BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

Scottish Sheriff Court Decisions


You are here: BAILII >> Databases >> Scottish Sheriff Court Decisions >> McLaughlan & Anor v. Edwards [2004] ScotSC 31 (28 April 2004)
URL: http://www.bailii.org/scot/cases/ScotSC/2004/31.html
Cite as: [2004] ScotSC 31

[New search] [Context] [Printable version] [Help]


SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT ELGIN

A318/01

   

JUDGEMENT

of

SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC

   

in the cause

   

WILLIAM McLAUGHLAN and MRS ELIZABETH HENDERSON McDONALD or McLAUGHLAN

   

Pursuers and Respondents

   

against

   

KEITH EDWARDS

   

Defender and Appellant

 

 

 

Act: Mr Craig Sandison, advocate, instructed by The Cruickshank Law Practice, Elgin

Alt: Mrs Sarah Wolffe, advocate, instructed by Simpson & Marwick, Edinburgh

 

Elgin: 28th April 2004

The sheriff principal, having resumed consideration of the cause, refuses the appeal and adheres to the principal interlocutor of the sheriff dated 23rd December 2003 under deletion of the words on page 7: "REPELS the first plea-in-law for the Defender"; recalls the subsidiary interlocutor of the sheriff also dated 23rd December 2003 in terms of which he continued the cause to the procedure roll of 20th January 2004 for consideration of further procedure; reserves meantime the question of the expenses of the appeal and appoints parties to be heard thereon at Elgin Sheriff Court on Wednesday 19th May 2004 at 9.30 am.

 

 

 

 

 

 

Note

[1]      In this case the pursuers are husband and wife. In May 1996 they entered into a contract with A. Stewart MacKay (Developments) Limited ("the sellers") for the purchase of a plot of ground at Braes of Allachie, Aberlour, and the construction thereon of a house. This had been designed by the defender who is an architect. After the house had been built various defects came to light which caused the pursuers to take action, and obtain decree, against the sellers. But they were unable to obtain any payment from them in satisfaction of this decree. They therefore raised the present action against the defender, and in terms of crave 1 they seek decree against him for payment of the sum of £145,000. Alternatively, in terms of crave 2 they seek decree against the defender for payment of the sum of £119,074.65.

[2]     
There was no contract between the pursuers and the defender. Both the pursuers' claims against him are therefore founded in delict. In articles 4 and 9 of the condescendence the pursuers aver, in short, that the defender assumed a responsibility and duty to them to exercise the skill and care of an ordinarily competent architect in the performance of his architectural services, and in particular to use such a degree of skill and care to ensure that the pursuers' house was built so as to be structurally sound, dry and habitable. The pursuers aver that they relied upon him to exercise such skill and care and that he failed in his duty to them with the result that they sustained a loss of £145,000, being the sum sued for in crave 1.

[3]     
During and after the construction of the house the defender issued certain certificates in reliance upon which the pursuers aver that they made various payments to the sellers. In article 10 of the condescendence the pursuers aver that the defender owed a duty to them to take reasonable care to ensure that the statements contained in the certificates were true and accurate. It is said that he was aware that the pursuers (either directly or through their law agent) would be issued with, and would rely upon the terms of, the certificates. It is further said that these were not true or accurate and, in short, that had he exercised reasonable care he would not have issued the certificates as he did. As a result of his breach of duty the pursuers aver that they have sustained a loss of £119,074.65, being the sum sued for in crave 2.

[4]     
The action in due course proceeded to a preliminary proof before answer on the limited issues (1) whether, in the context of crave 1, the defender was under a duty to the pursuers to take reasonable care in the provision of architectural services in connection with the design of the house and (2) whether, in the context of crave 2, he was under a duty to the pursuers to take reasonable care to ensure that the statements contained in the certificates which he issued were true and accurate. After a proof on 19th and 20th August and 27th November 2003, the sheriff on 23rd December 2003 issued an interlocutor in terms of which, in short, he found in fact and in law that the defender owed both these duties to the pursuers and, under reservation of the defender's first plea-in-law (which is a general plea to the relevancy and specification of the pursuers' averments), allowed parties a proof before answer of their respective averments in respect of the remainder of the pursuers' case. It is this interlocutor which is the subject of the present appeal.

[5]     
It would be normal at this point to examine the sheriff's findings in fact. But these are I think more easily understood against the background of the legal principles which in my opinion fall to be applied in cases of this kind and about which, despite the apparent complexity of the submissions in particular of counsel for the defender, it appeared that there was at the end of the day a substantial measure of agreement between the parties' respective counsel.

[6]     
Counsel for the pursuers was at pains to point out that both branches of their claim were founded on the proposition that the defender had assumed a responsibility to them to exercise care to avoid causing them economic loss. His primary submission in support of their first head of claim was that the present case was not fairly distinguishable in any material respect from the leading Scottish authority on the existence of a duty of care in the context of economic loss, namely Junior Books Limited v Veitchi Co Limited 1982 SC (HL) 244. In approaching the matter in this way it respectfully seemed to me that counsel was putting the proverbial cart before the horse. I say this since it very soon became apparent that counsel founded upon this case, not as a child (so to speak) of the now displaced decision of the House of Lords in Anns v London Borough of Merton 1978 AC 728, but as an example of the application of what has come to be known as the extended principle of liability derived from the decision of the House of Lords in Hedley Byrne and Co Limited v Heller & Partners Limited 1964 AC 465. But among the cases cited in argument this extended principle first found full expression in Henderson v Merrett Syndicates Limited 1995 2 AC 145 which, as the citation indicates, was only decided thirteen years or so after Junior Books. Moreover, the pursuers' second head of claim was founded upon what is now thought of as the Hedley Byrne principle of liability in its original or narrower form.

[7]      In other words, both branches of the pursuers' case were in counsel's submission based upon Hedley Byrne and in this situation, rather than concentrate upon Junior Books, I think that it may be helpful to start by considering the decision in Hedley Byrne itself and thereafter to look at how the principle established in that case of liability to make good pure economic loss has been developed, firstly, in its narrower form and, secondly, in its extended form.

[8]     
In Hedley Byrne the appellants were advertising agents who had placed substantial forward advertising orders for a company on terms by which they, the appellants, were personally liable for the cost of the orders. They asked their bankers to enquire into the company's financial stability and their bankers made enquiries of the respondents, who were the company's bankers. The respondents gave favourable references but stipulated that these were "without responsibility". In reliance on these references the appellants placed orders which resulted in a loss of £17,000. They brought an action against the respondents for damages for negligence and it was held that a negligent, though honest, misrepresentation, spoken or written, may give rise to an action for damages for financial loss caused thereby, apart from any contract or fiduciary relationship, since the law will imply a duty of care when a party seeking information from a party possessed of a special skill trusts him to exercise due care, and that party knew or ought to have known that reliance was being placed on his skill and judgement.

[9]     
At page 483 Lord Reid touched upon what has come to be thought of as the key concept in this field, namely the assumption of responsibility by a defender when he stated:

So it seems to me that there is good sense behind our present law that in general an innocent but negligent misrepresentation gives no cause of action. There must be something more than the mere misstatement. I therefore turn to the authorities to see what more is required. The most natural requirement would be that expressly or by implication from the circumstances the speaker or writer has undertaken some responsibility, and that appears to me not to conflict with any authority which is binding on this House.

At the top of page 484 Lord Reid indicated that there could be a duty of care in making a statement of fact or opinion which was independent of contract, and at pages 485/6 he quoted a passage from the judgement of Lord Haldane in Robinson v National Bank of Scotland Limited 1916 SC (HL) 154. At page 486 Lord Reid himself continued:

This passage makes it clear that Lord Haldane did not think that a duty to take care must be limited to cases of fiduciary relationship in the narrow sense of relationships which had been recognised by the Court of Chancery as being of a fiduciary character. He speaks of other special relationships, and I can see no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him. I say "ought to have known" because in questions of negligence we now apply the objective standard of what the reasonable man would have done.

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

[10]      At pages 502/3 Lord Morris of Borth-y-Gest formulated the duty as follows:

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 judgement or skill or upon his ability to make careful enquiry, 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.

