REEMAN AND ANOTHER v. DEPARTMENT OF TRANSPORT AND OTHERS

A public authority issuing a statutory safety certificate does not owe future purchasers a duty to protect them from pure economic loss merely because their reliance on the certificate is foreseeable. Liability for a negligent statement requires sufficient proximity and must be fair, just and reasonable.

In particular, the statement must be directed to the claimant, or to an identifiable group existing when it is made; used for the purpose for which it was made; and connected with the transaction undertaken in reliance on it. A certificate issued to promote safety at sea does not satisfy those conditions when a future purchaser relies on it to assess a vessel’s commercial value.

The respondents purchased a fishing vessel in reliance on a current statutory certificate indicating that it satisfied the Department of Transport’s stability requirements. The Department’s surveyor had negligently miscalculated the vessel’s stability. When the error was discovered, the certificate was withdrawn and the vessel could no longer be used without unaffordable modifications.

A deputy High Court judge entered judgment against the Department for damages to be assessed. Foreseeability, negligence and causation were no longer disputed. The Department appealed on the ground that it owed the purchasers no common law duty to protect them from pure economic loss.

The Court of Appeal initially confined the appeal to the Department’s liability. The central question was whether sufficient proximity existed and whether imposing the asserted duty was fair, just and reasonable.

1. Appeal allowed unanimously. Phillips LJ delivered the leading judgment. Peter Gibson LJ and Lord Bingham LCJ agreed that the Department owed no duty of care to protect the respondents from the pure economic loss caused by their reliance on the fishing vessel certificate.

2. Per Phillips LJ, foreseeability alone could not establish proximity in a claim for economic loss arising from a negligent statement. The approach in Caparo plc v Dickman required consideration of proximity and whether the proposed duty was fair, just and reasonable. Novel duties should be assessed by comparison with established categories and developed incrementally.

3. The certificate was issued under a statutory scheme whose purpose was safety at sea. It was not issued to inform future purchasers about the vessel’s commercial condition or value. The respondents therefore used it for a purpose different from that for which it was issued. Their later role as owners responsible for safety could not establish proximity in their earlier role as investors.

4. Potential future purchasers were not an identifiable or ascertainable class when the certificate was issued. They were merely an open-ended generic class. Knowledge that an unknown person might later rely on the certificate in a commercial transaction did not create the close and direct relationship required for liability.

5. Imposing the duty would not be fair, just and reasonable. It would significantly extend negligence liability across statutory schemes under which public authorities certify property for safety purposes. The reasoning in Murphy v Brentwood District Council weighed against imposing on a regulatory authority a liability resembling a transmissible warranty of quality. Purchasers could instead protect themselves through surveys and contractual warranties.

6. Peter Gibson LJ additionally rejected an assumption of responsibility. The Department acted under statutory duty at the existing owner’s request and could not know which persons or companies might later acquire the vessel. Lord Bingham LCJ expressed the decisive deficiencies as the absence of plaintiff-specific, purpose-specific and transaction-specific statements.

1. Court of Appeal (Civil Division): The Department’s appeal on liability was allowed unanimously. The court held that no duty of care was owed to the purchasers in respect of their pure economic loss.

2. High Court, Queen’s Bench Division: His Honour Judge Robert Taylor, sitting as a deputy High Court judge, entered judgment for the purchasers against the Department, with damages to be assessed. The claim against the valuers was dismissed, and a Sanderson costs order was made against the Department.