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You are here: BAILII >> Databases >> Supreme Court of Ireland Decisions >> Wildgust & anor. -v- The Governor and Company of the Bank of Ireland & anor. [2006] IESC 19 (22 March 2006) URL: http://www.bailii.org/ie/cases/IESC/2006/S19.html Cite as: [2006] IESC 19, [2006] 2 ILRM 28, [2007] 3 IR 39, [2006] 1 IR 570 |
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Judgment Title: Wildgust & anor. -v- The Governor and Company of the Bank of Ireland & anor. Composition of Court: Denham J., Geoghegan J., Kearns J. Judgment by: Geoghegan J. Status of Judgment: Approved
Outcome: Allow And Set Aside | |||||||||||||||||
- 12 - THE SUPREME COURT Denham J.Record No. 2002/177 Geoghegan J. Kearns J. BETWEEN: Appellants/Plaintiffs First-named Defendant and NORWICH UNION LIFE INSURANCE SOCIETY Respondent/Second-named Defendant JUDGMENT of Mr. Justice Geoghegan delivered the 22nd day of March 2006 This is an appeal by the above-named appellants/plaintiffs from an order of the High Court (Morris P.) dated 15th October, 2001 dismissing an action for damages for negligence against the above-named respondent/second-named defendant. There is also a cross-appeal by the said respondents against the particular costs order made in the High Court and I will return to that in due course. I gratefully adopt the full account of the relevant facts in the case as well as its complex procedural history set out in the judgment about to be delivered herein by Kearns J. I will content myself by giving a shorthand account of the salient facts as found by the trial judge. The first-named appellant (hereinafter referred to as “Mr. Wildgust” SIZE=4 FACE="Times New Roman">) and his late wife had effected a life policy of insurance on each of their lives with the respondent insurance company. Mr. Wildgust carried on business through a company controlled by him namely, the second above-named appellant, Carrickowen Limited. In the late nineteen eighties Carrickowen Limited purchased certain properties and for that purpose obtained loan facilities from Hill Samuel Bank Limited (“Hill Samuel”). In accordance with normal practice, Hill Samuel required collateral security for the loan. As a consequence, personal guarantees were entered into by Mr. Wildgust and his late wife, Margaret Wildgust. The properties acquired were to be mortgaged to Hill Samuel and two life policies including the policy already referred to were to be assigned by way of mortgage to Hill Samuel. Carrickowen Limited held an account with the first-named defendant, Bank of Ireland, and the arrangement was that the premiums on the relevant life policy were to be paid for by way of direct debit from that account. The mortgage assignment of the life policy to Hill Samuel contained a covenant by Mr. Wildgust and his wife to pay and keep up the premiums on the policy. A monthly premium became due on the 23rd March, 1992 but the direct debit for that month was not paid. I should explain that Mr. Wildgust took the view that the Bank of Ireland had wrongly neglected to pay the direct debit and in that connection the Bank of Ireland was originally a defendant in these proceedings. In the course of the hearing, the claim against the Bank of Ireland became settled and that bank is no longer involved. Returning to the action against the respondent on the appeal, i.e. the Norwich Union, that company notified Hill Samuel but not the Wildgusts or their insurance broker that there had been default in the direct debit. Mr. Declan O’Hanlon was the relevant manager of Hill Samuel at the time and when he received the notification of the default, he contacted Mr. Wildgust. It was of considerable concern to Mr. O’Hanlon that the policy should not be allowed to lapse and he was aware at the time that Mrs. Wildgust was seriously ill. Indeed around that time, she was diagnosed as terminally ill. Mr. Wildgust assured Mr. O’Hanlon that he, Mr. Wildgust, had sent a cheque or more accurately a bank draft that would cover the premium. In giving this assurance, Mr. Wildgust appears to have acted bona fide but as is explained in the judgment of Kearns J. that particular payment had been treated as an excess payment and was refunded not to Mr. Wildgust but to his company, Carrickowen Limited, a fact of which Mr. Wildgust only became aware after the policy lapsed in May, 1992. On the 22nd April, 1992, Mr. O’Hanlon, working off his diary, telephoned the respondent to make absolutely sure that the March payment had been made notwithstanding the assurance given to him by Mr. Wildgust. He did not personally remember making the call but he had a clear file note which showed that it had been made and detailing the contents of the call. The learned trial judge accepted that the file note was accurate. The file note read as follows:
Carrickowen Limited With regard to the above account I have been advised by Mr. Harry Wildgust that Mrs Margaret Wildgust has been diagnosed with cancer. We hold as security a policy assigned to ourselves with Norwich Union Life Insurance Society. On the 6th April 1992 we received an advice from Norwich Union Life Insurance Society that the direct debit on the policy had been returned unpaid. I contacted the clients and was informed that they had forwarded a cheque to Norwich Union to keep the policy in order. I rang Norwich Union today, 22nd April, to confirm that the policy was correct and in order. Norwich Union confirmed that the cheque had been received and everything was correct and in order.” Mr. O’Hanlon had not informed Mr. Wildgust that he had sought confirmation from the respondent that the premiums were paid up. Mr. Wildgust, therefore, cannot be said to have personally relied on the information given to Mr. O’Hanlon by the respondent. By reason of that fact, the learned President held that Mr. Wildgust was not entitled to recover damages in negligence against the respondent for loss resulting from the lapse of the policy. As is clear from the summary of facts which I have given and indeed the more detailed account of the facts set out by Kearns J. in his judgment, Mr. Wildgust was successful in the High Court on every relevant issue of fact. On some crucial facts there was no real controversy, such as for instance that it would generally have been known that where a life policy is mortgaged to a bank, the bank in its own self-interest would pay up any default premiums so as to prevent the policy lapsing. Mr. Wildgust failed, however, on the single legal ground of non-reliance. As it is quite crucial, it is worthwhile in my view quoting in full the final paragraph in the second reserved judgment of the President as it contains the basis on which the action was dismissed.
