Spring v Guardian Assurance

The House of Lords held that a person who gives a reference can, in appropriate circumstances, owe a duty of care to the subject of the reference. The duty arises where the maker of the reference has assumed responsibility (broadly in the sense explained in Hedley Byrne) and the subject reasonably relies on the maker to exercise due care and skill; the employer/ ex-employer context commonly gives rise to such proximity. The court rejected the proposition that the law of defamation (in particular the defence of qualified privilege) uniformly excludes a negligence cause of action: where policy considerations do not preclude it, negligent preparation of a damaging reference can found liability for pure economic loss. The decision relied on the Hedley Byrne principle, considered the public policy concerns underpinning qualified privilege (as expressed in Horrocks v Lowe) and applied the Lautro rule 3.5(2) as illuminating the context. The House allowed the appeal on negligence grounds, restored the trial judge's findings on duty and breach as against the Court of Appeal's contrary conclusion, but remitted the case to the Court of Appeal to determine causation and assessment of damages.

The appellant, Mr Spring, was a company representative and sales director(designate) associated with Corinium, which was an appointed representative of Guardian Assurance under section 44 of the Financial Services Act 1986 and subject to the Lautro Rules. After dismissal, Guardian Assurance (and associated companies) supplied prospective employers with a reference that contained adverse statements about Mr Spring's honesty and competence. Those employers declined to appoint him. Mr Spring sued in malicious falsehood, breach of contract and negligence. At trial Judge Lever Q.C. found no malice but did find negligence in the preparation of the reference and awarded damages; the Court of Appeal set that finding aside.

The appeal to the House of Lords raised principally whether (1) a duty of care in negligence arises to the subject of a reference prepared without reasonable care, and (2) whether public policy (reflected in the law of defamation and the defence of qualified privilege) should negate such a duty. The House analysed the matter under the Hedley Byrne principle (assumption of responsibility and reliance) and the Caparo-type tripartite considerations (foreseeability, proximity and whether it is fair, just and reasonable to impose a duty).

• The court held that, in the employment/reference context, damage from an inaccurate reference is foreseeable, proximity normally exists and it can be fair, just and reasonable to impose a duty of care: employers (and associated organisations) usually possess the special knowledge and assume responsibility when giving references.
• The House considered and rejected the argument that recognition of a negligence cause of action would necessarily subvert the law of defamation and the public interest in frank references: the defamation rules remain distinct and, in many employment contexts, policy favours permitting a negligence remedy for careless references.
• On contract, the court held it unnecessary to imply any wider term beyond the duty to comply with Lautro rule 3.5(2); but an implied contractual duty to exercise reasonable care could arise in appropriate employment contracts.

The House allowed the appeal on the negligence issue, restored the trial judge's order on liability and remitted the cause to the Court of Appeal to consider causation and assessment of damages.

Appeal allowed in respect of the negligence issue. The House held that a duty of care may arise to the subject of an employment reference where the maker has assumed responsibility and the subject reasonably relies on the exercise of due care (the Hedley Byrne principle applied). Public policy embodied in qualified privilege does not automatically negate such a duty in the employment/reference context. The case was remitted to the Court of Appeal to consider causation and damages.

Trial: His Honour Judge Lever Q.C. (20 December 1991) found negligence and awarded damages. Court of Appeal (Glidewell and Rose L.JJ. and Sir Christopher Slade) set aside the trial judge's negligence finding (10 December 1992) ([1993] 2 All ER 273). House of Lords allowed the appeal and restored the trial judge's order on liability but remitted the question of causation to the Court of Appeal ([1994] UKHL 7).