Peter Marples & Ors v Secretary of State for Education

A public authority does not owe shareholders a duty of care for pure economic loss merely because its decision foreseeably affects a proposed sale. The Hedley Byrne exception requires an objective assumption of responsibility and reasonable reliance, ordinarily evidenced by communications crossing the line between defendant and claimant. A commercial counterparty may have regard to its own interests, including public policy and value for money, where those interests conflict with the economic interests of the counterparty’s owners. Targeted malice in public office requires a specific intent to injure, and an intention to discourage an investment is insufficient without that purpose. The claim was dismissed.

The claimants, shareholders and option-holders in the parent company of an apprenticeship training provider, claimed damages from the Secretary of State for Education. They alleged that officials of the Skills Funding Agency negligently refused to approve a proposed change of ownership involving Trilantic Capital Partners LLP, causing the proposed sale to fail. They also alleged misfeasance in public office, principally on the basis that the decision was intended to discourage Trilantic from proceeding.

The court considered whether the SFA owed the claimants a duty of care in relation to its response under the company’s funding agreement, whether the decision involved targeted or untargeted malice, and whether the decision caused loss.

1. Expert evidence. The claimants’ expert accountancy evidence was prepared with substantial undisclosed involvement by Peter Marples. It was advocacy rather than independent expert opinion. Permission to rely on the reports was revoked.
2. Misfeasance in public office. The tort requires a public officer, a purported exercise of power, the requisite bad faith, and loss. Targeted malice requires a specific intent to injure the claimant. An intention to discourage Trilantic from acquiring the business, or to prevent excessive profits from public funds, did not establish that intent. The targeted-malice claim therefore failed.
3. The pleaded claim against two other officials failed in any event because the necessary states of mind were not pleaded. A hypothetical claim in untargeted malice would also have failed. The officials believed they had power to send the letter, and the letter was correspondence within the SFA’s powers rather than an unlawful exercise of power.
4. Negligence. Established principles governed. Pure economic loss is generally irrecoverable, subject to the Hedley Byrne principle of assumption of responsibility and reasonable reliance. No communications crossed the line between the SFA and the claimants or an authorised representative of the sellers. The relevant communications were with the company concerning a contractual request.
5. The SFA was not providing a professional service for the claimants’ benefit. It was acting as the company’s commercial counterparty and was entitled to consider its own interests, including public funding and policy objectives. Foreseeable economic impact was insufficient to create a duty. The White v Jones “lacuna” principle did not apply because the SFA owed no relevant duty to the company and the task was not undertaken for the claimants’ benefit.
6. The decision letter did not prevent a sale. The SFA’s consent was not legally required, another purchaser might have proceeded, and the evidence did not establish that the letter reduced the company’s value or rendered the shares unsaleable.
7. Disposition. The claim was dismissed. The court made no award of damages, but held that the claimants had in any event failed to establish the alleged loss and had failed to prove the pleaded lost chance concerning rollover loan notes.