Expectation Losses, Negligent Omissions and the Tortious Duty of Care

Editorial Committee of the Cambridge Law Journal

Expectation Losses, Negligent Omissions and the Tortious Duty of CareAuthor(s): John MurphySource: The Cambridge Law Journal, Vol. 55, No. 1 (Mar., 1996), pp. 43-55Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge LawJournalStable URL: http://www.jstor.org/stable/4508168 .

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Cambridge Law Journal. 55(1), March 19%, pp. 43-55 Prinied in Great Britain

EXPECTATION LOSSES, NEGLIGENT OMISSIONS

AND THE TORTIOUS DUTY OF CARE

John Murphy*

I. Introduction

In English law, the recovery of pure economic loss fails mainly within

the province of the law of contract, Only in very limited circumstances

does the law of tort provide for the recovery of such losses. As

Cardozo C.J. explained in Ultramares Corporation v. Touche,1 tort is

concerned not to permit "liability in an indeterminate amount, for an

indeterminate time to an indeterminate class".2 Notwithstanding this

reticence, their Lordships' speeches, though not the final decision, in

the seminal case of Hedley Byrne & Co. Ltd. v. Heller and Partners

Ltd.3 provided a notable inroad into the rigidity of this stance. Since

Hedley Byrne, the question has become, instead, how far, not //, pure economic loss is and should be recoverable in the law of negligence.

Another difficulty which has troubled the courts in recent years has been how to delimit the circumstances in which losses sustained

by virtue of nonfeasance are recoverable. In Smith v. Littlewoods

Organisation Ltd. ,4 Lord Goff attempted to set out the categories of

case in which damages could be obtained for negligent omissions.

Nevertheless, the decision in that case failed to remove all the

conceptual problems surrounding actionable nonfeasance. This is not

surprising when we recall that Lord Mackay L.C. and Lord Goff who

delivered the two leading speeches in the case, reached the same

conclusion by very different reasoning. Briefly, the Lord Chancellor was insistent that, in omissions cases, there must be a very high degree of foreseeability of harm to the plaintiff before a duty of care will be

imposed whereas Lord Goff opined that mere reasonable foreseeability would suffice. In addition, and this is something that will be explored in greater depth below, the criteria to determine the requisite degree

Lecturer in Law, Faculty of Law, University of Manchester. Thanks are due to Margaret Brazier for her comments on an earlier draft. (1931) 174M.E.441. Ibid., at 444. [1964] A.C. 465. [1987] A.C. 241.

43

















C.L.J. Expectation Losses and Negligent Omissions 51

C. Lord Must ill's Speech

As mentioned above, Lord Mustill also saw the existence of a

sufficiently close relationship between the plaintiffs and the defendant

to be the key to the case. He disagreed, however, with Lord Browne-

Wilkinson's analysis of what that entailed. Instead, he shared the view

proffered here (although he used different words to express it) that a

better understanding of what is required for an assumption of

responsibility to evince proximity, is that it bean undertaking to the

plaintiff. He reached this conclusion on the basis of a thorough trawl

of the decided cases, and a close scrutiny of the speeches in Hedley

Byrne. He observed in the case-law the requirement that an assumption of responsibility must display the crucial element of "mutuality" before

it will be taken to be evidence ofa sufficient relationship of proximity.

Mutuality, he said, meant "that both plaintiff and defendant played an active part in the transaction from which the liability arose".35 He

then explained and distinguished Hedley Byrne by reference to this

principle saying:

On the facts of Hedley Byrne this [crucial] relationship [between plaintiff and defendant] was bilateral, being created on the one hand by the acts of the plaintiffs in first asking for a reference in circumstances which showed that the bankers' skill and care would be relied upon and then subsequently relying on it; and on the other hand by the bankers' compliance with the request.36

Having found there to be an absence of any mutuality in White v.

Jones, his Lordship felt bound to hold that, despite the justice that

would be done by granting the plaintiffs in that case a remedy, no

duty of care existed under the present law nor couid he "create a

specialist pocket of tort law, with a special type of proximity, distinct

from the main body of doctrine, sufficient to provide a remedy".37

However, this element of his Lordship's speech is as questionable as

Lord Browne-Wilkinson's analysis of what ought to be the proper

understanding of an "assumption of responsibility". The details of this

argument, based on a broader principle-based approach to duty are

set out in the next section of this article. It attempts to find a tortious

solution to White v. Jones that was, unfortunately, overlooked by all

their Lordships in the House of Lords.

35 While v. Jones, at 283. 36 Ibid, an 287. 37 Ibid. at 291.







54 The Cambridge Law Journal [1996]

VI. Conclusion

Since we are now in an era of extending the parameters of tortious

liability on an incremental basis, reasoning by analogy with decided

cases,42 it is perhaps useful to demonstrate that liability ascribed on

the basis ofthe argument advanced in the preceding section is far from

a massive leap forward (if it is a step forward at all). In Henderson v.

Merrett Syndicates Ltd.43 A had a contract with B the performance of

which would "closely and directly" affect the financial status of C, the

plaintiffs. The same situation could be said to exist in White v. Jones, the only difference between the cases being that, in White v. Jones, the

contractual duty owed by A to B did not also entail an undertaking on A's part in favour of C. Yet, as has already been explained, the

existence of an undertaking is merely one means by which proximity can be shown to exist. It is not the only means by which a relationship of proximity can be established: damages for physical injuries and for

psychiatric harm are seldom if ever awarded in circumstances in which

proximity is manifested by reference to an undertaking by the

defendant to the plaintiff. Furthermore, were it the case that it was the voluntary undertaking

(rather than the breach ofthe tortious duty of care) that was actionable

in Henderson, then the case would have to have sounded in contract, for it is with the enforceability of undertakings voluntarily entered

into that the law of contract is concerned. But Henderson did not

sound in contract, it was a tort case, and rightly so, since, as between

the defendants and the indirect names affected, there was no privity.

Accordingly, the voluntary undertaking in that case cannot properly be seen as the essential basis of liability; it was simply evidence of the

crucial relationship of proximity between the plaintiffs and the

defendant. On this analysis, since there was proximity in the Atkinian

sense in both cases, Henderson becomes very clearly analogous with

White v. Jones. At the very least, there is a clear comparison to be

made between the two cases.

The concern that would naturally arise from the arguments made

here is whether the so called "floodgates of litigation" would be

opened. If they were to be so opened, the courts might be less prepared than their Lordships in White v, Jones to find it "just, fair and (above

all) reasonable" to impose a duty. So let us test whether the 'liberal5

42 In Murphy v. Brentwood District Council [ 1991] 2 A.C. 398 Lord Keith stated (at 461) his approval of the approach advocated by Brennan J. in Council ofthe Shire of Sutherland v. Heyman (1985) 157 CL.R. 424 that, "the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension ofprima facie duty of care restrained only by indefinable considerations" (at 481). This approach received further endorsement in Caparo, note 20 above.

43 Note 8 above.





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Expectation Losses, Negligent Omissions and the Tortious Duty of Care

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