The law If the former President is correct in his view that reliance by the actual plaintiff on the truth of an incorrect statement negligently made is an essential ingredient of liability in all cases of negligent misstatement then this appeal must obviously be dismissed. Having read all the relevant authorities, I am not satisfied that such personal reliance is always essential. The facts of this particular case are most unusual and I have not come across any reported case sufficiently analogous to this case as to be of definitive assistance. The wide interpretation of Donoghue v. Stevenson [1932] AC 562 in relation to liability for negligence prevalent until recently made it important to make a sharp distinction between negligence in act on the one hand and negligence in a statement on the other hand. Pragmatically, some kind of control mechanism was necessary in relation to liability for negligent misstatement as otherwise an action might lie at the suit of large numbers of people influenced and reasonably foreseen to be influenced by the erroneous statement. By contrast a negligent act will for the most part foreseeably damage only a small category of people. The more recent English case law coming from the House of Lords with particular reference to Caparo Industries v. Dickman [1990] 2 AC 605 has introduced a third element into liability for negligence in addition to reasonable foreseeability and proximity and that is reasonableness in the imposition of a duty of care. That principle has been endorsed albeit obiter by Keane C.J. in his judgment in this court in Glencar Exploration Plc v. Mayo County Council (No. 2) [2002] 1 IR 84. The different route ultimately traversed by the courts in England in relation to negligent statements was partly based on the necessity for a control mechanism for the reason which I indicated and partly because of pre Donoghue v. Stevenson authorities which were not mentioned and still less expressly overruled by that case. Those earlier authorities would not be binding in this jurisdiction and now that the concept of reasonableness in imposing a duty of care appears to be accepted, concepts which run through the English case law relating to negligent misstatements and negligent misrepresentations such as reliance by the plaintiff on the truth of the statement, “assumption of risk” by the maker of the statement, “special relationship”, “relationship analogous to contract”, or even for that matter the will-o’-the-wisp concept of “proximity” may not be all that necessary. For the purposes of this case however, I am prepared to assume that the law of negligent misstatements is a separate code from the law of negligent acts. This has the advantage that I do not have to consider the law relating to the recoverability of damages for economic loss arising from negligence in general as it has always been accepted that such loss is recoverable if it derives from an actionable negligent misstatement. The tort of negligent misstatement has its origins in England in Hedley Byrne and Co. Limited v. Heller and Partners Limited [1964] AC 465. It has an even earlier link with the famous minority Court of Appeal judgment of Denning L.J. (as he then was) in Candler v. Crane, Christmas and Co. [1951] 2 K.B. 164. As Kearns J. has pointed out, at an early stage Hedley Byrne was accepted by the Irish High Court as representing the law in this jurisdiction also (see Securities Trust Limited v. Hugh Moore and Alexander Limited [1964] I.R. 417 (Davitt P.) and Bank of Ireland v. Smyth [1966] I.R. 646 (Kenny J.). There has not been much discussion or analysis of the problems however in this court. The most relevant case law is essentially a succession of judgments from the House of Lords. In his speech in Hedley Byrne Lord Reid cited with approval a passage from the speech of Viscount Haldane LC in Naughton v. Lord Ashburton [1914] AC 932. He clearly indicated that quite apart from contractual or fiduciary relationships a duty of care in the making of a statement may arise “from other special relationships which the courts may find to exist in particular cases.” Lord Reid attached considerable importance to the expression “other special relationships” and he went on to observe as follows at p. 486: “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.” There were nuanced differences of emphasis in the speeches of the Law Lords in Hedley Byrne but overall, the concept of “special relationship” was accepted even though different characterisations were given. Lord Devlin, for instance, made a distinction between social and professional relationships and between those which are of a contractual character or equivalent to contract. He pointed out that “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. The service that a bank performs in giving a reference is not done simply out of a desire to assist commerce. It would discourage the customers of the bank if their deals fell through because the bank had refused to testify to their credit when it was good.” In Smith v. Bush [1990] 1 AC 831 at 846 Lord Templeman cited with apparent approval dicta of Lord Denning M.R. in Ministry of Housing and Local Government v. Sharp [1970] 2 Q.B. 223 at 268 where Lord Denning rejected the argument “that a duty to use due care (where there was no contract) only arose when there was a voluntary assumption of responsibility … Lord Reid in Hedley Byrne’s case … and Lord Devlin at p. 529 … used those words because of the special circumstances of that case (where the bank disclaimed responsibility). But they did not in any way mean to limit the general principle. In my opinion the duty to use due care in a statement arises, not from any voluntary assumption of responsibility, but from the fact that the person making it knows, or ought to know, that others, being his neighbours in this regard, would act on the faith of the statement being accurate.” The case from which I found the greatest assistance is White v. Jones [1995] 2 AC 207 and in particular the speech of Lord Browne-Wilkinson. This is the famous case in which the House of Lords held by a