Commissioner of Police of the Metropolis v Lennon

A duty to prevent pure economic loss may arise where a person voluntarily undertakes responsibility for a particular task, knows or ought to know that an identified person will rely on that undertaking, and fails to exercise due care and skill. The duty may require advice or a warning where the undertaking includes arranging a transaction and the risk falls within its known scope.

This is not a general duty on an employer, or a person in an employment-like relationship, to give financial advice. Liability depends on the particular assumption of responsibility and reliance, not on professional status or contract.

A serving Metropolitan Police officer transferred to the Royal Ulster Constabulary. A personnel officer handled the arrangements, told him to leave them to her, and advised him to state a leaving date which created a gap before his new service began.

The gap ended his entitlement to a housing allowance. The officer alleged that the Commissioner, through the personnel officer, had negligently failed to advise him of that consequence. He could not sue in contract because a police officer had no contract of employment.

HHJ Faber in the Central London County Court found that the Commissioner owed and had breached a duty of care, and awarded damages. The Commissioner appealed only on whether a duty to advise existed.

1. Appeal dismissed unanimously. Mummery LJ gave the leading judgment. Rix and Ward LJJ agreed. The County Court’s conclusion that the Commissioner owed a duty of care was upheld.

2. The case fell within the assumption-of-responsibility principle in Hedley Byrne v Heller [1964] AC 465. Liability for pure economic loss may arise from the negligent performance of a task expressly undertaken for an identified person who relies on it. This was an established duty situation, so no separate assessment of whether it was fair, just and reasonable was required.

3. The personnel officer assumed responsibility for arranging this particular transfer and for advising on the allowance risk which the officer had expressly raised. She had, or had access to, the relevant specialist knowledge. Her managerial rather than professional status did not prevent a duty arising. The duty extended to an omission: she should have warned of the consequence of entering a leaving date that broke continuity of service.

4. The court distinguished Outram v Academy Plastics [2001] 1CR 367. It did not impose a general duty on an employer to volunteer financial or pension advice. Rather, the duty arose from the express undertaking and reliance in this case. An employment-like relationship, and the absence of a contract of employment, did not prevent the Hedley Byrne principle applying.

• Court of Appeal (Civil Division): dismissed the Commissioner’s appeal and upheld the finding that a duty of care was owed.
• Central London County Court: HHJ Faber gave judgment for Mr Lennon on 24 June 2003, awarding £43,810.59 with interest and costs.