by jonathan s. fitzgerald bl construction bar …
TRANSCRIPT
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The Construction Bar Association of Ireland| The Law Library Distillery Building| 145 - 151 Church Street, Dublin 7|
DISCLAIMING NEGLIGENT MISSTATEMENT
BY JONATHAN S. FITZGERALD BL
CONSTRUCTION BAR ASSOCIATION OF IRELAND ANNUAL CONFERENCE, 27TH APRIL 2018
Construction Bar Conference Paper
1. Negligent misstatement occurs when there is a representation of fact, which is incorrect,
and is relied upon by another party to their disadvantage where the imparter undertook
or assumed the responsibility to perform the task in the context of a “special relationship”
between the imparter and the impartee of the information giving rise to a duty of care
owed by the imparter to the impartee.
2. A plaintiff’s capacity to recover damages for pure economic loss caused by the negligence
of another is a matter which is still an unsettled element of the law of negligence in this
jurisdiction. The survival of McCarthy J’s test in Ward v McMaster1 in parallel to the test
propounded by Keane CJ in Glencar2 appears to give credence to the basis that the
immovable portcullis has not yet come down upon the capacity to recover damages for
pure economic loss in negligence in Ireland (unlike the apparent position prevailing in the
UK). The dichotomy may in part be a normal product of the notably different legislative
environment pertaining in our neighbouring common law jurisdictions.
3. However, for our present purposes, a key aspect of negligent misstatement (and perhaps
its unique attraction from a practical litigator’s viewpoint) is that recovery for pure
economic loss has long been allowable for damage caused by negligent misstatement
1 [1985] I.R. 29 2 [2002]1 IR 94.
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since its emergence into the light in 1964 pursuant to the House of Lords judgment in
Hedley Byrne v Heller3. It is this characteristic which renders the cause of action
particularly attractive to a litigating plaintiff.
4. An adequate or even passing treatment of the jurisprudence of pure economic loss in
negligence lies outside of the purview of this paper. This is certainly a lucky escape in view
of the exceptionally learned and thoughtful treatment of the subject at the Construction
Bar Association of Ireland’s Annual Conference in 2016 by Deirdre Ni Fhlionn in her paper
“Compliance with the Building Regulations and Liability” and by Paul Gallagher SC in his
paper “Recoverability of Economic Loss In Construction Cases” which are both available
for download for Members from the CBA Codex [and now “for a limited time only” on the
public section of the website for the further edification of non-member attendees].
Hedley Byrne v Heller [1964]
5. The “front door” in any discussion of negligent misstatement is the magnus opus House
of Lords decision in Hedley Byrne. The facts of the case are no doubt familiar to all;
however, by way of recap: advertising agents who were considering acting on behalf of a
prospective client in an advertising campaign (for which the agents would be personally
liable) sought information as to their prospective client’s financial stability. They asked
their bank to contact Heller & Partner (the bankers of the then prospective clients) to
make suitable enquiries as to the respectability and standing of the prospective client.
Pursuant to the enquiry, Heller replied that it consider the prospective client trustworthy
in the way of business to the extent of £100,000 per annum.4 The plaintiff’s bank
communicated the replies to the plaintiff which relied upon those statements which
proved to be inaccurate when the relevant client went into liquidation causing loss in the
amount of £17,000 to the plaintiffs.
6. The Law Lords in Hedley Byrne set forth an encompassing treatment of the circumstances
in which a duty of care will arise in the context of innocent but inaccurate statements
which causes damage to the person who relies upon the inaccurate or incorrect statement
(the tort of negligent misstatement).
3 [1964] AC 465 4 Heller's replies were plainly caveated by a clear disclaimer; the letter was headed ”CONFIDENTIAL” and included the statement “For your private use and without responsibility on the part of the bank or its officials”.
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7. McMahon & Binchy comment that the law in the UK (and Ireland) has progressed upon
the foundation statement of the law of negligent misstatement as formulated by Lord
Morris as follows:
“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 that skill, a duty of care will arise… Furthermore, if, in the sphere
in which a person is so placed that others could reasonably rely upon his judgement or his
skill or upon his ability to make a full 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.”
8. Lord Pearce5 identified three situations where an innocent but inaccurate misstatement \
misrepresentation may give right to damages in tort as follows:
(a) if the misrepresentation was intended by the parties to form a warranty between
contracting parties, that is to say, a contractual situation, it gives on that ground a
right to damages;
(b) if an innocent misrepresentation is made between the parties in a fiduciary
relationship, it may, on background, with a right to claim damages for negligence;
and,
(c) there is also 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.
9. The fundamental difference to be drawn between liability for negligent acts and liability
for negligent speech was emphasised in the speech of Lord Reid6 where he stated:
“The appellants' first argument was based on Donoghue v. Stevenson. That is a very
important decision, but I do not think that it has any direct bearing on this case. That
decision may encourage us to develop existing lines of authority, but it cannot entitle us
to disregard them. Apart altogether from authority, I would think that the law must treat
negligent words differently from negligent acts. The law ought so far as possible to reflect
5 At page 539 - 540 of the judgement op. cit. 6 See pages 482 – 484 of the judgement op. cit.
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the standards of the reasonable man, and that is what Donoghue v. Stevenson sets out
to do. The most obvious difference between negligent words and negligent acts is this.
Quite careful people often express definite opinions on social or informal occasions even
when they see that others are likely to be influenced by them; and they often do that
without taking that care which they would take if asked for their opinion professionally
or in a business connection. The appellant agrees that there can be no duty of care on
such occasions, and we were referred to American and South African authorities where
that is recognised, although their law appears to have gone much further than ours has
yet done. But it is, at least, unusual casually to put into circulation negligently made
articles which are dangerous. A man might give a friend a negligently-prepared bottle of
homemade wine and his friend's guests might drink it with dire results. But it is by no
means clear that those guests would have no action against the negligent manufacturer.
10. Lord Reid continued, clarifying the position that a negligent statement of itself will not
give rise to liability per se. More is needed; namely, that the imparter of the information
needs to assume the responsibility to do the task and that there must exist a special
relationship (of proximity and objective foreseeability of reliance and damage) between
the imparter of the statement and the impartee to give rise to a duty of care (on the part
of the imparter to the impartee) in relation to the accurate performance of the task:
“Another obvious difference is that a negligently made article will 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.
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
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responsibility, and that appears to me not to conflict with any authority which is binding
on this House. Where there is a contract there is no difficulty as regards the contracting
parties: the question is whether there is a warranty. The refusal of English law to recognise
any jus quaesitum tertii7 causes some difficulties, but they are not relevant, here. Then
there are cases where a person does not merely make a statement but performs a
gratuitous service. I do not intend to examine the cases about that, but at least they show
that in some cases that person owes a duty of care apart from any contract, and to that
extent they pave the way to holding that there can be a duty of care in making a statement
of fact or opinion which is independent of contract.”