majority that the assumption of responsibility by a solicitor to his client who had given instructions for the drawing up of a will for execution extended to an intended beneficiary under the proposed will in circumstances where the solicitor could foreseeably foresee that a consequence of his negligence might be a resultant loss of the intended legacy without either the testator or his estate having a remedy against him; and that accordingly in the circumstances the plaintiffs were entitled to the relief sought. Interestingly, though perhaps irrelevantly, the Irish High Court (Barrington J.) had long before that made a similar decision in Wall v. Hegarty [1980] ILRM 124. I say “irrelevantly” because the importance of White v. Jones lies more in the further analysis by the Law Lords of the principles underlying Hedley Byrne. With reference to that case, Lord Browne-Wilkinson at p. 272 made the following observation: “… since this House was concerned with cases of negligent misstatement or advice, it was inevitable that any test laid down required both that the plaintiff should rely on the statement or advice and that the defendant could reasonably foresee that he would do so. In the case of claims based on negligent statements (as opposed to negligent actions) the plaintiff will have no cause of action at all unless he can show damage and he can only have suffered damage if he has relied on the negligent statement. Nor will a defendant be shown to have satisfied the requirement that he should foresee damage to the plaintiff unless he foresees such reliance by the plaintiff as to give rise to the damage. Therefore, although reliance by the plaintiff is an essential ingredient in a case based on negligent misstatement or advice, it does not follow that in all cases based on negligent action or inaction by the defendant it is necessary in order to demonstrate a special relationship that the plaintiff has in fact relied on the defendant or the defendant has foreseen such reliance. If in such a case careless conduct can be foreseen as likely to cause and does in fact cause damage to the plaintiff that should be sufficient to found liability.” “The law of England does not impose any general duty of care to avoid negligent misstatements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable. However, such a duty of care will arise if there is a special relationship between the parties. Although the categories of cases in which such special relationship can be held to exist are not closed, as yet only two categories have been identified namely (1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tendered skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice. In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff’s affairs or by choosing to speak. If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon. In the words of Lord Reid in Hedley Byrne [1964] AC 465, 486 he has ‘accepted a relationship … which requires him to exercise such care as the circumstances require’ i.e. although the extent of the duty will vary from category to category, some duty of care arises from the special relationship.” On the amended pleadings there are issues of contributory negligence both directly and vicariously by reason of the involvement of the Bank of Ireland. I express no views on these matters as they were not raised in argument. As regards the cross-appeal that is essentially a costs matter which can be dealt with when the costs of the appeal as a whole are being considered by the court. Wildgust & anor. v. Govr. of BOI JUDGMENT of Mr. Justice Kearns delivered the 22nd day of March, 2006 JUDGMENT of Mr. Justice Kearns delivered the 22nd day of March, 2006 This case raises an important point of law concerning the scope of liability for negligent misstatement. In particular, it gives rise to an important question as to whether a claimant, under the principles of law established in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] AC 465, may recover damages in circumstances where he is not the person to whom a negligent misstatement is addressed, has not relied upon it, but nonetheless has suffered loss and damage because an intermediary to whom the negligent misstatement was addressed was in consequence prevented from acting, as he most assuredly would have done, to protect both the claimant and the intermediary from the loss which in fact occurred. In a judgment Wildgust v. Bank of Ireland, delivered on the 28th July, 1998, Morris P. summarised the background facts of this case in the following manner:-
A breakdown in the system occurred as a result of which the direct debit payment due on the 23rd of March, 1992, was not paid. Mr. Wildgust held the Bank of Ireland responsible for this fact. They were accordingly joined as defendants in the present claim. However, after the hearing had progressed for some days a settlement was reached between Mr. Wildgust and the Bank of Ireland as a result of which they were struck out of the case. Because of the failure to discharge the premium due on the 23rd of March, 1992, the life policy lapsed. The late Mrs. Wildgust died on the 1st of January, 1993. The amount payable under the terms of the policy on her death was not paid as the Norwich Union claimed that the policy had lapsed. Mr. Wildgust brings this action to enforce payment of that amount and claims that as a result of withholding payment consequential loss has been suffered by him and by his company.” Accordingly, the hearing of the matter before the President recommenced on the 19th July, 2001. Because the facts of this case are of such vital importance, I propose to quote at some length from the summary of the issues of fact which appear in the judgment of Morris P. delivered on the 17th August, 2001. It is necessary to do so to understand how the claim for negligent misstatement arises in this case. Morris P. first identified the issues of fact giving rise to that claim in the following manner at p.6:-
It is denied on behalf of the Norwich Union Insurance Company that the telephone call described by Mr. O’Hanlon or any such call was ever made.”