[11]      At page 514 Lord Hodson agreed with Lord Morris of Borth-y-Gest in the passage just quoted, and at pages 528/9 Lord Devlin stated:

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 (1914 AC 932) 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. Where there is an express undertaking, an express warranty as distinct from mere representation, there can be little difficulty. The difficulty arises in discerning those cases in which the undertaking is to be implied. In this respect the absence of consideration is not irrelevant. Payment for information or advice is very good evidence that it is being relied upon and that the informer or adviser knows that it is. Where there is no consideration, it will be necessary to exercise greater care in distinguishing between social and professional relationships and between those which are of a contractual character and those which are not. It may often be material to consider whether the adviser is acting purely out of good nature or whether he is getting his reward in some indirect form.

At pages 529/30 Lord Devlin continued:

I do not think it is possible to formulate with exactitude all the conditions under which the law will in a specific case imply a voluntary undertaking any more than it is possible to formulate those in which the law will imply a contract. But insofar as your Lordships describe the circumstances in which an implication will ordinarily be drawn, I am prepared to adopt any one of your Lordship's statements as showing the general rule; and I pay the same respect to the statement by Denning L J in his dissenting judgement in Candler v Crane, Christmas & Co (1952 2 KB 164) about the circumstances in which he says a duty to use care in making a statement exists.

[12]      Finally, Lord Pearce commented at page 539:

If an innocent misrepresentation is made between parties in a fiduciary relationship it may, on that ground, give a right to claim damages for negligence. There is also, in my opinion, a duty of care created by special relationships which, though not fiduciary, give rise to an assumption that care as well as honesty is demanded.

[13]      The decision in Hedley Byrne was among a number of cases considered in some detail by the House of Lords in Caparo Industries plc v Dickman 1990 2 AC 605. For present purposes I do not think that it is necessary to examine the facts of this case. A good deal of the discussion in the speeches of their Lordships revolved around the question whether or not it was possible to state a single general principle which might be applied in all circumstances in cases of delict or tort to determine the existence of a duty of care. But, alongside this general discussion, consideration was given to the circumstances in which the narrow Hedley Byrne principle might be held to apply. At page 619 Lord Bridge of Harwich, after referring to Hedley Byrne, Candler v Crane, Christmas & Co and certain other authorities, observed:

Consistently with the traditional approach it is to these authorities and to subsequent decisions directly relevant to this relevantly narrow corner of the field that we should look to determine the essential characteristics of a situation giving rise, independently of any contractual or fiduciary relationship, to a duty of care owed by one party to another to ensure that the accuracy of any statement which the one party makes and on which the other party may foreseeably rely to his economic detriment.

Then at pages 620/1 Lord Bridge stated:

The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it. The situation is entirely different where a statement is put into more or less general circulation and may foreseeably be relied on by strangers to the maker of the statement for any one of a variety of different purposes which the maker of the statement has no specific reason to anticipate ........ Hence, looking only at the circumstances of these decided cases where a duty of care in respect of negligent statements has been held to exist, I should expect to find that the "limit or control mechanism ....... imposed upon the liability of a wrongdoer towards those who have suffered economic damage in consequence of his negligence" rested in the necessity to prove, in this category of the tort of negligence, as an essential ingredient of the "proximity" between the plaintiff and the defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of a identifiable class, specifically in connection with a particular transaction or transactions of a particular kind ...... and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter upon that transaction or upon a transaction of that kind.

[14]      Then at page 638 Lord Oliver of Aylmerton observed:

What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of the statement or giver of advice ("the adviser") and the recipient who acts in reliance upon it ("the advisee") may typically be held to exist where (1) advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive, but merely that the actual decision in the case does not warrant any broader propositions.

[15]      I turn now to the extended Hedley Byrne principle. In Henderson v Merrett Syndicates Limited the plaintiffs were underwriting members ("Names") at Lloyd's. They brought proceedings against the defendant underwriting agents, who were members' agents, managing agents or combined agents, in which they alleged that the defendants were negligent in their conduct of the Names' underwriting affairs. At the material time each Name entered into one or more underwriting agency agreements with either a members' agent or a combined agent governing the relationship between the Name and the members' agent, or between the Name and the combined agent in the capacity of members' agent. If the Name became a member of a syndicate which was managed by the combined agent, the agreement also governed the relationship between the Name and the combined agent acting in the capacity of managing agent. In such a case the Name was known as a direct Name. If the Name became a member of a syndicate which was managed by another managing agent, the Name's underwriting agent (whether or not a combined agent) entered into a sub-agency agreement appointing the managing agent as sub-agent to act in relation to the Name. In such a case the Name was known as an indirect Name. One of the principal issues in the case was whether or not the managing agents owed a duty of care in tort to the plaintiffs. This issue was focused in the leading speech of Lord Goff of Chieveley at page 177 where he stated:

The main argument advanced by the managing agents against the existence of a duty of care in tort was that the imposition of such a duty upon them was inconsistent with the contractual relationship between the parties. In the case of direct Names, where there was a direct contract between the Names and the managing agents, the argument was that the contract legislated exclusively for the relationship between the parties, and that a parallel duty of care in tort was therefore excluded by the contract. In the case of indirect Names, reliance was placed on the fact that there had been brought into existence a contractual chain, between Name and members' agent, and between members' agent and managing agent; and it was said that, by structuring their contractual relationship in this way, the indirect Names and the managing agents had deliberately excluded any direct responsibility, including any tortious duty of care, to the indirect Names by the managing agents.

[16]     
Lord Goff proceeded to examine the decision in Hedley Byrne, and in particular to quote certain passages from the speeches of Lord Morris of Borth-y-Gest and Lord Devlin (parts of which I have myself quoted at paragraphs [10] and [11] above). At pages 180/2 his Lordship continued:

From these statements, and from their application in Hedley Byrne, we can derive some understanding of the breadth of the principle underlying the case. We can see that it rests upon a relationship between the parties, which may be general or specific to the particular transaction, and which may or may not be contractual in nature. All of their Lordships spoke in terms of one party having assumed or undertaken a responsibility towards the other. On this point, Lord Devlin spoke in particularly clear terms in both passages from his speech which I have quoted above. Further, Lord Morris spoke of that party being possessed of a "special skill" which he undertakes to "apply for the assistance of another who relies upon such skill." But the facts of Hedley Byrne itself, which was concerned with the liability of a banker to the recipient for negligence in the provision of a reference gratuitously supplied, show that the concept of a "special skill" must be understood broadly, certainly broadly enough to include special knowledge. Again, though Hedley Byrne was concerned with the provision of information and advice, the example given by Lord Devlin of the relationship between solicitor and client, and his and Lord Morris's statements of principle, show that the principle extends beyond the provision of information and advice to include the performance of other services. It follows, of course, that although, in the case of the provision of information and advice, reliance upon it by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect), nevertheless there may be other circumstances in which there will be the necessary reliance to give rise to the application of the principle. In particular, as cases concerned with solicitor and client demonstrate, where the plaintiff entrusts the defendant with the conduct of his affairs, in general or in particular, he may be held to have relied on the defendant to exercise due skill and care in such conduct. In subsequent cases concerned with liability under the Hedley Byrne principle in respect of negligent misstatements, the question has frequently arisen whether the plaintiff falls within the category of persons to whom the maker of the statement owes a duty of care. In seeking to contain that category of persons within reasonable bounds, there has been some tendency on the part of the courts to criticise the concept of "assumption of responsibility" as being "unlikely to be a helpful or realistic test in most cases" (see Smith v. Eric S. Bush [1990] 1 AC 831, pp. 864-865, per Lord Griffiths; and see also Caparo Industries Plc. v. Dickman, p. 628, per Lord Roskill). However, at least in cases such as the present, in which the same problem does not arise, there seems to be no reason why recourse should not be had to the concept, which appears after all to have been adopted, in one form or another, by all of their Lordships in Hedley Byrne (see, e.g., Lord Reid, at pp. 483, 486 and 487; Lord Morris (with whom Lord Hodson agreed), at p. 494; Lord Devlin, at pp. 529 and 531; and Lord Pearce at p. 538). Furthermore, especially in a context concerned with a liability which may arise under a contract or in a situation "equivalent to contract," it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff: see Caparo Industries Plc. v. Dickman, p. 637, per Lord Oliver of Aylmerton. In addition, the concept provides its own explanation why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services. It follows that, once the case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss - a point which is, I consider, of some importance in the present case. The concept indicates too that in some circumstances, for example where the undertaking to furnish the relevant service is given on an informal occasion, there may be no assumption of responsibility; and likewise that an assumption of responsibility may be negatived by an appropriate disclaimer. I wish to add in parenthesis that, as Oliver J. recognised in Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp [1979] Ch. 384, p. 416F-G (a case concerned with concurrent liability of solicitors in tort and contract, to which I will have to refer in a moment), an assumption of responsibility by, for example, a professional man may give rise to liability in respect of negligent omissions as much as negligent acts of commission, as for example when a solicitor assumes responsibility for business on behalf of his client and omits to take a certain step, such as the service of a document, which falls within the responsibility so assumed by him.


