Spring v Guardian Assurance Plc

An employer or former employer who supplies a reference may owe its subject a duty to exercise reasonable care in its preparation. The duty arises where economic loss is foreseeable, the relationship is sufficiently proximate, and its imposition is fair, just and reasonable. It requires reasonable investigation of adverse facts and the factual basis of adverse opinions, but does not guarantee accuracy.

Qualified privilege in defamation does not exclude this distinct negligence liability. The public interest in full and frank references is compatible with requiring reasonable care. An employer cannot avoid responsibility merely by delegating the collection or communication of information used in the reference.

Spring v Guardian Assurance Plc concerned a former insurance representative whose applications for new appointments failed after the respondents supplied references alleging dishonesty, lack of integrity and mis-selling. The trial judge found that the principal adverse allegations had been made without reasonable investigation, although their makers honestly believed them and were not malicious.

The plaintiff's claims for malicious falsehood and breach of contract failed, but the trial judge upheld his negligence claim. The Court of Appeal reversed that decision, holding that a negligence action would circumvent qualified privilege in defamation: [1993] 2 All ER 273. The central issue before the House was whether the giver of a reference could owe its subject a duty of care in respect of economic loss caused by its negligent preparation.

1. Disposition. By a majority of four to one, the House allowed the appeal on negligence. The Court of Appeal's order was set aside and the trial judge's order restored. The issue of causation was remitted to the Court of Appeal.
2. Duty of care. Lord Goff, Lord Lowry, Lord Slynn and Lord Woolf concluded that a duty of care arose in the circumstances. Lord Goff derived it from the assumption-of-responsibility principle in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465. The respondents had special knowledge of the appellant's work, undertook to provide a reference affecting his future employment and knew that he relied on them to exercise care. Lord Lowry, Lord Slynn and Lord Woolf also emphasised foreseeability, proximity and whether the duty was fair, just and reasonable.
3. Scope and breach. Per the majority, the duty required reasonable care in investigating and communicating adverse facts and in establishing the factual basis of adverse opinions. It required care rather than a guarantee of accuracy. The trial judge was entitled to find that the allegations concerning honesty and integrity had been made without adequate investigation and that the duty had been breached.
4. Defamation and public policy. Per Lord Goff, Lord Lowry, Lord Slynn and Lord Woolf, qualified privilege did not exclude the negligence duty. Defamation protects reputation and requires malice to defeat privilege; the negligence claim concerned careless preparation and resulting economic loss. Full and frank disclosure under rule 3.5(2) of the Lautro Rules 1988 was compatible with reasonable care. The benefit of protecting employees against serious economic harm outweighed the risk that some referees might become less candid.
5. Delegation and contract. The controlling reasoning established that responsibility could not be avoided merely by delegating the collection or compilation of information. Lord Slynn and Lord Woolf would also have implied a contractual term requiring reasonable care in the defined employment setting. That contractual ground did not command a majority and was unnecessary to the disposition.
6. Dissent. Lord Keith would have dismissed the appeal. He considered that imposing negligence liability on a privileged reference would inhibit frank communication and undermine the policy of qualified privilege.

1. House of Lords: Allowed the appeal by a majority of four to one, set aside the Court of Appeal's order, restored the trial judge's order and remitted causation to the Court of Appeal.
2. Court of Appeal: Allowed the defendants' appeal and set aside the finding of negligence, holding that no duty of care was owed to the subject of the reference: [1993] 2 All ER 273.
3. High Court: Judge Lever QC, sitting as a deputy High Court judge, rejected malicious falsehood and breach of contract but upheld the negligence claim, with damages to be assessed.