On the 3rd April 1992 Hill Samuel received a direct debit breakdown advice indicating that a premium of £227.25 due on the 23rd March 1992 was unpaid. Upon becoming aware of this fact Mr. O’Hanlon says that as Account Manager he referred the matter to Senior Management and after discussing it with his superiors he contacted Mr. Wildgust informing him of the breakdown in payment. He says that when he contacted Mr. Wildgust and was informed by him that he, Mr. Wildgust had forwarded a cheque to the Norwich Union to keep the policy in order and he said that on the 22nd April 1992 he telephoned the Norwich Union to confirm that the cheque had been received and that everything was in order. He says that the Norwich Union confirmed that this was so. He says that he has no doubt that if he had known that the premium was not paid arrangements would have been made for Hill Samuel to pay the premium to prevent the policy lapsing. This was of particular importance as Mrs Wildgust had been diagnosed with cancer.” In resolving this issue of fact, the President found that, even though there existed a thorough and business-like procedure for noting inquiries in the Norwich Union office, it was not incapable of error and it would have been possible for Mr. O’Hanlon’s inquiry not to have been entered in the system. He also noted that Mr. O’Hanlon had no financial or other interest in the transaction to provide him with any motive to do otherwise than to tell the full truth about the memorandum or file note which he signed on the 22nd April, 1992. The President thus concluded that Mr. O’Hanlon was given the assurance in the terms which he described to the Court. Having made that crucial finding, the President then proceeded to address the evidence which had been given by Mr. Wildgust, stating at p.13:-
A premium was due to the Norwich Union on the 23rd March 1992 and default notices were sent by the Norwich Union to Hill Samuel and Mr. Wildgust in respect of that default. Mr. Wildgust says he never received this default notice. He claims there should not have been a failure on the part of the Bank of Ireland to pay the direct debit because he had at that time renegotiated overdraft arrangements with the Bank of Ireland which he believed provided him with the facility for meeting such payments. The first notice that he had that the premium due on the direct debit of the 23rd March 1992 was not paid was in the latter half of the month of June. This delay was due to the bank strike and the postal strike which finished at that time. He said ‘If I had found out before, I would have paid the money straight up.’ He said that between the 23rd March and the end of June he received no communication from the Bank of Ireland in relation to the direct debit nor did he receive any communication whatever from the Norwich Union in relation to the return of the direct debit. It was after June and probably around August that he had communication with the Norwich Union about the direct debit. He says that around the 8th, 9th or 10th April he had a telephone conversation with Mr. O’Hanlon of Hill Samuel. He said that Mr. O’Hanlon told him that the direct debit had not been paid and that he told Mr. O’Hanlon that he had sent a cheque to cover it. This was a reference to a cheque for £681.75 which he believed was to be held by the Bank of Ireland in reserve to meet a contingency such as this. In fact he did not know then but now knows that this reserve was not available because that cheque was returned.” It is also common case that the assignment of the life policy to Hill Samuel permitted (though did not oblige) Hill Samuel to discharge premiums in respect thereof. For the sake of completeness the court of trial also heard submissions in relation to a mortgage made between Carrickowen and Hill Samuel in connection with the advance of monies by Hill Samuel whereby, under clause 12 thereof, Carrickowen appointed Hill Samuel as its attorney for certain purposes related to Carrickowen’s covenants under the mortgage. However, these purposes appear unrelated to the life policy and the payment of premiums thereunder. The learned President continued at p.14 of the judgment:-
What emerges from Mr. Wildgust’s evidence is: (b) Mr. Wildgust believed at all times that the Bank of Ireland were in sufficient funds or otherwise obligated to him to discharge the direct debits due to the Norwich Union as premiums on the policy. (c) At no stage did or could Mr. Wildgust have placed any reliance upon any statements made by the Norwich Union to Mr. O’Hanlon.” Again, because this portion of the judgment of the learned President so neatly encapsulates the ultimate issue in this case, I propose to set it out in full:-