4. The application of the principle to managing agents at Lloyd's

Since it has been submitted on behalf of the managing agents that no liability should attach to them in negligence in the present case because the only damage suffered by the Names consists of pure economic loss, the question arises whether the principle in Hedley Byrne is capable of applying in the case of underwriting agents at Lloyd's who are managing agents. Like Saville J. and the Court of Appeal, I have no difficulty in concluding that the principle is indeed capable of such application. The principle has been expressly applied to a number of different categories of person who perform services of a professional or quasi-professional nature, such as bankers (in Hedley Byrne itself); solicitors (as foreshadowed by Lord Devlin in Hedley Byrne, and as held in the leading case of Midland Bank Trust Co. Ltd v. Hett, Stubbs & Kemp, and other cases in which that authority had been followed); surveyors and valuers (as in Smith v. Eric S. Bush); and accountants (as in Caparo Industries Plc. v. Dickman). Another category of persons to whom the principle has been applied, and on which particular reliance was placed by the Names in the courts below and in argument before your Lordships, is insurance brokers. As Phillips J. pointed out in Youell v. Bland Welch & Co. Ltd. (No. 2) [1990] 2 Lloyd's Rep. 431, p. 459, it has been accepted, since before 1964, that an insurance broker owes a duty of care in negligence towards his client, whether the broker is bound by contract or not. Furthermore, in Punjab National Bank v. de Boinville [1992] 1 Lloyd's Rep. 7 it was held by the Court of Appeal, affirming the decision of Hobhouse J., that a duty of care was owed by an insurance broker not only to his client but also to a specific person whom he knew was to become an assignee of the policy. For my part I can see no reason why a duty of care should not likewise be owed by managing agents at Lloyd's to a Name who is a member of a syndicate under the management of the agents. Indeed, as Saville J. and the Court of Appeal both thought, the relationship between Name and managing agent appears to provide a classic example of the type of relationship to which the principle in Hedley Byrne applies. In so saying, I put on one side the question of the impact, if any, upon the relationship of the contractual context in which it is set. But, that apart, there is in my opinion plainly an assumption of responsibility in the relevant sense by the managing agents towards the Names in their syndicates. The managing agents have accepted the Names as members of a syndicate under their management. They obviously hold themselves out as possessing a special expertise to advise the Names on the suitability of risks to be underwritten; and on the circumstances in which, and the extent to which, reinsurance should be taken out and claims should be settled. The Names, as the managing agents well knew, placed implicit reliance on that expertise, in that they gave authority to the managing agents to bind them to contracts of insurance and reinsurance and to the settlement of claims. I can see no escape from the conclusion that, in these circumstances, prima facie a duty of care is owed in tort by the managing agents to such Names. To me, it does not matter if one proceeds by way of analogy from the categories of relationship already recognised as falling within the principle in Hedley Byrne or by a straight application of the principle stated in the Hedley Byrne case itself. On either basis the conclusion is, in my opinion, clear. Furthermore, since the duty rests on the principle in Hedley Byrne, no problem arises from the fact that the loss suffered by the Names is pure economic loss.

[17]      Lord Goff went on to consider the impact, if any, of the contractual context upon the liability in tort of the managing agents. At pages 186/7 he referred again to the decision in Hedley Byrne and continued:

I have already expressed the opinion that the fundamental importance of this case rests in the establishment of the principle upon which liability may arise in tortious negligence in respect of services (including advice) which are rendered for another, gratuitously or otherwise, but are negligently performed - viz., an assumption of responsibility coupled with reliance by the plaintiff which, in all the circumstances, makes it appropriate that a remedy in law should be available for such negligence. For immediate purposes, the relevance of the principle lies in the fact that, as a matter of logic, it is capable of application not only where the services are rendered gratuitously, but also where they are rendered under a contract.

At page 193 his Lordship said:

Yet the law of tort is the general law, out of which the parties can, if they wish, contract; and, as Oliver J demonstrated (in Midland Bank Trust Co Limited v Hett, Stubbs & Kemp), the same assumption of responsibility may, and frequently does, occur in a contractual context. Approached as a matter of principle, therefore, it is right to attribute to that assumption of responsibility, together with its concomitant reliance, a tortious liability, and then to enquire whether or not that liability is excluded by the contract because the latter is inconsistent with it. This is the reasoning which Oliver J, as I understand it, found implicit, where not explicit in the speeches in Hedley Byrne. With this conclusion I respectfully agree. But even if I am wrong in this, I am of the opinion that this House should now, if necessary, develop the principle of assumption of responsibility as stated in Hedley Byrne to its logical conclusion so as to make it clear that a tortious duty of care may arise not only in cases where the relevant services are rendered gratuitously, but also where they are rendered under a contract.

Lord Goff concluded his consideration of this aspect of the case at page 194 where he stated:

But, for present purposes more important, in the instant case liability can, and in my opinion, should, be founded squarely on the principle established in Hedley Byrne itself, from which it follows that an assumption of responsibility coupled with the concomitant reliance may give rise to a tortious duty of care irrespective of whether there is a contractual relationship between the parties, and in consequence, unless his contract precludes him from doing so, the plaintiff, who has available to him concurrent remedies in contract and tort, may choose that remedy which appears to him to be the most advantageous.

[18]     
Lords Keith of Kinkel, Mustill and Nolan all agreed with Lord Goff. So too did Lord Browne-Wilkinson who, in addition, commented briefly on the relationship between the claim based on liability for negligence and the alternative claim advanced by the Names founded on breach of fiduciary duty. At page 205 he stated:

The liability of a fiduciary for the negligent transaction of his duties is not a separate head of liability but the paradigm of the general duty to act with care imposed by law on those who take it upon themselves to act or advise others. Although the historical development of the rules of law and equity have, in the past, caused different labels to be stuck on different manifestations of the duty, in truth the duty of care imposed on bailees, carriers, trustees, directors, agents and others is the same duty: it arises from the circumstances in which the defendants were acting, not from their status or description. It is the fact that they have all assumed responsibility for the property or affairs of others which renders them liable for the careless performance of what they have undertaken to do, not the description of the trade or position which they hold. In my judgement, the duties which the managing agents have assumed to undertake in managing the insurance business of the Names brings them clearly into the category of those who are liable, whether fiduciaries or not, for any lack of care in the conduct of that management.

[19]     
The decision in Henderson was the subject of comment in Williams v Natural Life Health Foods Limited 1998 1 WLR 830 which was another decision of the House of Lords. The leading speech was given by Lord Steyn, and the remainder of their Lordships simply agreed with him. As Lord Steyn observed at page 832, the principal question in the appeal was whether a director of a franchisor company was personally liable to franchisees for loss which they suffered as a result of negligent advice given to them by the franchisor company. At page 834 Lord Steyn stated:

In this case the identification the applicable principles is straightforward. It is clear, and accepted by counsel on both sides, that the governing principles are stated in the leading speech of Lord Goff of Chieveley in Henderson v Merrett Syndicates Limited. First, in Henderson's case it was settled that the assumption of responsibility principle enunciated in (Hedley Byrne) is not confined to statements but may apply to any assumption of responsibility for the provision of services. The extended Hedley Byrne principle is the rationalisation or technique adopted by English law to provide a remedy for the recovery of damages in respect of economic loss caused by the negligent performance of services. Secondly, it was established that once a case is identified as falling within the extended Hedley Byrne principle, there is no need to embark on any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss: p. 181. Thirdly, and applying Hedley Byrne, it was made clear that

"reliance upon [the assumption of responsibility] by the other party will be necessary to establish a course of action (because otherwise the negligence will have no causative effect) ......." (p.180).

