Cox v Sun Alliance Life Ltd

An employer giving a reference to a former employee owes a duty to take reasonable care to provide a reference that is both accurate and fair. The duty is not satisfied merely by honest belief. Reasonable care generally requires reasonable inquiry into the factual basis of adverse statements, although an employer is not normally required to complete an investigation after the employee has resigned or to provide a comprehensive report. Accuracy and fairness must be assessed in the round and in context. An agreed reference may create particular practical difficulties, but the contractual issue was not determined because the cross-appeal was not argued to conclusion.

After a negotiated departure from Sun Alliance Life Ltd, John Cox obtained employment with Hambro Guardian Consultancy Ltd and later Windsor Life Assurance Company Ltd. References supplied by Sun Alliance allegedly conveyed that he had been suspended and investigated for dishonest or corrupt conduct, although the allegations had not been properly investigated or formally put to him.

The Leeds County Court held that there was no breach of contract but that Sun Alliance was negligent, and that the negligence caused Mr Cox's loss of employment with Hambro Guardian. Sun Alliance appealed against liability and Mr Cox cross-appealed on contract. The central issues were the content of the duty of care in providing references, the relevance of the Lautro rules, and causation.

1. Appeal dismissed. Sun Alliance was liable in negligence for references given by Mr Jones to Hambro Guardian and Windsor Life. The cross-appeal on breach of contract was not completed and remained stayed.
2. The duty recognised in Spring v Guardian Assurance Plc extends beyond honesty. An employer must take reasonable care to provide an accurate and fair reference. Fairness and accuracy are assessed in the round and in context, rather than by dissecting isolated statements.
3. Following Bartholomew v London Borough of Hackney, a reference need not be a full and comprehensive report of every material fact. However, adverse comments should be confined to matters that have been reasonably investigated and for which there are reasonable grounds. The approach in BHS Ltd v Burchell provided useful guidance by analogy.
4. The employer was not obliged to continue investigating allegations after Mr Cox resigned. Nevertheless, Sun Alliance could not fairly present unexplored allegations as the product of a proper investigation supporting dismissal. Mr Jones's communications conveyed a seriously misleading impression of dishonesty and corruption and therefore breached the duty of care.
5. The burden lay on Sun Alliance to show that Mr Cox would have lost his employment with Hambro Guardian in any event. It failed to establish that the £250 payment, considered without the misleading surrounding allegations, would necessarily have led to his dismissal. Mr Jones's negligent reference was the effective cause of the loss.
6. The written reference to Windsor Life was also unfair because it implied that Mr Cox's resignation resulted from an investigation connected with dishonesty, although no dishonesty charge had been made. The extent of any resulting loss was left for assessment of quantum.

The order provided for the appeal costs to be paid by Sun Alliance, paragraph 7 of the recorder's order to be set aside, and quantum to be tried by a circuit judge or section 9 judge.

• Court of Appeal (Civil Division): dismissed Sun Alliance's appeal against the Leeds County Court's finding of negligence; stayed the cross-appeal on breach of contract and directed that quantum be assessed separately.
• Leeds County Court: Mr Recorder Duncan Smith held that there was no breach of contract but that Sun Alliance was liable in negligence and that the negligence caused Mr Cox's employment difficulties, subject to quantum.