In his judgment, delivered the 19th July 2001, Keane C.J. considered the approach of McCarthy J. in Ward v. McMaster and contrasted it to what he described as the more cautious approach favoured in Caparo Industries Plc. v. Dickman [1990] 2 AC 605 and Sutherland Shire Council v. Heyman [1985] 157 C.L.R. 424, and, having done so, summarising the law had this to say: ‘There is in my view, no reason why courts determining whether a duty of care arises, should consider themselves obliged to hold that it does in every case where injury or damage to property was reasonably foreseeable and the notorious difficulty and elusive test of ‘proximity’ or ‘neighbourhood’ can be said to have been met, unless very powerful public policy considerations dictate otherwise. It seems to me that no injustice will be done if they are required to take the further step of considering whether, in all the circumstances, it would be reasonable that the law should impose a duty of a given scope on the defendant for the benefit of the plaintiff, as held by Costello J., at first instance in Ward v. McMaster, by Brennan J. in Sutherland Shire Council v. Heyman and by the House of Lords in Caparo Industries Plc. v. Dickman. As Brennan J. pointed out, there is a significant risk that any other approach will result in what he called a ‘massive extension to a prima facie duty of care restrained only by indefinable considerations…’”
In my view the one major insurmountable difficulty for the plaintiff is that at no stage did he, Mr. Wildgust, become aware of the fact that the misstatement had been made by the Norwich Union nor did he place any reliance upon it. He was not misled by the misstatement because he was not aware of it. He was not prejudiced by it. It was not until two months later that he became aware of the fact that the premium had not been paid. In my view the misstatement in no way influenced or contributed towards the conduct of the plaintiff. It did not influence him or cause him to act to his detriment. I do not believe that it would be reasonable that the law should impose a duty on the defendant for the benefit of the plaintiff in these circumstances. In my view to do so would, as Brennan J. said in Sutherland Shire Council v Heyman be a ‘massive extension of a prima facie duty of care’ which is not my understanding of the law in this jurisdiction.” Submissions of the parties On behalf of the plaintiff, Mr. Bradley submitted that the learned President had found a number of crucial facts proven to his satisfaction, including the following:- Counsel for the plaintiff contended that these primary facts as so found by the trial judge were based on credible evidence and cannot now be denied by the respondent. It was also implicit from the aforesaid findings of fact that the respondent had not notified Mr. Wildgust of the non-payment of the premium for the month of March at all. In this regard, Mr. Bradley relied upon decisions of this court in relation to primary findings of fact in Hay v. O’Grady [1992] 1 I.R. 210 and Best v. Wellcome Foundation Ltd. [1993] 3 I.R. 421. Counsel for the plaintiff further argued that the trial judge was entitled to infer from the foregoing established facts that the respondent had been guilty of negligent misstatement. It necessarily followed that Hill Samuel had made the inquiry in the capacity of a person who held the benefit of the policy as security and, depending on the answer to the inquiry, would have taken appropriate steps to ensure that the policy did not lapse. Counsel for the plaintiff further submitted therefore that the only issue in dispute was whether the respondent had been guilty of a breach of duty of care towards the appellants, giving rise to an entitlement to damages in the particular circumstances where they had not in fact been aware of the relevant communication and consequently did not act upon it. While the learned trial judge had held that to include the plaintiff as either a person, or being in a category of persons, to whom a duty was owed would represent “a massive extension of a prima facie duty of care”, counsel for the plaintiff submitted that this conclusion was erroneous. He submitted that for all practical purposes the plaintiff and Hill Samuel could be regarded as having an identical interest, the latter as assignees of the policy, and the plaintiff as a person who had contracted with the respondent and who was entitled to an equity of redemption in the policy in question. He submitted that the trial judge was clearly in error in finding, as he did, that the appellants were not prejudiced in the events which occurred and in further finding that it was necessary for Mr. Wildgust to have actually been misled by the statement and to have actually relied upon it before it would be reasonable to impose a duty of care. He further contended that it could not be seriously disputed that if the first appellant had made the inquiry on his own behalf and had received the same information as Mr. O’Hanlon with the same