Fourthly, it was held that the existence of a contractual duty of care between the parties does not preclude the concurrence of a tort duty in the same respect.

[20]      At pages 835/7 Lord Steyn observed that the practical application of the extended Hedley Byrne principle was not agreed in the Williams case and, before turning to the facts of the case, he commented:

Two matters require consideration. First, there is the approach to be adopted as to what may in law amount to an assumption of risk. This point was elucidated in Henderson's case by Lord Goff of Chieveley. He observed, at p.181:

"especially in a context concerned with a liability which may arise under a contract or in a situation 'equivalent to contract', it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff ......."

The touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff. Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene. Subject to this qualification the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff .......

That brings me to reliance by the plaintiff upon the assumption of personal responsibility. If reliance is not proved, it is not established that the assumption of personal responsibility had causative effect ...... The test is not simply reliance in fact. The test is whether the plaintiff could reasonably rely on an assumption of personal responsibility by the individual who performed the services on behalf of the company ........ Returning to the particular question before the House it is important to make clear that a director of a contracting company may only be held liable where it is established by evidence that he assumed personal liability and that there was the necessary reliance.

[21]     
In the course of his discussion in Caparo of the question whether a single general principle could be stated to provide a practical test which could be applied to every situation to determine whether a duty of care is owed Lord Bridge referred (1) to the threefold test of (a) foreseeability, (b) proximity and (c) fairness, justice and reasonableness, and also (2) to the so-called incremental approach to the question whether or not a duty of care is owed: see pp. 617/8. As I understood her submissions, counsel for the defender maintained that one or other or both of these two approaches fell to be applied in the present case. But in my opinion it is clear from what was said in Henderson and Williams that the correct approach to be applied to both the pursuers' claims in this case is to ask whether there was an assumption of responsibility by the defender coupled with a concomitant reliance by the pursuers.

[22]     
For the sake of completeness at this point, I should mention too that counsel for the defender submitted that there was no duty on the defender under the extended Hedley Byrne principle to take care to avoid causing the pursuers pure economic loss, and she referred here to the speech of Lord Keith of Kinkel in Department of the Environment v Thomas Bates and Son Ltd 1991 1 AC 499 at p.519. In my opinion this submission cannot stand in the face of the decisions in Henderson and Williams.

[23]     
I turn now to the sheriff's findings in fact. Those numbered 1 and 2 introduce the parties and explain that the defender is an architect who professes skill and expertise in the provision of architectural services in relation to the erection of dwellinghouses. In those numbered 3 and 4 it is found that in early 1995 the pursuers became aware of a small housing project then in the course of development at Aberlour. They obtained a leaflet about this from the developer's law agents. This leaflet showed outline plans for the houses to be built and noted that "amendments may be made in conjunction with the developer who is a local business man and the development architect, both of whom can frequently be found on site". Findings in fact 5 to 16 inclusive were of particular importance in relation to the pursuers' first head of claim, and were as follows:

  1. The developer was Stewart MacKay, a local farmer, or a company associated with him. The development architect was the Defender.
  2. Some months after obtaining the leaflet, in January 1996 the Pursuers contacted Stewart MacKay and visited him at his home to discuss the possibility of having a dwellinghouse built for their occupation on Plot 3 of the development.
  3. The Pursuers informed Mr MacKay when they met him that they would like to have some changes made to the outline plan which existed for the house proposed for that site. Mr MacKay made an appointment for the Pursuers to see the Defender in the connection.
  4. The Pursuers visited the Defender at his offices shortly after having been referred to him by Mr MacKay. The parties discussed changes which the Pursuers wanted to the outline plan which existed for the house proposed on Plot 3 of the development.
  5. In particular, at their first meeting the parties discussed changes to the formation of the kitchen and living areas of the house, the location of the back door, and the layout of the electrical socket system. The Defender was aware from his first contact with the Pursuers that the Pursuers intended to occupy any house built for them on the plot as their own home.
  6. The Pursuers met the Defender for further discussions on three or four occasions and the Second Pursuer in particular had several further telephone conversations with him, before missives were entered into for their purchase of the site and for the erection of the house.
  7. The discussions concerned alterations to the frontage of the house and the setting back of the garage under a balcony in order to make the proposed house resemble a particular existing house in Elgin. They also concerned reductions in the overall size of the house, alterations to form a patio door instead of a proposed window, changes in window sizes and locations, alterations to the formation of interior walls, the omission of a proposed toilet in the garage area, the repositioning of the gas boiler, the balcony screed finish, and various internal features. The Defender gave effect to the matters discussed on the plans for the proposed house.
  8. During the same period, the manufacturers of the timber frame for the proposed house, Scotframe Timber Engineers Limited of Inverurie, suggested to the Pursuers that there should be a step down from the house to the balcony, and the Pursuers reported that suggestion to the Defender, who gave effect to it on the plans.
  9. The Pursuers reasonably regarded the Defender as the designer of the house and as the person in ultimate charge of all tasks involving technical, design or building issues which arose or which might arise in connection with the proposed building project.
  10. The Pursuers placed reliance on the exercise by the Defender of the degree of skill and care appropriate to the provision of architectural services in the performance of those tasks.
  11. It was obvious to the Defender that he was being relied upon by the Pursuers in that regard. At no time did the Defender refuse to advise or assist the Pursuers in relation to the architectural services required for the completion of the project. At no time did he advise the Pursuers to seek further or alternative assistance with those issues.
  12. The Defender accepted responsibility to the Pursuers for the exercise of skill and care appropriate to the provision of the architectural services required for completion of the project.

[24]     
Findings in fact 17 to 21 inclusive describe the contractual arrangements between the pursuers and the sellers. In May 1996 the pursuers entered into a contract with the sellers for the purchase of plot 3 at the development and the construction thereon of the house which the defender had designed in accordance with the pre-existing outline plan as altered as a result of the discussions between the parties. The contract was constituted by a letter of offer dated 23rd April 1996, two letters of qualified acceptance dated 26th April and 8th May 1996 respectively and a final letter of acceptance dated 17th May 1996. The offer incorporated a letter of specifications dated 9th February 1996 which, in addition to specifying certain electrical and other details to be incorporated in the house, included a sentence which read: "Also included in the price is a one year guarantee on all products and a ten year guarantee on any structural defects". The agreed purchase price was £93,081. The pursuers had evidently paid an initial deposit of £1,000 before the offer was made, and the balance of the price of £92,081 was payable by four instalments as follows, (a) £25,000 to be payable five days after the conclusion of the missives, (b) £25,000 to be payable within seven days of the foundations having been certified by the defender as being properly laid, (c) £25,000 to be payable within seven days of the dwellinghouse being certified by the defender as being wind and watertight, and (d) the final instalment of £16,081 to be payable on the date of entry which was to be not later than fourteen days after the property had been certified as complete by the Local Authority Buildings Inspector in connection with the issue of a Completion Certificate. Clause 12 of the original offer provided that an Architect's Supervision Certificate in standard RIBA terms would be provided by the defender and would be for the benefit of the pursuers and would be delivered at settlement. Clause 18 provided: "Upon completion of the house the sellers will assign to the purchasers any rights they may have in terms of building contracts or sub-contracts. In addition, the sellers will assign to the purchasers any rights which they may have in terms of any agreement/contract with the supervising Architect".

