The Court of Appeal has upheld an important decision on how professionals might be liable for the negligent advice they give to their friends. Stuart Pemble looks at the dangers
I suspect that Oscar Wilde (whose thoughts on the nature of friendship gave this Legal Note its title) would have accurately predicted the outcome of the Court of Appeal’s decision in Burgess and another v Lejonvarn [2017] EWCA Civ 254; [2017] PLSCS 87.
Hamblen LJ (with whom Gloster and Irwin LJJ agreed) upheld the first instance decision (see “A friend in need is not always a friend in deed”, Legal Notes, EG, 19 March 2016, p89) of Alexander Nissen QC (sitting as a High Court judge) that Basia Lejonvarn owed her neighbours, the Burgesses, a duty of care in tort for design and project management services she provided in relation to landscaping work at their north London home.
Although the High Court judgment arguably did no more than correctly apply the relevant legal principles to the case’s particular facts, both decisions have attracted significant legal comment as well as the interest of Fleet Street. However, if you look behind the story of a falling-out between the well-to-do folk of Highgate (and while acknowledging that Oscar might have had a point – being sued by your friends in the High Court undoubtedly counts as being stabbed in the front and not the back), Hamblen LJ’s judgment deals with some fascinating legal issues, prompted by the very robust challenges to the first instance decision by Lejonvarn.
The arguments on appeal
Lejonvarn’s case centred around the fact that the first instance judge held there was no contract between the Burgesses and her.
In the light of this, she argued that the judge applied the wrong test to establish a duty of care. Had the correct test been used, she would not be liable.
Lejonvarn also argued that there was a fundamental difference between contractual obligations, which can impose positive duties on parties, and tortious ones, which are negative requirements to avoid either doing something at all or doing it badly. Since there was no contract, it was wrong of the judge to have imposed positive obligations on her. This second argument was based on fundamental principles. If tort could impose positive obligations on parties, it would effectively circumvent the normal rules of contract, which need other requirements – such as consideration – before a positive obligation can be said to exist.
The correct test
The most famous rule for establishing a duty of care in tort is the “threefold” test established in Caparo Industries plc v Dickman [1990] AC 605. One is owed if (a) the loss suffered was reasonably foreseeable, (b) the relationship between the parties is sufficiently close, and (c) in all of the circumstances of the case in question, it is fair, just and reasonable to impose a duty.
However, in cases where the claimant is looking to recover pure economic loss, the “assumption of responsibility” test (most famously summarised in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145) is used. This creates a duty of care in situations where a defendant has voluntarily answered a question or provided skilled advice or services where they know that the claimant will rely on their answers or advice. The judge applied the assumption of responsibility test. Lejonvarn argued that the threefold test should have been used and that it would not be fair, just or reasonable to impose a duty of care.
Hamblen LJ agreed with the judge. He relied on Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28, which made it clear that the assumption of responsibility test was applicable in cases that are akin to a contract and where, as here, Lejonvarn voluntarily tendered “skilled professional services in circumstances where she knew the Burgesses would rely on the proper performance of those services”. Hamblen LJ also noted that, in Barclays, both Lords Mance and Hoffmann had stressed that where the assumption of responsibility test applies, it effectively subsumes and replaces the threefold test.
A positive obligation?
Hamblen LJ also dismissed Lejonvarn’s argument that she had been placed under a positive tortious duty that could only exist as a matter of contract. Although he accepted the importance of that distinction (and relied on an earlier Court of Appeal decision in General Accident Fire and Life Assurance Corp Ltd v Tanter (The Zephyr) [1985] 2 Lloyd’s Rep 529), Hamblen LJ did not think it applied in this instance. This was because the finding against Lejonvarn at first instance was not that she had a duty to carry out the services. Rather, it was that if she voluntarily chose to carry out the services, then she had to act with reasonable skill and care when doing so. Hamblen LJ stressed that “a duty expressed in these terms does not trespass on the realm of contract”. He also noted that the first instance hearing was limited to preliminary issues, and that the precise nature and extent of Lejonvarn’s duty would only emerge at a full trial.
Consequences
The advice to construction and property professionals following the Court of Appeal’s judgment remains the same as it did following Mr Nissen QC’s. First, if you are being asked to give professional advice, agree a contract and get paid for the provision of your expertise. However, if you are being asked for your advice in an informal or social context, stress that you are not giving advice that is to be relied on. If your friends want to rely on your advice (and to sue you if it is wrong), they should be willing to pay for it.
Stuart Pemble is a partner at Mills & Reeve LLP