consequent effects, then the appellant’s claim for damages for negligence would be unanswerable. Equally, if Hill Samuel itself had suffered the loss and damage which in fact was suffered by the appellants, the respondent could hardly be heard to say that it was not liable to Hill Samuel in negligence in the like circumstances. In the present case, the respondent had a distinct duty of care both to Hill Samuel and to their own policy holder, and counsel for the plaintiff submitted it was unreal and artificial to suggest that the appellants had no case simply because the inquiry was made by another interested party. He submitted that in all the circumstances it was just, fair and reasonable in the present case that a duty of care be imposed. In response, Mr. Sreenan S.C., on behalf of the respondent insurance company, argued that the plaintiff was now seeking to maintain a cause of action in respect of a statement made, not to him, but to Hill Samuel, about which he did not know and upon which he did not rely. He submitted that the cause of action was not just unsustainable as a matter of law, but was an entirely circular contention since the respondent could not be held liable for loss caused by the plaintiff’s own breach of contract with the respondent and/or by a breach of contract and/or negligence by the plaintiff’s own bank in failing to pay the premium on its behalf, for which as a matter of law the plaintiff was now liable. In essence, counsel for the respondent argued that the plaintiff’s claim was that the respondents owed to him some type of legal obligation to prevent him suffering loss as a result of his own wrongdoing and that of his agent, namely, the Bank of Ireland. He further submitted there was no evidence to support the suggestion by the plaintiffs that Hill Samuel Bank were acting as the agent of the plaintiffs in making the inquiry of the Norwich Union. Mr. O’Hanlon had specifically indicated that in telephoning the Norwich Union, he was concerned to ensure that things were in order from Hill Samuel’s point of view as the assignee of the policy. When asked whether his concern was to look after the interests of Hill Samuel in this matter, he had answered that that was so. He went on to confirm that he was making the call on behalf of Hill Samuel and that he was contacting the insurance company “independently”. He did not go back to Mr. Wildgust after receiving information from Norwich Union. Further, Mr. Wildgust said that he did not rely on Hill Samuel to contact the Norwich Union. In order to make a case in negligent misstatement in the instant circumstances, counsel for the respondent contended that the plaintiffs would have to establish:-
Counsel for the respondent argued that these requirements had not been met in the instant case. Further, the plaintiffs were attempting to subsume the tort of negligent misstatement into ordinary principles of negligence because the facts of the case could not sustain a claim in negligent misstatement. While the plaintiffs had attempted to rely upon the decision of the Supreme Court in Glencar Exploration plc. v. Mayo County Council (No.2) [2002] 1 IR 84, the Chief Justice had stated in that case that a claim for damages in negligent misstatement was a major qualification to the principle that no action for negligence lay in respect of purely economic loss. The plaintiffs were in effect seeking to extend the law of negligence in respect of purely economic loss in circumstances where they cannot bring themselves within the parameters of the tort of negligent misstatement, nor could they bring themselves within the category of cases represented by Siney v. Dublin Corporation [1980] I.R. 400 and Ward v. McMaster [1988] I.R. 29. Counsel further submitted that there was no basis for an extension of the law of negligence to embrace a claim where the statement of the defendant was unknown to and not relied on by the plaintiff. Furthermore, counsel for the respondent submitted that before addressing the question of whether the plaintiffs had made out a case in negligent misstatement, this Court should find that no duty of care can or should arise at all by virtue of the fact that the parties were in a contractual relationship and the losses suffered by the plaintiffs were caused by their own breach of contract in failing to pay the premiums due under the policy. Hamilton C.J. quoted from Halsbury (4th ed. Vol.3(1) para. 149) in Kennedy v. Allied Irish Banks SIZE=4 FACE="Times New Roman"> [1998] 2 IR 48 as follows:-
Having adverted to this passage in Kennedy v. Allied Irish Banks SIZE=4 FACE="Times New Roman">, Hamilton C.J. also observed at p.56:-
I should also state that counsel made extensive reference to case law on negligent misstatement in their respective submissions and these cases are referred to in the main part of the judgment which follows.