[25]     
Findings in fact 22 to 25 inclusive were as follows:

  1. The Pursuers would not have entered into any contract for the purchase of the site and erection of the house which did not contain clauses requiring appropriate certification of the execution of the building project in the way described.
  2. The Pursuers were told by Mr MacKay that he had a contract with the Defender and that a ten year structural guarantee offered in (the letter of specifications dated 9th February 1996) was being made available "through" the Defender. The Pursuers mentioned this to the Defender and he did not deny that statement.
  3. The Pursuers were also advised by Mr MacKay and the Defender that, of the total sums payable by them to A. Stewart MacKay (Developments) Limited, £1,000 was being paid on to the Defender for his work in altering the outline plans to their requirements. Such a payment was made to the Defender.
  4. The Pursuers continued to have contact with the Defender while the house was in the course of being built in the Summer of 1996. They discussed alterations to the back stair of the house, building levels, the omission of a wall at the rear, the heating system, a central vacuuming system, and an electronically-operated garage door, as well as general progress with the project. The Pursuers' discussions with the developer during this period concerned only interior finishes and light fittings.

[26]     
Findings in fact 26 to 30 describe how on 13th May 1996 the defender issued to the sellers an Inspection Certificate which bore the serial number 1. The certificate gives the location of the house and names the defender as the architect, the sellers as the client and G S M Builders as the contractor. There was no reference thereon to the pursuers. The defender reported that he had made a periodic site visit to monitor progress and to check by visual inspection on the use of materials and conformity with the approved drawings and/or specifications. The certificate was given in relation to the foundations and substructure of the house and narrated (see finding in fact 28) that the ground had been excavated to the levels given in the plans, that soil and been retained for future use, that the foundations had been excavated with concrete laid to the requisite strength, that the substructure blockwork had been built to the given dimensions and specifications, with vents to the garage, stores, underbuilding and honeycombed dwarf walls, and that the damp proof course had been laid ready for the erection of the timber frame superstructure, with the ground backfilled round the house. At the foot of the certificate immediately above the defender's signature were the words "We hereby certify that the workmanship conforms to adequate building practice and the property is in general conformity with the plans and/or specifications lodged for all necessary consents and/or any variations we have noted and approved".

[27]     
Findings in fact 29 and 30 read as follows (Messrs R & R Urquhart were the sellers' law agents):

  1. Certificate No. 1 was sent shortly after its issue by R & R Urquhart to Mr Iain MacDonald of Messrs Wink & Mackenzie, Solicitors, Elgin, the Pursuers' Law Agent, together with a request for payment of the instalment of £25,000 contractually due upon certification of the foundations as having been properly laid.
  2. In reliance on the accuracy of the certificate, Mr MacDonald obtained the requisite funds from the Pursuers and paid them to R& R Urquhart for the developer. Had the certificate disclosed that any defect or problem existed in relation to the work it narrated, no such payment would have been made.

[28]     
Findings in fact 31 to 34 inclusive refer to the issue by the defender on 14th June 1996 to the sellers of a second Inspection Certificate which bore the serial number 2. The same details of the architect, client and location of the house appear as on the first certificate, but the contractor was stated to be GSM Builders and Cullen Joiners. Again there was no reference to the pursuers. The introductory narrative and the final certificate were in the same terms as on the first certificate. Specifically, it was said that the certificate was given in relation to the superstructure of the house and that the timber frame kit supplied by Scotframe Timber Engineers Limited had been erected to a wind and weather type standard, including all windows, external doors and roof tiling. It was also said that the internal flooring, ceiling sheeting partitions and external walling were in progress and that the first fix of the services had been completed.

[29]     
Findings in fact 33 and 34 read as follows:

  1. Certificate 2 was sent shortly after its issue by R & R Urquhart to Mr MacDonald, together with a request for payment of the instalment of £25,000 contractually due upon certification of the dwellinghouse as being wind and watertight.
  2. In reliance on the accuracy of Certificate 2, Mr MacDonald obtained the requisite funds from the Pursuers and paid them to R & R Urquhart for the developer. Had the certificate disclosed that any defect or problem existed in relation to the work it narrated, no such payment would have been made.

[30]     
Findings in fact 35 to 38 describe how on 29th July 1996 the defender issued to the sellers a final inspection certificate which bore the serial number 6. (No certificate 3, 4 or 5 is known to exist). The details on this certificate of the architect, the client and the location were the same as on the previous certificates, but the contractor was stated to be GSM Builders, Cullen Joiners and C & M Electrical. After narrating these details the certificate read:

REPORT

In accordance with our appointment, having officially inspected the above property from time to time to monitor progress and to check the use of materials and conformity with the approved drawings and/or specifications,

 

WE HEREBY CERTIFY

that, subject to any outstanding items as listed below, the workmanship conforms with adequate building practice and the property is in general conformity with the plans and/or specifications lodged at the time of all statutory approvals and/or any variations we have noted and approved.

SCHEDULE OF OUTSTANDING ITEMS

[31]     
No details were stated under this last schedule. The defender's signature appears at the foot of the certificate where he is designed, as on the previous two certificates, as a Chartered Architect. All three certificates are printed on forms which have at the top what appears to be a copy of the seal of the Royal Incorporation of Architects in Scotland.

[32]     
Findings in fact 37 to 40 were as follows:

  1. Certificate No. 6 was sent shortly after its issue by R & R Urquhart to Mr Iain MacDonald of Messrs Wink & Mackenzie, Solicitors, Elgin, the Pursuers' Law Agent, together with a request for payment of the remainder of the contract price.
  2. In reliance on the accuracy of Certificate 6, Mr MacDonald obtained the requisite funds from the Pursuers and paid them to R & R Urquhart for the developer. Had the certificate disclosed that any defect or problem existed in relation to the work it narrated, or that any further works were required for completion of the dwellinghouse, no such payment would have been made.
  3. The Certificates referred to were issued by the Defender to A Stewart MacKay (Developments) Limited in the first instance. The Defender was aware when he issued each of the Certificates that it was likely to be shown to the Pursuers or their agent and that the accuracy of its terms was likely to be relied upon by them when deciding whether or not to pay A Stewart MacKay (Developments) Limited the price payable for the building works or any part thereof.
  4.  

  5. There were defects in the dwellinghouse which caused the Pursuers to take action, and obtain decree against, A Stewart MacKay (Developments) Limited. The Pursuers were unable to obtain any payment from that company in satisfaction of the decree.

[33]     
Finally the sheriff made two findings in fact and law as follows:

    1. The Defender owed a duty to the Pursuers to exercise the skill and care of an ordinarily competent architect in the performance of the architectural services he carried out in connection with the design and implementation of the project for erection of their dwellinghouse at 7 Braes of Allachie, Aberlour.
    2. The Defender owed a duty to the Pursuers to take reasonable care that the statements contained in the Certificates 1, 2 and 6 issued by him were true and accurate.

[34]     
In light of these findings the sheriff excluded from probation certain averments in answers 4 and 10 to the effect that the defender owed no duty of care to the pursuers in the context of either of their heads of claim. Otherwise, as indicated, he allowed parties a proof before answer of their respective averments.

[35]     
Being dissatisfied with the sheriff's decision, the defender lodged a note of appeal in which certain grounds of appeal were specified. These were subsequently amended and now read as follows:

The Defender respectfully submits that the learned Sheriff was in error in allowing the case to proceed to Proof before Answer under exception of the pleadings for the Defender contained in the last sentence of Answer 4 to Condescendence and the fourth and last sentences of Answer 10 to Condescendence. It is submitted that the Defender should have been assoilzied from the craves of the writ and awarded the expenses of process as taxed. In particular:-

    1. There was no proper basis in evidence led (nor inferences reasonably drawn from such evidence) which justified the Sheriff in making findings in fact to the effect that:-

    1. the Pursuers placed reliance on the exercise by the Defender of care and skill in the provision of architectural services in terms of his contract with the developer;
    2. the Defender accepted responsibility to the Pursuers to exercise such skill and care;
    3. the Pursuers (or anyone on their behalf) relied upon the accuracy of certificates issued by the Defender;
    4. the Defender was aware at the time of issue of any such certificates that they were likely to be shown to the Pursuers or their agent and that the accuracy of their terms was likely to be relied upon by said parties.
    5. that it was obvious to the Defender that he was being relied upon by the Pursuers in the provision of architectural services.
    6. that the Defender was aware (1) of any contractual provision between the Pursuers and Mr. MacKay relating to the provision of a 10 year guarantee or (ii) and that this was to be available to the Pursuers 'through' the Defender.