11. As is clear from the judgment of the House of Lords the impartee must actually rely on
the statement in acting (or, sometimes, failing to act) to his detriment causing loss.
Securities Trust Limited v Hugh Moore and Alexander Limited [1964]
12. Hedley Byrne very promptly made its way into Irish law in the same year by way of the
High Court decision of Securities Trust Limited v Hugh Moore and Alexander Limited8
where the proposition at the heart of Hedley Byrne was accepted by Davitt P that:
“Circumstances may create a relationship between two parties in which, if one seeks
information from the other and is given it, but other is under a duty to take reasonable
care to ensure that the information is correct“9
13. The controversy in Securities Trust arose from a printing error contained in the articles of
association of the defendant company where those articles were sent by the company to
a shareholder in response to his request. The shareholder was a managing director of the
plaintiff company, which, on foot of the inaccuracies in the articles, decided to invest
money in the defendant company. The investment subsequently proved to be
unprofitable and the plaintiff maintained an action for negligent misstatement for the loss
suffered by the investor caused by the printing error upon which it relied in making the
unprofitable investment decision. Ultimately the plaintiff’s action for negligent
misstatement foundered upon the rock of “special relationship” (as described by Lord
Morris above in Hedley Byrne) were Davitt P concluded that it could:
7 The concept of privity of contract (Jus quaesitum tertio), when the third party (tertius or alteri) is the intended beneficiary of the contract. 8 [1964] IR 417. 9 At page 421 of the judgement.
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“hardly be seriously contended that the defendant company owed a duty of care to the
world at large to take care to avoid mistakes and printing errors in the reprint of their
Articles.” 10
Bank of Ireland v Smith [1966]
14. Two years later, the borders of negligent misstatement were again considered by the High
Court in Bank of Ireland v Smith11. Here the defendant auctioneer published an
advertisement for the sale of lands wherein it was inaccurately stated that a significant
proportion of the lands had been under-sown with permanent pasture. The evidence in
the case demonstrated that the plaintiff purchased the land, in part, on foot of this
statement (which proved to be false). However, again the absence of special relationship
caused the claim to fail where Kenny J rejected the argument that the auctioneer acting
for the vendor or should have anticipated that any statement made by him about the
property would be relied upon by the purchaser holding that liability could be imposed
only where there was a relationship between the parties that was “equivalent to
contract”, namely, where there was an assumption of responsibility in circumstances in
which, but for the absence of consideration, there would be a contract.12
15. In the subsequent years, the tight rein on the cause of action of negligent misstatement
imposed by the necessity for the connection between the imparter of the statement and
the impartee to be a relationship “equivalent to contract” underwent a significant
loosening.13
16. It might be further observed that a significant number of the judgements in this period
tended to intertwine consideration of the tort of negligence (per the line of authority
starting with Donoghue v Stevenson – liability for negligent acts) with the tort of negligent
misstatement whereby it is sometimes difficult to accurately survey the exact position of
the borders between the two torts.
10 See page 422 of the judgement 11 [1966] IR 646 12 See “Law of Torts”, McMahon and Binchy, Fourth Edition 2103, page 324 at paragraph 10.87, 13 See Curley v Mulcahy, High Court, McMahon J 21 December 1977; Wall v Hegarty [1980] ILRM 124, Finlay v Murtagh [1979] IR 570.
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Caparo Industries Plc v Dickman [1990]
17. In the UK, matters developed with the decision of the House of Lords in Caparo14 which
concerned a firm of accountants, the auditors of a public limited company, whom the
plaintiffs accused of being negligent in the performance of their auditing duties where the
auditors allowed the significant and material misstatement of the financial statements
which were relied upon by shareholders in the company in their decision to purchase
more shares, in the first instance, and then, in the second instance, to stage a successful
takeover bid for the company. When the true financial picture of the company became
apparent the plaintiffs sued for negligent misstatement for losses suffered in their
investment. 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.”
18. The House of Lords in Caparo were at all times cognisant of the proverbial “floodgate”
threat inherent in negligent misstatement in the absence of an effective brake upon its
application and stressed the necessity for the existence of a “special relationship”
between imparter of the inaccurate statement and the impartee. Lord Bridge continued
as follows:
“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’ . . . 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
14 [1990] 2 A.C. 605
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defendant, that the defendant knew that his statement would be communicated to the
plaintiff, either as an individual or as a member of an identifiable class, specifically in
connection with a particular transaction or transactions of a particular kind (e.g. in a
prospectus inviting investment) 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.”
Wildgust v Bank of Ireland [2006]
19. The factual matrix in Wildgust v Bank of Ireland15 involved a complex set of facts which
pertained to the liability of an insurance company for an incorrect answer from the
plaintiffs’ banker to an enquiry as to whether a premium for loan insurance had been paid.
Bank of Ireland, when informed that the premium had not been paid, did not feel it
incumbent upon it to contact the plaintiffs. The background context was that it was
normal for the bank to pay the premium itself rather than let the policy lapse. As it
transpired as a result of the error, a payment made by the plaintiffs had not been correctly
processed and the policy lapsed causing injury to the plaintiffs. The plaintiffs’ case in the
High Court failed on the basis that there had been no actual reliance by the plaintiffs on
the incorrect statement as they were unaware of it at the time.
20. The issue of reliance was, perhaps, the dominant element of the judgements of
Geoghegan J and Kearns J in the Supreme Court where the Supreme Court found that
there was a “special relationship” between the plaintiffs and the defendant in
circumstances where, if the statement made was incorrect, the policy could lapse to the
detriment of both the bank and the plaintiffs who had a beneficial interest in the form of
an equity of redemption in the policy.
21. Kearns J, delivering the main judgement of the court, speaking of the development of the
law in Hedley Byrne from the principles originally enunciated in Donoghue v Stevenson
concluded that the former had extended liability to include pecuniary loss caused by a
negligent misstatement on a very specific basis namely;
15 [2006] 1 IR 570
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“That the law would 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 a party knew or ought to
have known that reliance has been placed on his skill and judgement.”
22. In considering the synthesis of the leading English authority Caparo and the core Irish
authorities on negligence of Ward v McMaster16 and Glencar Explorations plc v Mayo
County Council (No2)17, Kearns J quoted from Keane CJ’s judgment in the Glencar as
follows:
“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 notoriously difficult 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 is just and 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 [1985] I.R. 29, by Brennan J. in Sutherland Shire Council v.
Heyman (1985) 157 C.L.R. 424 and by the House of Lords in Caparo Industries plc. v.
Dickman [1990] 2 A.C. 605.”
23. Kearns J continued at paragraph 56 et seq of his judgement:
“This most authoritative recent statement of the law in relation to the general duty of care
in negligence is in itself a powerful reason for holding that the test in Caparo, if applicable,
must apply with even greater force to cases of negligent misstatement and that Lord
Bridge’s caveat at page 621 that an essential ingredient of the proximity between the
plaintiff and the defendant in such circumstances must at the very least involve prove “that
the defendant knew that his statement would be communicated to the plaintiff, either as
an individual or as a member of an 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 purposes of deciding whether or not to enter upon that
transaction or upon a transaction of that kind.”