Decision As was noted by Keane C.J. in Glencar Exploration plc. v. Mayo County Council (No.2) [2002] 1 IR 84 at 136:-
The key passage about the duty of care in the speech of Lord Atkin in Donoghue v. Stevenson at p. 580 is in the following terms:-
The Court was careful to draw a distinction between negligent words and negligent acts. In the course of his speech, Lord Reid stated at p.482:-
Another obvious difference is that a negligently made article would only cause one accident, and so it is not very difficult to find the necessary degree of proximity or neighbourhood between the negligent manufacturer and the person injured. But words can be broadcast with or without the consent or the foresight of the speaker or writer. It would be one thing to say that the speaker owes a duty to a limited class, but it would be going very far to say that he owes a duty to every ultimate ‘consumer’ who acts on those words to his detriment. It would be no use to say that a speaker or writer owes a duty but can disclaim responsibility if he wants to. He, like the manufacturer, could make it part of a contract that he is not to be liable for his negligence: but that contract would not protect him in a question with a third party, at least if the third party was unaware of it.” He concluded that before any duty could arise the most “natural requirement would be that expressly or by implication from the circumstances the speaker or writer has undertaken some responsibility.” The principles laid down in Hedley Byrne & Co v Heller were followed almost immediately in this jurisdiction by the High Court in Securities Trust Ltd. v Hugh Moore & Alexander Ltd. [1964] I.R. 417 wherein Davitt P. defined the context in which liability may arise as follows at p.421:-
In the course of his speech, Lord Bridge noted at p. 617, “the inability of any single general principle to provide a practical test which can be applied to every situation to determine whether a duty of care is owed and, if so, what is its scope.” Lord Bridge went on to say at pp. 617-618:-
In considering firstly the general duty of care in this jurisdiction it might be argued that the parameters of the duty were extended somewhat significantly by the judgment of McCarthy J. in this Court in Ward v. McMaster [1988] I.R. 337. This was a case in which a married couple purchased a house which contained structural defects which had not been picked up on examination on behalf of the local authority by an auctioneer. The plaintiffs sued both the builders and the local authority, their claim against the latter being based on the contention that the local authority should have known that the plaintiffs would rely on an appropriate inspection having been carried out on behalf of the authority. In fact it was carried out by an auctioneer who was not a qualified surveyor and whose report did not reveal the defects in the house. In the High Court, Costello J. held it was within the reasonable contemplation of the second defendant that carelessness on its part in carrying out the valuation of the house might be likely to cause damage to the purchaser. He further held it was consistent with the local authority’s public law powers that they should be accompanied by a common law duty of care in favour of the plaintiffs and he further held that, for similar reasons, it was “just and reasonable” that the Court should hold that a duty of care arose in the case. Upholding the judgment of Costello J. on appeal, Henchy J. was satisfied that the facts of the case were such that it could be decided in accordance with “well established principles” in that the relationship between the plaintiff and the local authority was such that the latter owed to him a duty of care to carry out an appropriate valuation. McCarthy J., however, went a little further, adopting the two stage test adopted by Lord Wilberforce in Anns v. Merton London Borough Council [1978] AC 728, to state at p. 349:-
This strikes me as a particularly appropriate restriction to apply to any duty of care arising in respect of negligent misstatement for all the reasons identified in the cases already considered and bearing in mind always the crucial distinction between words and statements on the one hand and deeds and conduct on the other. It seems obvious that this distinction is one which should not be elided. The question however is whether the principles in Caparo, itself a case in negligent misstatement, should apply to cases of negligent misstatement in this jurisdiction, as distinct from cases of the general duty of care in negligence where application of those principles has been established by the decision of this Court in Glencar plc. v. Mayo Co. Co. (No.2). There are findings of fact in the present case which place the defendants in an invidious position. This Court, following its own decisions in Hay v. O’Grady [1992] 1 I.R. 210 and Best v. Wellcome Foundation [1993] 3 I.R. 421, must accept as correct the primary findings of fact made by the learned trial judge, which include findings that Mr. O’Hanlon did make the disputed telephone call, was given inaccurate information by specialised and trained staff in relation to the position of premium payments payable under the policy, that the information given was therefore a negligent misstatement and that Hill Samuel did rely upon this negligent misstatement not to intervene on the plaintiff’s behalf, as on the evidence most certainly would have occurred, to pay the premiums in question having regard to the parlous state of health of Mrs. Wildgust and Mr. Wildgust’s then preoccupation with her care and welfare. It is also a further finding of fact by the learned trial judge that Mr. Wildgust only knew about the problem with the premium payments in June, 1992, from which it follows that the trial judge was satisfied that Mr. Wildgust had not received any breakdown notice. Mr. Sreenan has repeatedly stated that in the absence of the negligent misstatement being addressed directly to the plaintiff, and in the further absence of any communication by Mr. O’Hanlon with Mr. Wildgust to inform him of his conversation with the official in Norwich Union, essential links in the chain of causation are broken because Hedley Byrne & Co. v. Heller & Partners [1964] AC 465 indicates that these are appropriate limbs of the test. Of course it is argued on behalf of the plaintiff that essentially Mr. Wildgust and Hill Samuel were “under the same roof” insofar as any proximity test is concerned, that they both had an equal interest in getting accurate information to prevent the happening of the loss which did in fact occur, and thus may be identified for all practical purposes as being the same person in law in the context of the particular misstatement. It seems to me that the ‘agency’ argument relied on by the plaintiffs in this respect, whereby