    1. That in consequence there was no proper basis for the learned Sheriff to find in fact and law that the Defender owed a duty to the Pursuers to exercise the skill and care of an ordinarily competent architect in the performance of architectural services undertaken by him in connection with the design and direction of the house known as No. 7 Braes of Allachie, Aberlour or to take reasonable care that statements contained in certificates issued by him were true and accurate.

[36]     
Before turning to the submissions for the defender on these grounds of appeal, I should mention that at the proof the only witnesses were the two pursuers and the solicitor who acted for them in connection with the purchase of the house. No evidence was led by or on behalf of the defender. Of course he did not have to lead evidence but, not having done so, he cannot complain that in the circumstances the most favourable inferences should have been drawn from the pursuers' evidence of which it was reasonably capable - see Ross v Associated Portland Cement Manufacturers Limited 1964 1 WLR 768, Lord Reid at page 775, and O'Donnell v Murdoch McKenzie & Co Limited 1967 SC (HL) 63, Lord Upjohn at page 71 and Lord Wilberforce at page 73. At the same time the sheriff was not entitled to indulge in speculation when considering the evidence for the pursuers. "The evidence led must be capable of giving rise to any inference drawn from it, and such an inference must be a reasonable one" - see Johnstone v City of Glasgow District Council 1986 SLT 50 at p. 52.

[37]     
Opening the appeal, counsel for the defender submitted that I should sustain his third plea-in-law (which is to the effect that, the pursuers' averments so far as material being unfounded in fact, he should be assoilzied), allow the appeal and assoilzie the defender from both the pursuers' craves. She acknowledged in light of Clarke v Edinburgh & District Tramways Co Limited 1919 SC (HL) 35 and Thomas v Thomas 1947 SC (HL) 45 that she could only ask me to interfere with particular findings in fact made by the sheriff if she could demonstrate that there had been no evidence to support them or that the sheriff had been plainly wrong in reaching them. She submitted in short that there had been no evidence to support the findings in fact to which reference had been made in the grounds of appeal and hence that the sheriff had gone plainly wrong in making these particular findings.

[38]      Paragraph 1(i) of the grounds of appeal refers to finding in fact 14. It will be recalled that this reads: "The pursuers placed reliance on the exercise by the defender of the degree of skill and care appropriate to the provision of architectural services in the performance of those tasks". The expression "those tasks" here refers back to finding in fact 13 which reads: "The pursuers reasonably regarded the defender as the designer of the house and as the person in ultimate charge of all tasks involving technical, design or building issues which arose or which might arise in connection with the proposed building project". In this context I understood both counsel to accept that the reference in finding in fact 14 to the provision by the defender of architectural services and the similar references in findings in fact 15 and 16 were references to the work carried out by the defender in the whole design of the house and not merely the work carried out by him to give effect to the various alterations to the original plans which were made as a result of his meetings and discussions with the pursuers.

[39]     
Counsel for the defender drew attention to two passages in the evidence of the second pursuer at pages 16 and 19 of the notes of evidence and submitted that these passages did not translate into reliance by the pursuers upon the provision of architectural services by the defender of the requisite quality in law to bring home liability to the defender. She referred here to Muirhead v Industrial Tank Specialities Limited 1986 QB 507 and James McNaughton Paper Group Limited v Hicks Anderson & Co 1991 2 QB 113. She submitted that it was unsound in law to hold that, because the sellers had encouraged discussion between the pursuers and the defender, the pursuers could somehow reply upon him so as to create a liability on his part. It followed, so it was argued, that finding in fact 14 should be deleted.

[40]      In response, counsel for the pursuers drew attention to the point that paragraph 1(i) of the grounds of appeal indicated that the sheriff had found in fact that the pursuers had placed reliance on the exercise by the defender of care and skill in the provision of architectural services in terms of his contract with the developer. Counsel observed, rightly, that the sheriff had not found that the provision by the defender of architectural services had been "in terms of his contract with the developer". Counsel referred to the evidence of the second pursuer at pages 16, 18/19, 25, 38 and 39 of the notes of evidence and the evidence of the first pursuer at pages 59 and 61 and submitted that in the light of all this evidence there was no merit in the suggestion that the sheriff had not been entitled to make findings in fact 13 and 14. Counsel further submitted that the only gloss which the law placed on "reliance" as a purely factual matter was the requirement that the reliance should be reasonable (see Lord Steyn in Williams at page 837B). Nothing, said counsel, in the circumstances of the present case could properly lead to the conclusion that the pursuers had been unreasonable in relying upon the defender to exercise due skill and care in the performance of the relevant tasks.

[41]     
In my opinion the submissions for the pursuer in this context are to be preferred. It is I think abundantly clear from the passages in the notes of evidence to which counsel for the pursuers referred that they did indeed place reliance upon the exercise by the defender of the degree of skill and care appropriate to the provision of architectural services in the design of the house as a whole. Thus at page 16 the second pursuer stated: "My faith was in Keith because he was the technical person. He knew the rules, regulations, etc., and Mr MacKay was a farmer so that's why I had questioned Keith on it. You know, if there was anything wrong. My faith and trust was in his design, his building, etc., and his certification". Moreover, in my view it was perfectly reasonable for the pursuers to rely upon the defender in this context and in light of the various meetings and discussions that they had had with him.

[42]     
Paragraph 1(v) challenges the finding made by the sheriff in the first sentence of finding in fact 15 that it was obvious to the defender that he was being relied upon by the pursuers in that regard (that is, as stated in finding in fact 14). Counsel for the defender submitted that there was no evidence to support this particular finding either as a primary fact or as an inference to be drawn from other facts in the case. Counsel suggested that the sheriff in this context had had in mind the various meetings and discussions between the pursuers and the defender before conclusion of the missives to purchase the house, and she submitted that these meetings and discussions had taken place at the instigation of the sellers. She reminded me too that the defender had not been instructed directly by the pursuers.

[43]     
Counsel for the pursuers submitted that the sheriff had been perfectly entitled to find as he had in the first sentence of finding in fact 15. He drew attention to pages 19 and 61 of the notes of evidence, and also what the sheriff himself had said at paragraph 7.2 of his note where he wrote:

On the evidence I am satisfied that the defender was aware of the services which the pursuers required and expected of him. In that regard the parties had meetings before missives were concluded to discuss what changes to the plans the pursuers required. The developer took little if any part in such detailed discussions. The defender was the sole architect involved apart from an architect who was employed by the suppliers of the timber frame and suggested one change which the defender incorporated. The defender never declined to enter discussion with the pursuers anent design details. He visited and inspected the property periodically during the course of the erection. (The sheriff then referred to pages 5, 8, 9, 16, 26, 44, 53 and 69 of the notes of evidence).

[44]     
The sheriff's finding in the first sentence of his finding in fact 15 that it "was obvious to the defender that he was being relied upon by the pursuers in that regard" was an inference which in my opinion the sheriff was quite right to draw (in particular in the absence of any evidence by or on behalf of the defender) from the findings which he had already made. The blunt fact is that he had a series of meetings and discussions with the pursuers in the course of which a wide variety of matters to do with the design of the house were considered, and in the course of which too he never suggested to the pursuers that they should engage their own architect. Against this background it cannot in my opinion seriously be maintained that it was not obvious to the defender that he was being relied upon by the pursuers in connection with the design of the house as a whole.