24. Kearns J continued at paragraph 57 of his judgment:
16 [1985] I.R. 29 17 [2002]1 IR 84
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“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 were application of those principles has been established by [Glencar].”
25. Ultimately Kearns J concluded:
“In a nutshell, I would interpret Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. in the
light of what was stated in Caparo Industries plc. v. Dickman [1990] 2 A.C. 605 on the
facts of this case.”
26. The Court then determined that the proper interpretation of the Hedley Byrne principles
included a potential duty of care in negligent misstatement owed to more than just the
person to whom the negligent misstatement was specifically addressed, stating:
“The “proximity” test in respect of a negligent misstatement 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 enquiry, that reliance will be placed
thereon by such a person or persons to act or not act in a particular manner in relation to
that transaction.”
“Put shortly, the first plaintiff was a neighbour for the purposes of the law of negligence
and an especially close one at that. There was no question here of the second defendant
being liable to large numbers of perhaps unknown persons.”
27. Geoghegan J in his judgement expressed the view that the court’s finding relating to
information given to a third party also affected by the incorrect information was only “a
small extension” of the principle that a court might hold there was a special duty of care
when a person, even one who was not the inquirer, was damaged as a consequence of an
incorrect statement and where the existence of such an affected person, and the
reasonable foreseeability of such damage, ought on an objective basis to have been
present in the mind of the person imparting the information.
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28. Geoghegan J further opined that apart from contractual or fiduciary relationships, a duty
of care in the making of the statement may be held to arise in the context of other “special
relationships” which the court may find to exist in particular cases.
29. Geoghegan J held that this duty might emerge when it was plain that the relationship was
such that a party seeking information or advice was trusting the other party to exercise
such a degree of care as the circumstances required, where it was reasonable for the party
seeking information to do that and where the imparter of information gave advice when
he knew, or ought to have known, that the inquirer was relying upon him.
MaGee [2016]
30. The relatively recent High Court decision of O’Malley J in Kevin and Grit McGee v Mark
Alcorn and Michael Friel trading as Michael Friel Architectural Design & Surveying18
(“McGee”) is a formidable synthesis of the Supreme Court’s judgements in Ward V
McMaster and in Glencar. 19 The case has attracted a lot of attention in the construction
law world…..
31. In McGee, the Plaintiffs purchased a new house built by the first defendant, Alcorn, for
the purchase sum of €430,000 in 2008. The second defendant (“Friel”), an architectural
technician employed by Alcorn, provided two certificates to Alcorn - a “Certificate of
Supervision” and a “Certificate of Compliance” – which, premised upon his periodic
inspection during the currency of the works and upon their completion - warranted that
the foundations were satisfactory and suitable in the context of the prevailing ground
conditions; that good building materials and workmanship have been used throughout;
that the property was structurally sound and constructed in accordance with good
practice; and that the construction of the house was in substantial compliance with the
Building Regulations. The certificates were provided by Alcorn to the plaintiffs as part of
the transaction to acquire the house.
32. Serious cracks manifested in the house in 2009 and it was subsequently found, inter alia,
that the foundations were wholly inadequate having regard to the prevailing ground
conditions (or at all) being described by the Plaintiffs’ expert as “incredibly poor” and
18 [2016] IEHC 59 19 [2002]1 IR 94. The Court’s treatment of the Ward v McMaster test and the test set down in Glencar is discussed in Paul Gallagher SC’s paper referred to above at pages 12 and 13 thereof.
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“pathetically bad”. In the circumstances of the case Alcorn had ceased trading and did not
offer a defence to the claim.20 The plaintiff secured judgement against Alcorn and
proceeded at trial against Friel in negligence.
33. O’Malley J’s considered the concept of the relationship as between the Plaintiff and Friel
in finding the existence of a duty of care owed to the Plaintiffs under the principles as
enunciated by McCarthy J in Ward v McMaster and pursuant to the test propounded by
Keane CJ in Glencar. There was no issue of a disclaimer upon the certificates which might
have complicated the analysis of the creation of duty of care as between the parties.
Further, the authorities relied upon by both the parties presented to the Court stem in
the main from the O’Donoghue v Stevenson line of authority (save and except for
Wildgust, see below).
34. The Court concluded:
“135. On the facts of the instant case, I have no difficulty in finding the existence of a duty
of care on either the approach of McCarthy J or Keane CJ
136. There was, in the first place, undoubtedly proximity between the plaintiffs and the
second named defendant. In this respect I consider that the absence of a contractual
relationship between the parties is immaterial. It is true to say that the certificates were
supplied by the second named defendant to the builder, but the only conceivable purpose
of them from the builder's point of view was for presentation to a prospective buyer. The
second named defendant must have been aware of this, and there must have been implicit
knowledge and indeed an assumption that such a person would rely upon the certificates
– that is the purpose for which they were issued. This is particularly so in the case of the
representation that the foundations were properly constructed. Having regard to the
evidence in this case as to how the problem was identified – by the digging of large test
holes around the house - this is not a matter that can readily be assessed by a potential
buyer. By the same token, it was eminently foreseeable by a person in the second named
defendant's position that if the foundations were in fact inadequate, there was likely to be
loss occasioned to the buyer.
20 An unfortunately not irregular experience of plaintiffs in construction disputes in the past decade.
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137. The alternative questions: “Is there any reason not to impose a duty of care in the
circumstances?” and “Is it fair, just and reasonable to impose a duty of care in the
circumstances?” both lead me, on the facts of the case, in the same direction. No argument
has been made by the second named defendant that there are any policy considerations
that would make the Court hesitate in finding that the duty exists. The class of persons to
whom the duty is owed is easily defined – it is the purchaser to whom the certificate has
been presented, since that is the person who will rely upon it. It is not necessary to go
further in this case, and consider the possibility of open-ended liability to subsequent
buyers years down the line.
138. I further consider that it is fair, just and reasonable to impose a duty of care towards
purchasers on persons such as engineers and architects who provide certificates of this
nature to builders. Most people buying a modern house, and most of the lenders to whom
they will go for mortgages, will require such certificates and will rely upon them. Self-
certification by a builder does not seem a realistic alternative. It is simply untenable to
suggest that the person who holds himself out as professionally qualified to assess, and in
a position to certify, the quality of the house and the workmanship of its construction,
should not thereby be required to take care in giving such certification.”
35. It is noteworthy that the Court did not explicitly adopt an approach that separately framed
its consideration of the tort of negligence vs. the tort of negligent misstatement. Rather,
the court engaged in an illuminating consideration and synthesis of the Irish law of
negligence and then proceeded, thereafter, to fold its analysis into a consideration of the
Supreme Court’s judgement in Wildgust.
