.S.W.L.R. 796.
17 (1976)
11
A.L.R. 227.

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