[45]     
Paragraph 1(ii) of the grounds of appeal challenges the sheriff's finding in fact 16, namely that the defender accepted responsibility to the pursuers for the exercise of skill and care appropriate to the provision of the architectural services required for completion of the project. Counsel for the defender submitted that this finding in fact should be deleted. She referred to paragraph 7.3 of the sheriff's note where he had stated that finding in fact 16 was an inference which he had drawn from findings in fact 5 and 8-14 inclusive. Counsel drew attention to pages 3, 4, 5, 6, 51, 52 and 70 of the notes of evidence and submitted that the contact which had taken place between the pursuers and the defender before the conclusion of the missives had all been at the instigation of the sellers. It had, said counsel, been part of the defender's contract with the sellers that he should meet prospective purchasers to consider design details relating to the finishes and layouts and other aesthetic matters in the houses to be built, but not structural matters. Thus, so counsel maintained, the matters which were discussed between the pursuers and the defender as narrated in findings in fact 8 to 11 were all of an aesthetic, internal character. These were to be contrasted with what had been complained of by the pursuers in article 7 of the condescendence which, in short, related to major defects in the design of the structure of the house which had been bought by the pursuers. Counsel submitted that none of the discussions and meetings which had taken place between the pursuers and the defender had translated into an assumption of responsibility by the defender to the pursuers for all the matters referred to in findings in fact 13 and 14, namely all the tasks involved in the design of the house as a whole. Alternatively, there had at most been an assumption of responsibility by the defender in respect of the matters which had been the subject of the discussions and meetings between him and the pursuers as reflected in findings in fact 9, 10 and 11. But this was not enough to bring home liability to the defender as there was no complaint on record about his performance in relation to these aesthetic/internal matters.

[46]     
Counsel for the pursuers drew attention here to the notes of evidence at pages 3 - 10 and 50 -53. He submitted that all three of the findings in fact 14, 15, and 16 flowed from the previous findings in fact, in particular those numbered 8 onwards. He argued that there was no merit in the suggestion that there was no basis for these findings in the evidence or that the inference which had been drawn by the sheriff in finding in fact 16 was not one which it had been lawfully open to him to make. With reference to the suggestion that all that had been done by the defender in connection with the pursuers had been done by him in performance of his contractual duties to the sellers, it was submitted that there was no basis at all in the evidence for any such suggestion. All that the evidence showed was that the developer, Mr MacKay, had been the means whereby the initial introduction of the parties had been effected. If it was truly the defender's position that all that he had done had been done in pursuance of his contract with the sellers or that he had at least believed that this was what he had been doing, no attempt had been made to aver, far less prove, this.

[47]     
Turning to the suggestion that what had been discussed between the pursuers and the defender by way of architectural services had been restricted to aesthetic/internal matters and had been unrelated to the grounds of fault advanced in the action, counsel submitted that this was not supported by the evidence or the sheriff's findings in fact. The relevant findings in fact (8, 9, 11 and 25) referred to a variety of structural matters all of which were plainly related to the averments of fault in article 7 of the condescendence. Furthermore, it was submitted on behalf of the pursuers that a general relationship of trust and confidence had grown up between the parties in relation to the defender's provision of architectural services for the house and that this relationship had been accepted and indeed fostered by the defender. The suggestion (which had earlier been made by counsel for the defender) that he had been a "mere conduit" for the expression by the pursuers of their aesthetic/internal preferences was, so it was argued, without basis in the evidence.

[48]     
As the sheriff observed, his finding in fact 16 is an inference which he drew from findings in fact 5 and 8 - 14 inclusive. Read in conjunction with the immediately preceding findings in fact, finding in fact 5 states that the defender was the development architect for the project which included the house which was eventually bought by the pursuers. In finding in fact 8 it is recorded that they visited him at his offices shortly after having been referred to him by Mr MacKay and that they discussed changes which the pursuers wanted to the outline plan which already existed for the house. In particular, according to finding in fact 9, at this first meeting they discussed changes to the formation of the kitchen and living areas of the house, the location of the back door and the layout of the electrical socket system. Significantly, it is also found that the defender was aware from his first contact with the pursuers that they intended to occupy the house as their own home. In finding in fact 10 it is recorded that the pursuers and the defender met for further discussions on three or four occasions and that the second pursuer in particular had several further telephone conversations with him before the conclusion of missives. In finding in fact 11 it is recorded that these discussions covered a range of matters which in my opinion went far beyond a consideration only of aesthetic/internal matters as had been suggested by counsel for the defender. In finding in fact 12 it is found that the defender gave effect to the suggestion which had been made by the manufacturers of the timber frame for the house and which had been passed on to him by the pursuers. In finding in fact 13 it is found that they reasonably regarded the defender as the designer of the house and as the person in ultimate charge of all (my emphasis) tasks involving technical, design or building issues which arose or which might arise in connection with the proposed building project. And finally in finding in fact 14 the sheriff found that the pursuers placed reliance on the exercise by the defender of the degree of skill and care appropriate to the provision of architectural services in the performance of those tasks. In my opinion the inferences which the sheriff drew in his findings in fact 15 and 16 from these earlier findings in fact were amply justified. The defender knew that the pursuers intended to occupy the house as their own home and it cannot seriously be maintained that his meetings and discussions with them were conducted on any other footing than that, in short, he had exercised the appropriate skill and care in the design of the house as a whole. In these circumstances, and in the absence of any evidence by or on behalf of the defender, the sheriff was in my opinion quite right to draw the inference that the defender had accepted responsibility to the pursuers for the exercise of skill and care appropriate to the provision of the architectural services required for completion of the project.

[49]     
Paragraph 1(iii) refers to the sheriff's finding in fact 30, 34 and 38. In finding in fact 30 it is found that, in reliance upon the accuracy of the certificate numbered 1, the pursuers' solicitor obtained from them the requisite funds due upon certification of the foundations of the house as having been properly laid and paid them to the sellers' solicitors. It is found too that, had this certificate disclosed that any defect or problem existed in relation to the work it narrated, no such payment would have been made. Findings in fact 34 and 38 are to similar effect, only they relate to the certificates numbered 2 and 6 and the payments due upon certification of the house as being wind and watertight and as having been completed respectively. Paragraph 1(iv) refers to the second sentence in finding in fact 39, namely that the defender was aware when he issued each of these certificates that it was likely to be shown to the pursuers or their agent and that the accuracy of its terms was likely to be relied upon them when deciding whether or not to pay the sellers the price payable for the building works or any part thereof.

[50]     
Referring to these four findings in fact 30, 34, 38 and 39, counsel for the defender submitted that the transaction which had been in the contemplation of the pursuers in the present case had been their purchase of the house. It followed, said counsel, that there could not have been any reliance by the pursuers upon the three certificates issued by the defender since the pursuers' decision to purchase the house had already been made before the certificates were issued. In any event, if the transactions in contemplation had been the making of the payments to which reference had been made, then not all these payments had been made in reliance upon the certificates. Thus the first instalment of £25,000 due under the missives had been payable, not upon production upon a certificate, but five days after the conclusion of missives. Moreover it was clear from the admissions made by the pursuers at the end of articles 5 and 10 of the condescendence that inspections of the house had been carried out, and the certificates produced, by the defender in terms of his contract with the sellers. There was, so it was argued, no direct evidence that the defender had been aware that the certificates might be used for a different purpose outwith the contract between himself and the sellers. Thus there was no reference in the certificates to the pursuers. At best they referred to the main contractors, GSM Builders, with the result that they pointed to a contract between the sellers and these contractors and to the conclusion that the certificates would be used to trigger payments by the sellers to the contractors.

[51]     
Counsel for the defender accepted in this context that the knowledge of their solicitor was to be imputed to the pursuers themselves. It was accepted too that the certificates had been communicated by the sellers to the pursuers' solicitor for the limited purpose only of triggering payments by the pursuers to the sellers. But in deciding whether or not to enter into the transaction to buy the house in the first place, the pursuers had objectively relied, not upon these certificates, but upon the guarantee which had been given by the sellers - see the letter dated 9th February 1996. There was no evidence that the defender had had any knowledge of the terms of the missives between the pursuers and the sellers or, in particular, of the arrangements made in terms of the missives for stage payments during the construction of the house. Thus the defender had, so it was argued, been ignorant of the use to which the sellers had put the certificates, namely triggering the stage payments by the pursuers. It followed that findings in fact 30, 34 and 38 should be deleted since the pursuers had relied, not upon the certificates issued by the defender, but upon the guarantee given by the sellers and in any event the defender had not been aware of the use to which the certificates would be put by the sellers. Thus the second sentence in finding in fact 39 should also be deleted.