it is contended that Hill Samuel were ‘agents’ of the plaintiffs for the purpose of making the particular inquiry is a red herring. Hill Samuel were acting on their own behalf. This does not dispose of the proximity point however because it must have been within the contemplation of the official giving out the information that it would either be relayed to Mr. Wildgust as the person liable for the payments under the policy or acted upon by the bank to prevent the lapse of the policy. It would be absurd to treat Hill Samuel as though it had in some way itself become the sole insured under the policy so as to exclude Mr. Wildgust from the very limited category of persons with an interest in the transaction. It would equally have been well within the understanding of the respondents that Hill Samuel, as a merchant bank in the business of lending money, was holding the policy by way of security subject always to Mr. Wildgust’s equity of redemption. They were thus, in my view, both ‘neighbours’ in the legal sense to whom a duty was owed. Is Mr. Wildgust in these circumstances to be deprived of a remedy because the communication was made to only one of two neighbours where one or other could and would have acted to prevent the loss? In Spring v. Guardian Insurance plc. [1995] 2 AC 296, the plaintiff was dismissed as an insurance salesman by the respondent company who then supplied a reference for the plaintiff which contained a negligent misstatement. The House of Lords held that an employer who gave a reference in respect of a former employee owed that employee a duty to take reasonable care in its preparation and would be liable to him in negligence if he failed to do so and the employee thereby suffered economic damage. Further, it was held that the plaintiff was entitled to succeed on the principle in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.[1964] AC 465. At p. 319 Lord Goff of Chieveley stated:-
Prima facie (i.e. subject to the point on defamation, which I will have to consider later), it is my opinion that an employer who provides a reference in respect of one of his employees to a prospective future employer will ordinarily owe a duty of care to his employee in respect of the preparation of the reference. The employer is possessed of special knowledge, derived from his experience of the employee’s character, skill and diligence in the performance of his duties while working for the employer…. Furthermore, when such a reference is provided by an employer, it is plain that the employee relies upon him to exercise due skill and care in the preparation of the reference before making it available to the third party. In these circumstances, it seems to me that all the elements requisite for the application of the Hedley Byrne [1964] AC 465 principle are present.” From the foregoing it is apparent that I favour an interpretation, or adaptation if needs be, of the Hedley Byrne principles which would include more than just the person to whom the negligent misstatement is addressed. The ‘proximity’ test in respect of a negligent misstatement in my view must go further than that and include persons in a limited and identifiable class when the maker of the statement can reasonably expect, in the context of a particular inquiry, that reliance will be placed thereon by such person or persons to act or not act in a particular manner in relation to that transaction. As I accept the submission of plaintiff’s counsel that Mr Wildgust and Hill Samuel had virtually an identical interest in preserving the policy and that both formed such an identifiable class, either of whom could have acted to prevent Mr. Wildgust’s loss, I believe it is just and reasonable to ascribe to the respondents a duty of care with regard to Mr Wildgust in such circumstances. In a nutshell, I would interpret Hedley Byrne in the light of what was stated in Caparo on the facts of this case. I am far from convinced that to so hold represents any major extension of the principles in Hedley Byrne v Heller as the facts of that case may indicate. The appellants in Hedley Byrne 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 orders. They asked their bankers to inquire into the company’s financial stability and their bankers made inquiries of the respondents, who were the company’s bankers. The respondent gave favourable references, and in reliance on these references the appellants placed orders which resulted in financial loss. Without having to specifically decide the particular point of identification, Lord Reid had the following to say at p.482:-
Lord Pearce, also in point in the same case at p. 539, added:- “Was there such a special relationship in the present case so as to impose on the defendants a duty of care to the plaintiffs as the undisclosed principals for whom the National Provincial Bank was making the inquiry? The answer to that question depends on the circumstances of the transaction. If, for instance, they disclosed a casual social approach to the inquiry, no such special relationship or duty of care would be assumed (see Fish v. Kelly 17 C.B.N.S. 194). To import such a duty the representation must normally, I think, concern a business or professional transaction whose nature makes clear the gravity of the inquiry and the importance and influence attached to the answer,” That leaves only the argument that the plaintiff cannot profit from his own breach of contract by invoking a claim in tort. As already indicated, reliance was placed by the respondents on the decision of this Court in Kennedy v. Allied Irish Banks plc [1998] 2 IR 48 in making this submission and on certain dicta of Hamilton C.J. cited above. However the case in question is an authority for the proposition that, irrespective of the existence of a contract, a duty of care may still arise where a party undertakes to exercise a special skill to perform a particular task knowing that the party on whose behalf the task was being performed relied on that skill. In so holding, Hamilton C.J., having invoked Hedley Byrne, stated at p 56:-
In these cases it is found as a fact that the customer, to the knowledge of the bank, relied on the bank to perform a particular task, that the bank assumed the responsibility of performing that task and failed to exercise the requisite degree of care in the performance of such task.” Nor does the decision of this Court in Pat O’Donnell & Co. Ltd. v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 materially assist the respondent. Having referred to a multitude of cases wherein it was held that there can be concurrent liability in tort and contract, O’Flaherty J. stated at p 199:-
However, in turning to address the facts of the particular case, O’Flaherty J. then went on to say at p. 200:-
I would allow the appeal herein.
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