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Blurred lines between liability in contract and tort

In Burgess and another v Lejonvarn, Alexander Nissen QC (sitting as a Deputy High Court judge) determined that the defendant owed a duty of care in tort to her former neighbours in connection with what the court held to be the provision of a number of professional services on their garden project.

This was so irrespective of the fact that the parties had concluded no contract, for a whole host of reasons, including that there had been:

  • No offer and acceptance.
  • No intention to create legal relations.
  • No consideration.

Indeed, the court went so far as to say that “the contention that the parties had concluded a contract was a hopeless one”.

Oliver Pearson has already provided a detailed account of the facts of the case in an earlier post, so I won’t repeat that here. I want to look more closely at some of the tortious duties that were found to arise. A number of those duties imported positive obligations to act, and beg the question: if you haven’t entered into any contract, can the law of tort build one for you?

Liability in tort for pure economic loss

As Jackson LJ said in Mr JA Robinson v Jones (Contractors Ltd):

“…tortious duties are imposed by law (without any need for agreement by the parties) because society demands certain standards of conduct.”

For example, society demands that if you are engaging in conduct that is liable to cause physical injury or damage to another’s property, you take reasonable care so as to avoid doing so.

As we all know, when it comes to liability for pure economic loss, things become a bit more tricky. One might ask: why should society demand a certain standard of conduct in the provision of information or advice in circumstances in which the recipient had the opportunity to bargain (and pay) for a contractual warranty, but instead went ahead without one?

Whatever the merits of that debate, it has been clear since Hedley Byrne v Heller that a duty of care can arise in this context. Indeed, the rationale for such a duty being imposed was relatively straightforward. In circumstances in which the bank took it upon itself to prepare the reference (knowing that it would be relied upon and could cause loss if incorrect), the claimant was (or would have been, absent the disclaimer) entitled to assume that reasonable care had been taken in preparing it. As such, a duty of care arose, the threshold test set out in Hedley Byrne being an assumption of responsibility coupled with reliance.

In Henderson v Merrett Syndicates, Lord Goff analysed the Hedley Byrne principle in detail, and confirmed that it applied to the provision of services as well as advice, and could give rise to liability for damaging omissions as well as damaging acts.

Again, one can see the rationale for this. It would be odd if:

  • Somebody giving advice on what investments to make could owe a duty of care, but somebody managing a client’s assets directly could not.
  • A solicitor who agreed to issue a claim form could be negligent if it was posted to the wrong address, but not if they just forgot to do anything at all.

I would suggest that what the above examples have in common is an assumption of responsibility (irrespective of contract) for a specific task which, if negligently performed, could result in the infliction of damage on another party. (In my examples, the depletion of their investment or, assuming that alternative steps would have been taken to issue the claim form had the solicitor not become involved, the loss of value of their claim). In those circumstances, the law demands that reasonable skill and care be exercised. You become your brother’s keeper whether he has paid you something or not.

Nevertheless, unless tort is to become a mechanism for the imposition of positive obligations akin to contractual ones, a distinction still needs to be borne in mind between non-feasance (for which liability would normally attach in contract only), and misfeasance (for which liability might attach in tort). As Chitty on Contracts says (at paragraph 4-201):

“…non-feasance means complete failure to pursue a promised course of action, while misfeasance means carelessness in the pursuit of that course of action, leading to failure to achieve a promised result… There is no liability in tort for simply doing nothing after having promised to render services gratuitously.”

The duty of care in Burgess v Lejonvarn

In Burgess v Lejonvarn, the judge found that, among other things, Mrs Lejonvarn owed a duty of care to the Burgesses that required her to:

  • Inspect the contractor’s work “as often as was reasonably necessary to inspect the quality of work being carried out”.
  • Carry out detailed design “of the type which would be expected of an architect providing services of the type which arose in this case”.

The findings the court relied on to justify imposing these duties seem to have been threefold:

  • That Mrs Lejonvarn agreed to provide the services in question even if not contracted to do so.
  • That the Burgesses were relying upon her to provide the services and would have gone ahead with another gardening contractor, Mark Enright, had she not agreed to do so.
  • That, to some extent at least, she was in fact performing the relevant services.

taking those findings at face value, I think that a number of interesting points might be said to arise in opposition to the duties that were found to exist:

  • First, one secures a right to demand performance of a service or set of services by contracting (and paying) for those services to be provided. In the absence of a contract, there is ordinarily nothing to define the scope of services to be provided nor to impose a positive obligation to actually render those services.
  • Second, while it might be argued that the element of reliance justifies the imposition of positive obligations in tort, the reality is that reliance (that is, choosing not to proceed with Mark Enright) was, at best, placed on the existence of an agreement to perform a set of services. Again, in the absence of any contract, it is difficult to see how such reliance could give that agreement some kind of quasi-contractual force. Once the project had started, there was no suggestion that the Burgesses would have engaged another architect had Mrs Lejonvarn decided, for example, that she wanted to go on holiday instead. In that sense, her involvement in the project was really nothing more than a bonus for which the Burgesses were paying nothing.
  • Third, if it is the fact of performance that justifies the imposition of a duty of care, then one would expect that duty to be limited to the occasions on which the relevant service was actually carried out (that is, when an inspection took place, a design was produced, and so on). It would be odd if no duty of care arises if an inspection never takes place but, if there were some instances of inspection, an elevated duty to carry out inspections of the work at reasonable intervals were suddenly generated.
  • Fourth, it is arguable that the nature of the duties themselves is fundamentally different to those outlined above. A negligent inspection does not actually inflict harm since, by definition, the relevant defect already exists. At best, a failure to identify the defect deprives the employer of an opportunity to have it corrected, and the complaint is really one of a failure to confer a benefit that competent performance of the service would have provided. While the law of tort generally requires you to refrain from doing something that causes positive harm, if somebody wants to protect their expectation interest in the performance of a promise, then ordinarily they should contract and pay for that protection.
  • Finally, it might be thought an odd state of affairs in which a builder who has been paid to carry out construction work generally owes no duty of care in tort in respect of the quality of his work, but somebody who has not been contracted and is being paid nothing to oversee it does.

Conclusion

Whether the Burgesses can establish any breach of duty remains to be seen. Nevertheless, it appears from the outcome of the preliminary issues hearing that liability may, in principle, arise based on an alleged failure to perform services that Mrs Lejonvarn was never contracted to provide. That being the case, it would seem that not only are you your brother’s keeper but, in some circumstances, his insurer too.

Keating Chambers David Sheard

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