36. It might be noted that this approach adopted by the court may have been, in part, a
function of the framing of the case in the pleadings where negligent misstatement was
not explicitly pleaded by the Plaintiffs and where Friel had explicitly pleaded in his Defence
that damages were not recoverable where the Plaintiffs’ claim as pleaded was confined
to negligence which he maintained precluded recovery for pure economic loss and
maintained this position in submissions at the trial of the matter.
37. The Court did not directly reject the cornerstone of the Defence’s submissions (that pure
economic loss was irrecoverable in negligence), rather the Court, looking to the pleadings,
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notice for particulars and the replies, concluded that there was sufficient therein to make
out a plea of negligent misstatement21 and concluded:
“… It appears to me that in the circumstances, the combination of the statement of claim,
the notice for particulars and replies thereto are adequate for the purpose of making a
case of negligent misstatement. On the facts of the case, there can be little doubt as to
whether the criteria for liability for negligent misstatement, as discussed in the authorities
and most recently in Wildgust, have been met. Damages for economic loss are, therefore,
recoverable.”
38. In view of the latter finding (of the existence of the plea of negligent misstatement having
been made out in the pleadings) the Court did not consider it necessary to grapple with
the (tentative) general principle that damages in negligence could only be awarded in
respect of personal injuries or damage to property (not being the property, the subject of
the litigation) where negligent misstatement was an acknowledged exception to this
(tentative) principle (in addition to those matters falling within the categories identified
in Siney v Dublin Corporation22 and Ward v McMaster).23
Walsh v Jones Lang Lasalle Limited [2017]
39. It was in the above context that the long running litigation of Walsh v Jones Lang Laselle
Limited24 hoved into view.
21 O'Malley J noted that a similar issue had arisen in Wildgust v Bank of Ireland [2001] 1 ILRM 24 where the plaintiffs had not included a specific plea of negligent misstatement and where during the course of the High Court hearing it became clear that negligent misstatement was, in fact, the true basis of the plaintiffs’ case, the High Court had directed the plaintiffs to amend the statement of claim to include the specific plea of negligent misstatement. Looking to the judgment of McGuinness J in the Supreme Court in this discrete issue, O'Malley J concluded that the elements necessary to found the claim of negligent misstatement were contained in the statement of claim, the misstatement notice for particulars and replies thereto were adequate for the purpose of making a case of negligent. 22 In Siney v Dublin Corporation [1980] IR 400 the Supreme Court held a defendant local authority was liable in negligence in respect of an apartment provided under the Housing Act 1966, which contained defects rendering it unfit for human habitation where the damages were confined to the plaintiff’s possessions in the flat (there was no claim maintained for damages to rectify the defects in the property). 23 As noted, the Supreme Court in Glencar (Keane CJ) expressly reserved the question of whether economic loss was recoverable in negligence per se and expressly opted not to overrule the earlier cases of Ward v McMaster and Siney v. Dublin Corporation stating that : “I would expressly reserve for another occasion the question as to whether economic loss is recoverable in actions for negligence other than actions for negligent misstatement and those falling within the categories identified in Siney and Ward v. McMaster and whether the decision of the House of Lords in Junior Books Ltd. v. Veitchi Co. Ltd. should be followed in this jurisdiction.” It might be noted that Junior Books appears to have fallen into a jurisprudential cul de sac in England and Wales. Ni Fhlionn commented in her CBA paper op cit that “JustCite reveals that the case has not been followed in any subsequent decision of the Courts of England and Wales, although it has been followed in Singapore, Malaysia, and Ireland”.
24 [2017] IESC 38
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40. As to the factual matrix, in the summer of 2000, the defendant (“Jones”) acted as the
estate agent for the vendor of a two-storey commercial property located in the north
inner city area of Dublin. Jones advertised the property and prepared a sales brochure.
The plaintiff (“Walsh”) contacted Jones who provided him with a copy of the sales
brochure during Walsh’s visit to view the property. The brochure generally described the
property and contained specific measurement details of the floor area. However, these
particulars materially overstated the measurement of the first floor area of the
commercial property as 10,463 ft.² (by some 20% as it turned out25).
41. Walsh relied upon the measurement contained in the brochure in the calculation of his
bid(s) in relation to the property premised upon the anticipated commercial rent that
could be charge per square foot of the commercial property. Walsh’s offer was accepted
and he entered into a contract of sale with the vendor to purchase the property on 9
August 2000 for a contract sum of £2,342,000 which completed on 28 September 2000.
42. After the completion date Walsh instructed his chartered surveyor to measure the total
floor area of the property and discovered the material inaccuracy contained in the
brochure where the actual measurement of the first floor was 8,575.5 ft.². A key issue of
contention in both the High Court and subsequently in the Supreme Court was the
presence of a disclaimer contained within the brochure at the bottom of the first page in
very small print as follows:
“Whilst every care has been taken in the preparation of these particulars, and they are
believed to be correct, they are not warranted and intending purchasers\lessees should
satisfy themselves as to the correctness of the information given.”
43. Walsh sued Jones in the High Court by way of plenary summons claiming that Jones owed
Walsh a duty of care in preparing and making available the brochure to Walsh which
included a duty to ensure that the information and particulars provided to Walsh would
be accurate and that all reasonable skill and care would be used by Jones in providing such
information and particulars. Walsh further claimed that Jones knew or ought to have
known that Walsh would rely upon the contents of the brochure; that Jones had expressly
represented that it had taken every care in the preparation of the particulars in the
brochure and that, by reason thereof, Jones had assumed responsibility for the contents
25 No evidence was adduced as to how this error had occurred.
16
of the brochure to Walsh. Particulars of breach of duty and negligence including negligent
misstatement were set down in the statement of claim asserting an alleged failure on the
part of Jones to take reasonable care in relation to the preparation and contents of the
brochure.
44. Jones pleaded in its defence that it owed no duty of care to Walsh to ensure that the
details in the brochure were accurate claiming that there was no special relationship
between the parties and where the disclaimer expressly advised Walsh to satisfy himself
as to the correctness of the information contained in the brochure. Jones further claimed
under the Glencar principles that would be unfair, unjust and unreasonable for the court
to impose upon the defendant a duty of care circumstances.
45. As can be seen from the head note of the High Court judgment, it was held by Quirk J in
finding for Walsh and awarding him damages in the sum of €350,000 as follows:
i. The proximity test in respect of a negligent misstatement included persons in a
limited and identifiable class when the maker of the statement could reasonably
expect, in the context of a particular enquiry, that reliance will be placed thereon by
such persons to act or not to act in a particular manner, potentially to their detriment,
in relation to that transaction.