[52]     
In response to the challenge to findings in fact 30, 34 and 38 counsel for the pursuers drew attention to the notes of evidence at pages 20 - 21, 62, 72, 83, 88 and 91. He submitted that this evidence was amply sufficient to justify these particular findings. In this I thought that he was clearly correct. Moreover, in this context it is important to notice that, to borrow the language of Lord Bridge of Harwich in Caparo at pages 620/1, the transaction which the pursuers had in contemplation was not the contract to buy the house but the making of the various stage payments due under the contract. It was in reliance upon the accuracy of the certificates issued by the defender, and not the guarantee, that the pursuers, through their solicitor, made the second, third and final stage payments due under the contract to the sellers, and for present purposes it is nothing to the point that they did not also make the first stage payment in reliance upon one of these certificates.

[53]     
Referring to the defender's state of knowledge as found in the second sentence in finding in fact 39, counsel for the pursuers drew attention to the sheriff's observation at paragraph 7.4 of his note to the effect that this particular finding was inferential in general from the whole of the preceding findings. Counsel submitted that the terms of the certificates themselves were clear, that specific stages of construction had been certified by the defender as a member of a profession whose duties involved the exercise of independence and integrity, that the defender had had extensive and close contact with the pursuers, that he had been aware that they had no other architectural adviser and were relying upon him, and that, most importantly, absolutely no alternative explanation to that contended for by the pursuers had been advanced by or on behalf of the defender in evidence or even in averment. All of the other possible explanations which had been advanced as to what might have been in the defender's mind when he had issued the certificates had been based entirely retrospectively in the submissions on behalf of the defender. If he had wished to avoid or restrict the availability to the sheriff of the inference which he had drawn, he had had every opportunity to give evidence and to state on oath his position as to what he had in fact believed. For whatever reason, he had chosen not to do so. Against this background he had, so it was submitted, no valid ground of complaint when the sheriff drew an inference against him which it was open to him to draw. In the circumstances it would have been surprising if the sheriff had reached any other conclusion, but in any event it was submitted that the conclusion which he had reached was very comfortably within the range of conclusions open to him.

[54]     
In my opinion the submissions for the pursuers on this branch of the case are to be preferred. The three certificates in question were issued by the defender to the sellers. When he did this, he knew that they all related to the house which was being built for the pursuers to occupy as their home and about which he and they had previously had meetings and discussions in the course of which various aspects of the design of the house had been gone into in some detail. He must have known that the pursuers would have entered into a contract with the sellers and, while he may not have been privy to the precise terms of this contract, I think that common sense would have told him that, unless the pursuers had been very badly advised (which he was not entitled to assume), the contract would have been very likely to have provided for payment for the house which was being built for them to his design to be made, at least in part if not in whole, against the production of certificates by himself as the architect of the house. It follows in my opinion that he knew or ought to have known that the certificates which he had issued to the sellers would be likely to be exhibited to the pursuers directly or through their solicitor and that, since to his knowledge they had no other independent architectural adviser, it was likely that they in turn would rely on the certificates in deciding whether or not to make payment, at least in part, for the house. In these circumstances, and in the absence of any evidence by or on behalf of the defender, I agree with counsel for the pursuers that the inference drawn by the sheriff in the second sentence of his finding in fact 39 was amply justified by his earlier findings in fact.

[55]     
Paragraph 1(vi) of the grounds of appeal refers to the sheriff's finding in fact 23. Counsel for the defender accepted the accuracy of the first sentence in this finding. But she submitted that the second sentence should be deleted upon the basis that it was, according to her, wholly unsupported by the evidence. In response, counsel for the pursuers referred to the notes of evidence at pages 37/8, and I agree with him that the evidence there justified the finding made by the sheriff in the second sentence of finding in fact 23. In any event, as counsel for the pursuers pointed out, it does not seem to me that there is any particular significance in this finding and it does not appear to have weighed heavily, if at all, in the mind of the sheriff in reaching the conclusions which he did.

[56]     
Paragraph 2 of the grounds of appeal is expressed to be consequential upon paragraph 1 and, since I have rejected all the criticisms made of the sheriff's findings in fact in terms of paragraph 1, it follows that the ground of appeal set out in paragraph 2 falls to be rejected as well. In my opinion, in light of the passages from the speeches of Lords Goff of Chieveley and Browne-Wilkinson in Henderson and Lord Steyn in Williams which I have quoted at paragraphs [15] to [20] above, the sheriff's findings in fact clearly justify his first finding in fact and law, namely that the defender owed a duty to the pursuers to exercise the skill and care of an ordinarily competent architect in the performance of the architectural services he carried out in connection with the design and implementation of the project for the erection of the pursuers' house. Likewise, in light of the extracts from the speeches of Lords Bridge of Harwich and Oliver of Aylmerton in Caparo which I have quoted in paragraphs [13] and [14] above, I think that the sheriff's findings in fact justify too his second finding in fact and law, namely that the defender owed a duty to the pursuers to take reasonable care that the statements contained in the three certificates issued by him were true and accurate. Thus I am not prepared to accede to the submission by counsel for the defender to the effect that these two findings in fact and law should be deleted.

[57]     
Much of the time during the hearing of the appeal was taken up by both counsel with a consideration of the applicability to the circumstances of this case of the decision of the House of Lords in the Junior Books case. Likewise, the sheriff considered this case in some detail in the course of his note. But, upon the view of the applicable law which I have taken in light of the decisions in Hedley Byrne, Caparo, Henderson and Williams, I do not think that it is necessary for the pursuers to succeed in this case that they should rely to any extent on the Junior Books case. Accordingly I do not think that I need to consider it at all.

[58]     
For the sake of completeness I should mention two other matters. In the course of her submissions counsel for the defender several times touched upon the familiar "floodgates" argument. She submitted that an architect was not generally regarded as owing a duty of care to a third party who was purchasing a house from the architect's own client and she suggested that, if the arguments for the pursuers in the present case were well founded, there could be an indeterminate class of persons to whom the defender might be liable including, for example, persons who had lent money to the pursuers to purchase the house. In my opinion, the short answer to these submissions is to be found in the fact that no one else, apart from the pursuers, is said to have had detailed meetings and discussions with the defender along the lines set out in the sheriff's findings in fact, and it is the fact of these discussions and meetings having taking place which forms the backbone, so to speak, of the pursuers' claim against the defender in both its branches.

[59]     
Counsel for the defender also founded upon the contractual arrangements between the pursuers and the sellers in the context of addressing the questions (a) whether there had been an assumption of responsibility by the defender to the pursuers and (b) whether it was fair, just and reasonable that there should be any liability on his part to the pursuers. On the first of these questions I would refer to the comments of Lord Goff of Chieveley in Henderson which I have quoted in paragraph [17] above. It seems to me that the contractual arrangements between the pursuers and the sellers are really beside the point in determining whether or not there was an assumption of responsibility by the defender to the pursuers. This depended, not upon anything done between the pursuers and the sellers, but upon what was done between the defender and the pursuers, in particular during the meetings and discussions to which reference has already repeatedly been made. As for the second question raised by counsel in this context, I would refer again to the observation of Lord Steyn in Williams at page 834 to the effect that Henderson established "that once a case is identified as falling within the extended Hedley Byrne principle, there is no need to embark on any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss". In any event, it does not seem to me in the particular circumstances of this case that the contractual arrangements between the pursuers and the sellers support the proposition that it would not be fair, just or reasonable to impose liability upon the defender.

[60]     
Upon the whole matter I am persuaded that the sheriff's findings in fact were fully justified by the evidence and that his findings in fact and law in turn were justified by his findings in fact. It follows that this appeal falls to be refused.

[61]     
In addition to the authorities which I have already mentioned, I was referred to Scott Lithgow Limited v GEC Electrical Projects Limited 1992 SLT 244, Peach Publishing Limited v Slater & Co. 1998 PNLR 364, D & F Estates Limited v Church Commissioners for England 1989 1 AC 177, Murphy v Brentwood District Council 1991 1 AC 398, Millars of Falkirk Limited v Turpie 1976 SLT (N) 66 and Thomson v Kvaerner Govan Limited 2003 SCLR 765. I myself drew the attention of counsel to Parkinson v St James and Seacroft University Hospital NHS Trust 2002 QB 266.

[62]      It was agreed that the question of the expenses of the appeal should be reserved for a further hearing.

 

 

 

 

 

 

 

 

 

 

 


BAILII:
Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/scot/cases/ScotSC/2004/31.html