Glencar Explorations plc v Mayo County Council (No. 2) [2002] 1 IR 84 followed.
ii. That the information contained within the brochure prepared and published by the
defendant was directed towards a very specific, limited and identifiable category of
persons for the express purpose of influencing that limited number of identifiable
people to purchase the property. It was therefore to be expected that potential
purchasers would rely upon the information contained within the brochure or when
deciding whether or not to offer to purchase. Therefore, the relationship between
the plaintiff and the defendant was sufficiently proximate to give rise to a special
relationship.
Wildgust v Bank of Ireland [2006] IESC 19, [2006] 1 IR 570 followed.
iii. That the presence of the “waiver” within the brochure and its precise terms were
insufficient to exclude the defendant from liability to the plaintiff in respect of
17
negligence by the defendant in the incorrect measurement of the floor area of the
property and negligent misstatement on the part of the defendant in publishing the
incorrect measurements of the floor area. If the defendant wished to reserve to itself
the right to publish within its sales brochure, precise measurements which were, in
fact, grossly inaccurate and relieve itself of liability to the category of persons to
whom the brochure and its contents were directed, then there was an obligation
upon the defendant to draw to the attention of the plaintiff and other prospective
purchasers to the fact that the seemingly precise measurements published were
likely to be wholly unreliable and should not be relied upon in any circumstances. By
including within its brochure or a sentence in small print claiming to have taken
particular care in the preparation of all of the particulars within the brochure or but
advising prospective purchasers to satisfy themselves as to the correctness of the
information given the defendant failed to discharge that obligation.
iv. That, in the circumstances of this case, there was a duty upon the defendant to ensure
that the information which it provided was reasonably accurate. The loss and damage
claimed on behalf of the plaintiff was a loss which was reasonably foreseeable by the
defendant and the imposition upon the defendant of such a duty was not unfair,
unjust or unreasonable.
46. In the course of its judgement the High Court made a number of telling findings of fact
and/or inferences from the evidence that:
i. The total rental income recoverable from commercial property will often be the
principal factor in the calculation of value;
ii. The floor area of a commercial premises is an important factor in establishing the
total rental income from the property;
iii. Jones knew, or ought to have known that Walsh would estimate the value of the
property premised upon the floor area of that property;
iv. The overstatement of the floor area of the property would give rise to an inflated
estimate of the rental income recoverable;
v. Walsh had been generally aware of the disclaimer contained in the brochure but
could not recall whether he had read it with any care;
18
vi. Walsh had noted that Jones had stated in the brochure that it had taken “every care”
and that he relied upon the reputation of Jones as a firm of the utmost probity;
vii. None of the other 10 or 12 potential investors who looked at the property carried out
their own measurement surveys;
viii. Jones was a large firm in existence for a considerable period of time, who are
justifiably acquired an excellent reputation for competence, probity and integrity in
its business dealings. Jones held itself out as a company with particular skills and
expertise in the commercial property markets both in Ireland and elsewhere. Jones
relied upon its reputation for excellence in order to encourage prospective customers
to avail of its services.
ix. The brochure was expressly designed to attract the attention of potential purchasers,
in order to encourage them to bid or tender against one another for the property;
x. The brochure was an integral part of the tendering process with the explicit intent of
maximising the price which potential purchasers would pay
xi. The brochure was issued with the implicit motivation of maximising the fee which
Jones would obtain upon the sale of the property.
xii. Potential purchasers would rely upon the information contained in the brochure
when deciding whether or not to purchase;
xiii. The brochure had been published by Jones for the express purpose of influencing a
limited number of identifiable persons, and the publication of the disclaimer was
immaterial to that fact
xiv. Walsh was among the persons to whom the brochure was expressly directed;
xv. Walsh had been influenced by the information published within the brochure and had
relied upon its contents including the measurements when calculating his precise bid
or tender for the purchase of the property;
xvi. The general and\or approved practice in the Dublin market was not to conduct
individual personal measurements of the floor area of commercial properties prior to
purchase.
47. The High Court’s decision was appealed to the Supreme Court which was premised, inter-
alia, on the core contention that the High Court had failed to appreciate the legal import
of the disclaimer contained in the brochure which negatived an essential element
necessary for the finding of a duty of care as between Walsh and Jones (namely the
19
assumption of the duty to Walsh to accurately carry out the measurement of the
property).
48. Sitting as a court of five, the Court was split 3 to 2 with the Honourable Justices O’Donnell
and Laffoy (delivering written judgements for the majority) and with the Honourable
Justice O’Malley concurring, finding in favour of Jones and allowing the appeal. The
Honourable Justices McKechnie and MacMenamin dissented upholding the judgement of
the High Court and dismissing the appeal.
49. A key and perhaps determinative dividing line between the approaches adopted by the
majority and the minority in the Supreme Court was each’s consideration of the import
and application of the rule in Hay v O’Grady26. McMenamin J in his dissenting judgement
at paragraph 10 thereof states as follows:
“This appeal, in my view hinges on findings of fact made by the trial judge these are to be
assessed with references to the tests set out by McCarthy J in Hay v O’Grady27 and
Northern Bank Finance Corporation v Charlton28. It is common feature of both
judgements that such findings, when supported by credible evidence should not be
disturbed by an appeal court. I consider that this appeal is, essentially, a “fact case”, in
particular as regards the judge’s finding as to the state of knowledge of Mr Walsh, and
finding as to market custom. The judge’s assessments of the context and content of the
disclaimer clause were reasonable.”
50. The above cornerstone of the dissenting minority’s approach may be contrasted with the
statements of O’Donnell J in his written judgement at paragraph 18 which states:
“There is an undeniable attraction in taking the approach of treating this case as an
individual instance having no broader implications for the law and capable of being
decided on its own facts by reference to the well-known principles of Hay v O’Grady which
sets out the limitations of appellate review.”
51. O’Donnell J continued in paragraph 19:
26 [1992] IR 210 which is considered a keystone of the Supreme Court’s approach to appellate matters that if "the findings of fact made by the trial judge are supported by credible evidence, the Court is bound by those findings". However, see the recent decision of the Court of Appeal in Lynch v Cooney & Winkworth [2016] IECA 1 for further discussion by Hogan J. 27 [1992] IR 210 28 [1979] IR 149
20
“However, this case proceeded to hearing and was determined in favour of the plaintiff.
Again, if it were permissible to take a broad brush approach to this case, then the result is
certainly not one which is demonstrably unfair. Jones Lang Lasalle did not deny that it was
careless in providing inaccurate measurements, something which was well within its
expertise. Furthermore, the waiver upon which it now relies stated that “every care” had
been taken. Again, therefore, if it were permissible to approach this case is simply one
more instance of the “wilderness of single instances” of the law of negligence and raising
no broader issue, it would not call for much judicial attention. However, this appeal,
whether viewed narrowly or broadly, raises important issues of law which this court
cannot, at least in my view, and should not properly avoid.”
52. A similar ethos is perhaps more implicitly present in the opening paragraph of Laffoy J’s
judgment where the learned judge states:
“For just over half a century, starting with the decision of the House of Lords in Hedley
Byrne & Co. v. Heller & Partners Limited [1964] A.C. 465 (“Hedley Byrne”), the law on
liability in tort for negligent misstatement has been evolving in the United Kingdom. In
general, the developments in the United Kingdom have been followed in this jurisdiction.
However, a very fundamental question which arises on this appeal, namely, if, in what
circumstances and to what extent a disclaimer of responsibility absolves a defendant
supplier of information from liability for economic loss incurred by a plaintiff recipient of
the information due to what would otherwise be negligent misstatement on the part of
the defendant, has not previously been determined by this Court.”
The Judgment of Laffoy J
53. Having set out a detailed consideration of the facts of the matter in paragraph 34 to 65 of
the judgement Laffoy J undertook a comprehensive review of the core authorities which
most importantly included a detailed consideration and application of the principles
propounded in the following:
Hedley Byrne,
Caparo Industries Plc v Dickman [1990] 2 A.C. 605
McCullagh v Lane Fox & Partners [1996] P.N.L.R. 205
Glencar Exploration Plc v Mayo County Council (No. 2) [2002] 1 I.R. 84,
Wildgust v Bank of Ireland [2006] 1 I.R. 570
21
54. In paragraph 50 of her judgment Laffoy J commented that McCullagh was the authority
“which factually bears most resemblance to this case” which the learned judge considered
represented the proper approach to be adopted in this jurisdiction.
55. In McCullagh, the plaintiff viewed a property in London, having seen a magazine
advertisement which describe the relevant property as having “gardens of nearly 1 acre”.
At the viewing, a director of the defendant estate agents who were handling the sale orally
represented to the plaintiff that the site occupied “0.92 of an acre” and, at the conclusion
of the viewing, handed the plaintiff a copy of the particulars of the property (drafted by
the defendant estate agent) which also stated that the area of the site was 0.92 acres.
The plaintiff promptly made an offer on the property which was accepted by the vendor.
Subsequent to the purchase of the property, the plaintiff discovered that the plot site was
only 0.48 acres and sued the estate agent in negligence. The estate agents relied upon a
disclaimer in their particulars document.29
56. In paragraph 52 of her judgment Laffoy J quoted with approval a statement at page 222
of Hobhouse LJ’s judgment as follows:
“Thus the relevance of the disclaimer is to negative one of the essential elements for the
existence of the duty of care. It negatives the assumption of responsibility for the
statement. It implicitly tells the recipient of the representation that if he chooses to rely
upon it he must realise that the maker is not accepting responsibility for the accuracy of
the representation. The disclaimer is part of the factual situation which the court has to
take into account in deciding whether or not the defendants owed a duty of care to the
plaintiff. Put another way, the question is whether the plaintiff was entitled to treat the
29 When compared to the somewhat enigmatic disclaimer set down in small print in the Jones brochure, the disclaimer in McCullagh was significantly more clear and exclusionary in its terms as follows:
1. These particulars do not constitute, not constitute any part of, and offer of contract. 2. All statements contained in these particulars, as to this property, I made without responsibility on the part of
Lane Fox or the vendors or leasers. 3. None of the statements contained in these particulars, as to this property, are to be relied on as statements, or
representations of fact. 4. Any intending purchasers must satisfy themselves by inspection, or otherwise, as to the correctness of each of
the statements contained in these particulars. 5. The vendors to not make or give, and neither Lane Fox nor any person in their employment, has any authority to
make or give any representation or warranty whatsoever in relation to this property.
22
representation as one for which the defendants were accepting responsibility. This is
primarily a factual question.”30
57. In relation to the issue of assumption of responsibility by the imparter of the statement
Laffoy J referred to page 237 of Hobhouse LJ judgment which stated:
“The right approach, as is made clear in Hedley Byrne, is to treat the existence of the
disclaimer as one of the facts relevant to answering the question whether there had been
an assumption of responsibility by the defendants for the relevant statement. This question
must be answered objectively by reference to what a reasonable person in the position of
Mr. McCullagh would have understood at the time that he finally relied upon the
representation. In this context, it is obvious that the statement that the acreage of the
property is 0.92 was a statement that was taken from the particulars, and that the
defendants were not assuming responsibility for that statement. The mere fact that Mr.
Scott, when showing Mr. McCullagh round the property, gave the same information to Mr.
McCullagh, would not lead a reasonable person to conclude that the defendants were
thereby choosing to assume responsibility for the statement which they said, in the
particulars, they were not assuming responsibility for. The submission that such a
conclusion would be reasonable is unreal. It was not supported by any evidence. Mr.
McCullagh said (surprisingly) that he had not bothered to read the particulars, but he also
said that he knew that they would contain disclaimers of the type which they, in fact, did.
The submission was further inconsistent with paragraph 5 of the disclaimer. The essence
of the law of negligence is the application of objective standards of reasonableness. By
those standards, it is clear that the defendants were not assuming responsibility for the
accuracy of the statement about the acreage. The position might be different if the
representation had been about something not, or not expected to be, included in the
particulars.’31
58. Premised on the review of the authorities and, in my view, most significantly by the
judgement of Hobhouse LJ in McCullagh, Laffoy J determined that the High Court had
failed to adequately consider the import of the disclaimer in which Jones made it clear
that the particulars in the brochure or were not warranted and that Walsh was aware of
the disclaimer stating at paragraph 69 of her judgment that:.
30 see page 222 of the judgement. 31 see page 237 of the judgement.
23
“Where the person giving information in so doing has expressly included a disclaimer in
the brochure or advertising and, in my view, the core issue in determining whether a duty
of care exists is whether the existence of the disclaimer by reference to its terms has the
effect that there is no assumption of responsibility for the task of furnishing correct
information on the part of the estate agent giving the information to the recipient. If it has
that effect, a duty of care is not owed to the recipient.”
59. Laffoy J continued at paragraphs 68 and 72 of her judgement that the effect of a disclaimer
must be determined objectively having regard to the words used in the disclaimer.
60. In paragraph 79 of her judgement the learned judge concluded:
“The point on which I fundamentally disagree with the reasoning in the judgment of the
High Court, which ultimately led to what I consider to be the incorrect conclusion that
[Jones] owed a duty of care to [ Walsh] and was in breach of that duty, was the failure,
having considered the matter objectively, to recognise that there was no assumption of
responsibility on the part of [Jones] in relation to the task of furnishing accurate internal
measurements to Mr. Walsh and that the consequence was that the law imposed no duty
of care on Jones. As such recognition should have been the starting point in the process of
determining whether a duty of care was owed by [Jones] to [Walsh] and whether liability
for negligent misstatement lay on Jones, the controversies in relation to the findings of fact
made by the trial judge raised on the appeal do not have to be resolved, even if they could,
or should, be.”
The Judgment of O’Donnell J
61. The judgement of O’Donnell J is founded principally upon the judgments in Hedley Byrne
and McCullagh. A key concept of O’Donnell J’s judgement which echoes throughout his
consideration of the authorities is set down at the end of paragraph 20 and paragraph 21
where the judge states:
“21…. in my view, the importance of recalling that the starting point of the analysis in
Hedley Byrne v. Heller [1964] A.C. 465 was that normally a party does not owe a duty in
tort to another in respect of statements made by them. This is an important distinction. In
the area of actions it can be said the starting point is normally “duty of care unless”,
whereas for statements it is a case of “duty of care only if”.
24
The Broad or Narrow Approach to Liability
21 The narrow version of the plaintiff’s claim depends solely on the interpretation of the
waiver for the purposes of the traditional law of negligent misstatement. The question
here is whether the relationship between the parties is sufficient to create a duty of care
and a disclaimer can be an important piece of evidence in that regard. The plaintiff’s case,
on this narrow version, is simply that the terms of the waiver here are not sufficient to
mean that a duty of care did not arise. A broader version of the claim, which appears to be
discernible at points in the judgment of the High Court and in the submissions made to this
Court, would, however, involve a significant development of the law, and a blurring of the
distinction between negligent misstatement and the law of negligent acts, if not its
removal. In the context of this case, these two approaches have significant differences for
the analysis of the waiver clause. On the traditional principles of negligent misstatement,
a waiver is relevant when considering whether a duty of care arose at all. A waiver is
interpreted fairly broadly in considering whether the defendant can be said to have
assumed, as between itself and a plaintiff, the risk of error. However, if the case is
approached on the basis that there was an existing duty of care by reason of the proximity
of the parties, then the waiver becomes a clause excluding or limiting liability to which
courts have traditionally applied a very strict analysis. It is clear, therefore, that the
manner in which the case is approached may have significant, indeed decisive, impact on
the outcome.”
62. O’Donnell J undertook a thorough review of the judgments of the House of Lords in
Hedley Byrne - where the impugned communication had been subject to a disclaimer -
and highlighted important elements from the Law Lords’ speeches as follows:
Lord Reid at pp 482-484:
i. “... Donoghue v Stevenson. That is a very important decision, but I do not think
that it has any direct bearing on this case….. Apart altogether from authority, I
would think that the law must treat negligent words differently from negligent
acts.”32
32 see paragraph 25 of O'Donnell J’s judgement.
25
ii. “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
acts on those words to his detriment.”33
iii. “In general an innocent but negligent misrepresentation gives no cause of action.”
iv. “The most natural requirement would be that expressly or by implication from the
circumstances the speaker or writer has undertaken some responsibility.”34
63. O’Donnell J further highlighted Lord Reid’s statement at page 492 of the judgment which
makes an important distinction between disclaimers provided prior to the assumption of
responsibility and an exemption clause purporting to excuse a party from liability which
he or she already owes (in contract or in tort):
v. “In the case of a contract it is necessary to exclude liability for negligence, but in
this case the question is whether an undertaking to assume a duty to take care
can be inferred; that is a very different matter.”
63 Reviewing the judgement of Lord Devlin O’Donnell J highlighted the statement at page 533
of the judgement:
vi. “A man cannot be said voluntarily to be undertaking a responsibility if at the very
moment when he is said to be accepting it he declares that in fact he is not. The
problem of reconciling words of exemption with the existence of a duty arises only
when a party is claiming exemption from a responsibility which he has already
undertaken or which he is contracting to undertake.”35
64. Reviewing the judgement of Lord Pearce O’Donnell J highlight the statement at page 540:
vii. “I do not, therefore, accept that even if the parties were already in contractual or
other special relationship the words would give no immunity to a negligent
33 At page 492 34 It should be noted that the responsibility spoken of herein has been interpreted as being the responsibility to undertake a task not legal responsibility per se. 35 See paragraph 31 of O'Donnell J’s judgement.
26
answer. But in any event they clearly prevent a special relationship from arising.
They are part of the material from which one deduces whether a duty of care and
a liability for negligence was assumed.”
65. O’Donnell J declined to distinguish McCullagh on the basis that the disclaimer in that case
was more extensive than the disclaimer under consideration by the court; rather, in
keeping with his analysis of the judgment in Hedley Byrne the judge characterised the
disclaimer not as an exemption clause (to exclude liability arising from an extant duty of
care) but rather as part of the evidence as to whether a duty of care had arisen at all. It
might be posited that, pursuant to the informal law of unintended consequences, that
this decision might stand alongside the main thrust of the Court’s clarification of the law
of negligent misstatement. The disclaimer in Jones was noticeably weak (see McMenanim
J’s unequivocal comments in relation to same in the minority dissent). By comparison,
the McCullagh disclaimer McCullagh was encompassing and clear. The majority’s finding
of fact in relation to the Jones’ disclaimer, upon an objective interpretation, is likely to be
a key practical lodestone for defendants to negligent misstatement actions into the future.
66. O’Donnell J concluded that the judgement of the High Court ran together its analysis of a
claim for a negligent act (namely the measurement or non-measurement of the second
floor of the commercial property) and a claim for negligent misstatement (contained in
the particulars of the property) where the trial judge misstepped in his examination by
proceeding upon the assumption that there existed a duty of care and, only then, looking
to the disclaimer to consider whether it was sufficient to exclude that duty of care.
67. At the heart of O’Donnell J’s judgment to allow the appeal is his conclusion that the High
Court’s approach was more appropriate to the consideration of an exemption clause or
disclaimer which seeks to limit a contractual or tortious liability that already existed and
that this approach in the context of negligent misstatement represented a significant
movement away from Hedley Byrne which mandated that a disclaimer should be
considered earlier in the analysis as part of the evidence as to whether a duty of care arose
in the first place:
“The approach in the High Court appears to be based upon a blurring of the distinction
between liability for negligent act and liability for a negligent statement which was
27
identified in Hedley Byrne v Heller and the succeeding case law, and in doing so, reliance
on the decision of the Supreme Court in Wildgust.”
68. O’Donnell J further concluded in paragraph 51 of his judgment that the High Court failed
to properly objectively interpret the disclaimer in the above legal context. Interpreting
the disclaimer objectively, and reading it as a whole, O’Donnell J concluded that the
disclaimer, when so analysed objectively, was not immaterial and that it was evidence
pursuant to traditional Hedley Byrne principles that Jones expressly disclaimed the
assumption of a duty of care to Walsh and was, therefore, not in breach of such a duty
where Jones had not assumed responsibility in relation to the task of furnishing accurate
internal measurements of the relevant property.
The Dissent – Judgment of MacMenamin J
69. As stated above McMenamin and McKechnie JJ dissented from the majority view tacking
strictly in accordance with the principles of Hay v O’Grady not to disturb the factual
conclusions and inferences from evidence drawn by the trial judge.
70. Throughout his dissenting judgment McMenamin J consistently framed his consideration
of the appeal from the standpoint of the findings of fact and (in his view) reasonable
inferences upon the evidence made by the trial judge.
71. The second key stage of the dissent is McMenamin J’s consideration of the language of
the disclaimer. McMenamin J allowed that if the disclaimer had been clear to the
objective reader it would operate to avoid liability under the Hedley Byrne principles.
72. However, crucially, McMenamin J disagreed with the conclusions of Laffoy J and
O’Donnell J in their objective interpretation of the language of the disclaimer and
expressed agreement with the views of the trial judge, concluding that the disclaimer
clause was objectively ambiguous in the sense that, while it conveyed an invitation (to
intending purchasers to satisfy themselves as to the accuracy of its particulars), it also
contained a representation that acceptance of the invitation was hardly necessary.
73. McMenamin J concluded that not every disclaimer would operate to negative the
assumption of a duty of care by an imparter of information and proceeded to
distinguished the core authority relied upon by the majority, McCullagh, on the basis that
28
the terms of the disclaimer in that case “were crystal clear” as opposed to the purported
disclaimer relied upon by Jones which was ambiguous and opaque in circumstances where
a highly reputable firm had represented that they had taken every care in preparing
measurements.
Commentary
74. The judgement of the Supreme Court in Walsh is of exceptional importance and direct
relevance to the construction industry where at nearly every stage of construction activity
- up to and including the sale of completed properties - reliance is placed upon the
statements of experts and advisers which are often relied upon by third parties outside
the privity of contract.
75. The three written judgements handed down by the court bring a valuable clarity to the
tort which often provides a plaintiff with the clearest route to recovery for pure economic
loss in circumstances of building defects which have been certified by an inspecting or
supervising professional.
76. While each case can only be judged upon its merits the following tentative legal
conclusions might be drawn from the Supreme Court’s analysis:
i. The judgment of the Supreme Court is in no way confined to disclaimers or
exception employed by estate agents and, in view of the approach adopted by
Laffoy J and O’Donnell J, is a broadly applicable clarification of the law of negligent
misstatement;
ii. In the analysis of a disclaimer in the context of a claim for negligent misstatement
brought by a third party (such as a house purchaser) the disclaimer will not be
interpreted as an exemption clause (designed to exclude and/or limit liability for an
extant duty in contract or in tort) but rather shall be considered as part of the body
of evidence to be considered by a tribunal to determine whether there was an
assumption by the imparter to perform the task (i.e. provide accurate
measurements) and, ultimately, whether a duty of care exists at all;
iii. The existence of a disclaimer, even if the language contained therein is relatively
weak, can be evidence that no duty of care is assumed by the imparter in relation
to the statement relied upon;
29
iv. The existence and the objective interpretation of a disclaimer is a fulcrum point in
deciding whether a claim in negligent misstatement is likely to succeed;
v. The existence of a disclaimer may be sufficient, depending on the particular
circumstances, to negative the existence ab initio of a duty of care for negligent
misstatement;
77. Over and above the foregoing, applying a granular construction focus, the clarification of
the tort of negligent misstatement and disclaimer provided by the Supreme Court in
Walsh does have particular relevance in relation to issues of liability arising from and in
relation to the Building Control (Amendment) Regulations, 2014 (“BC(A)R”).36 I would
tentatively opine that strictly applying the approach of the Supreme Court in Walsh to
MaGee (which involved negligent certification) that the High Court would have reached
the same conclusion.
78. A consideration of the potential liability arising from BC(A)R has been the subject of
significant analysis by the Construction Bar Association and others previously. Of
particular note is the detailed and empirical consideration contained in the paper
presented by John Trainor, Senior Counsel to the Construction Bar Association on 14
December 2016 entitled “The Civil Liability of Certifiers – Under the Building Control
(Amendment) Regulations of 2014\15”. (hereinafter “the Trainor Paper”)
[A copy of this paper is also available on the Codex along with a video recording capturing
the erudition of John Trainor SC’s presentation to the Association. In addition, a copy of
the paper has been made available for download on the public section of the CBA website
at http://www.cba-ireland.com/resources/ practices for the ease of attendees.]
79. A significant, although by no means the only, focus of the paper is a consideration of
O’Malley J’s judgement in McGee and the implications arising therefrom for liability under
the system of self-certification envisaged by BC(A)R.
80. Paragraph 7.10 on page 19 of the Trainor Paper states that the certificates of compliance
on completion are in a mandatory statutory form and are required to be used with no
36 SI 9 of 2014
30
entitlement for ad hoc modification or qualification. At footnote 20 at the bottom of the
same page it states:
“Enquiry with the building control section of DCC suggests that the certificates are perused
for format and rejected if not strictly in accordance with the statutory form such as e.g.
not signed, or if they include words of qualification or any additions. Other BCA’s
presumably do likewise.”
81. On the coming into force of the original 2013 regulations the then Minister for the
Environment, Community and Local Government, Phil Hogan TD stated that the BC(A)R
Certificates would provide:
“Clear, unambiguous statements on statutory forms stating that each of the key parties to
a project certifies that the works comply with the building regulations and that they accept
legal responsibility for their work.”
82. It is certainly clear that BC(A)R certificates may be accessed by the public and that the
system is designed such that the certificates are intended to be made available and relied
upon by third parties (for example, prospective purchasers of those properties).
83. I further note Mark Sanfey’s SC’s statement towards the conclusion of his outstanding
article entitled “The Implications of the New Building Regulations for Design and
Construction Professionals” published in the Bar Review, Volume, 21 February 2016 where
he states:
“It is clear from the statutory framework of certification by specific professionals in the
construction process, and the fact that those certificates may be accessed by the public,
that the certificates are intended to be documents that will be procured and relied upon
by any subsequent titleholder. In this way, professionals may expect that their liability on
foot of the certificates will extend far beyond any contractual relationship that they may
have in relation to the works, with all the implications for the professional indemnity
insurance that that may have.”
31
84. While the extent of the change in liability risk for Certifiers under BC(A)R, if any,37 remains
to be determined by our courts. It is to be anticipated that in circumstances of defects
manifesting in properties certified under BC(A)R that plaintiffs will seek redress against
those certifiers in negligent misstatement.
85. In light of the illuminating written judgements of our Supreme Court in Walsh, it is starkly
notable that the statutory certificates (strictly required to be in a statutory format and, as
such) will not and cannot contain any express words disclaiming an assumption of
responsibility on the part of the certifier to third parties with whom the court may well
find the certifier has a “special relationship” and owes a duty of care in negligent
misstatement.
- END -
Disclaimer (wholly without irony): This is a lecture paper only. No liability is accepted in respect of
its contents or omissions. Specialist legal advice should be obtained before any decision is taken in
respect of any of the matters discussed or referred to in it.
37 Please see the Trainor Paper particularly at pages 29 et seq therein where John Trainor SC explores (and advances) a number of powerful arguments and searching questions which might support a finding by our courts that civil liability in negligent misstatement ought not to follow ipso facto negligent certification under BC(A)R.