Disclaiming Negligent Misstatement

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DISCLAIMING NEGLIGENT MISSTATEMENT

BY JONATHAN S. FITZGERALD BL

CONSTRUCTION BAR ASSOCIATION OF IRELAND ANNUAL CONFERENCE, 27TH APRIL 2018 Construction Bar Conference Paper

1. Negligent misstatement occurs when there is a representation of fact, which is incorrect, and is relied upon by another party to their disadvantage where the imparter undertook or assumed the responsibility to perform the task in the context of a “special relationship” between the imparter and the impartee of the information giving rise to a duty of care owed by the imparter to the impartee.

2. A plaintiff’s capacity to recover damages for pure economic loss caused by the negligence of another is a matter which is still an unsettled element of the law of negligence in this jurisdiction. The survival of McCarthy J’s test in Ward v McMaster1 in parallel to the test propounded by Keane CJ in Glencar2 appears to give credence to the basis that the immovable portcullis has not yet come down upon the capacity to recover damages for pure economic loss in negligence in Ireland (unlike the apparent position prevailing in the UK). The dichotomy may in part be a normal product of the notably different legislative environment pertaining in our neighbouring common law jurisdictions.

3. However, for our present purposes, a key aspect of negligent misstatement (and perhaps its unique attraction from a practical litigator’s viewpoint) is that recovery for pure economic loss has long been allowable for damage caused by negligent misstatement

1 [1985] I.R. 29 2 [2002]1 IR 94.

since its emergence into the light in 1964 pursuant to the House of Lords judgment in Hedley Byrne v Heller3. It is this characteristic which renders the cause of action particularly attractive to a litigating plaintiff.

4. An adequate or even passing treatment of the jurisprudence of pure economic loss in negligence lies outside of the purview of this paper. This is certainly a lucky escape in view of the exceptionally learned and thoughtful treatment of the subject at the Construction Bar Association of Ireland’s Annual Conference in 2016 by Deirdre Ni Fhlionn in her paper “Compliance with the Building Regulations and Liability” and by Paul Gallagher SC in his paper “Recoverability of Economic Loss In Construction Cases” which are both available for download for Members from the CBA Codex [and now “for a limited time only” on the public section of the website for the further edification of non-member attendees].

Hedley Byrne v Heller [1964] 5. The “front door” in any discussion of negligent misstatement is the magnus opus House of Lords decision in Hedley Byrne. The facts of the case are no doubt familiar to all; however, by way of recap: advertising agents who were considering acting on behalf of a prospective client in an advertising campaign (for which the agents would be personally liable) sought information as to their prospective client’s financial stability. They asked their bank to contact Heller & Partner (the bankers of the then prospective clients) to make suitable enquiries as to the respectability and standing of the prospective client. Pursuant to the enquiry, Heller replied that it consider the prospective client trustworthy in the way of business to the extent of £100,000 per annum.4 The plaintiff’s bank communicated the replies to the plaintiff which relied upon those statements which proved to be inaccurate when the relevant client went into liquidation causing loss in the amount of £17,000 to the plaintiffs.

6. The Law Lords in Hedley Byrne set forth an encompassing treatment of the circumstances in which a duty of care will arise in the context of innocent but inaccurate statements which causes damage to the person who relies upon the inaccurate or incorrect statement (the tort of negligent misstatement).

3 [1964] AC 465 4 Heller's replies were plainly caveated by a clear disclaimer; the letter was headed ”CONFIDENTIAL” and included the statement “For your private use and without responsibility on the part of the bank or its officials”.

7. McMahon & Binchy comment that the law in the UK (and Ireland) has progressed upon the foundation statement of the law of negligent misstatement as formulated by Lord Morris as follows:

“It should now be regarded as settled that if someone, possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon that skill, a duty of care will arise… Furthermore, if, in the sphere in which a person is so placed that others could reasonably rely upon his judgement or his skill or upon his ability to make a full enquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise.”

8. Lord Pearce5 identified three situations where an innocent but inaccurate misstatement \ misrepresentation may give right to damages in tort as follows:

(a) if the misrepresentation was intended by the parties to form a warranty between contracting parties, that is to say, a contractual situation, it gives on that ground a right to damages; (b) if an innocent misrepresentation is made between the parties in a fiduciary relationship, it may, on background, with a right to claim damages for negligence; and, (c) there is also a duty of care created by “special relationships” which, though not fiduciary, give rise to an assumption that care as well as honesty is demanded.

9. The fundamental difference to be drawn between liability for negligent acts and liability for negligent speech was emphasised in the speech of Lord Reid6 where he stated:

“The appellants' first argument was based on Donoghue v. Stevenson. That is a very important decision, but I do not think that it has any direct bearing on this case. That decision may encourage us to develop existing lines of authority, but it cannot entitle us to disregard them. Apart altogether from authority, I would think that the law must treat negligent words differently from negligent acts. The law ought so far as possible to reflect

5 At page 539 - 540 of the judgement op. cit. 6 See pages 482 – 484 of the judgement op. cit.

the standards of the reasonable man, and that is what Donoghue v. Stevenson sets out to do. The most obvious difference between negligent words and negligent acts is this. Quite careful people often express definite opinions on social or informal occasions even when they see that others are likely to be influenced by them; and they often do that without taking that care which they would take if asked for their opinion professionally or in a business connection. The appellant agrees that there can be no duty of care on such occasions, and we were referred to American and South African authorities where that is recognised, although their law appears to have gone much further than ours has yet done. But it is, at least, unusual casually to put into circulation negligently made articles which are dangerous. A man might give a friend a negligently-prepared bottle of homemade wine and his friend's guests might drink it with dire results. But it is by no means clear that those guests would have no action against the negligent manufacturer.

10. Lord Reid continued, clarifying the position that a negligent statement of itself will not give rise to liability per se. More is needed; namely, that the imparter of the information needs to assume the responsibility to do the task and that there must exist a special relationship (of proximity and objective foreseeability of reliance and damage) between the imparter of the statement and the impartee to give rise to a duty of care (on the part of the imparter to the impartee) in relation to the accurate performance of the task:

“Another obvious difference is that a negligently made article will only cause one accident, and so it is not very difficult to find the necessary degree of proximity or neighbourhood between the negligent manufacturer and the person injured. But words can be broadcast with or without the consent or the foresight of the speaker or writer. It would be one thing to say that the speaker owes a duty to a limited class, but it would be going very far to say that he owes a duty to every ultimate ‘consumer’ who acts on those words to his detriment. It would be no use to say that a speaker or writer owes a duty but can disclaim responsibility if he wants to. He, like the manufacturer, could make it part of a contract that he is not to be liable for his negligence: but that contract would not protect him in a question with a third party, at least if the third party was unaware of it.

So it seems to me that there is good sense behind our present law that in general an innocent but negligent misrepresentation gives no cause of action. There must be something more than the mere misstatement. I therefore turn to the authorities to see what more is required. The most natural requirement would be that expressly or by implication from the circumstances the speaker or writer has undertaken some

responsibility, and that appears to me not to conflict with any authority which is binding on this House. Where there is a contract there is no difficulty as regards the contracting parties: the question is whether there is a warranty. The refusal of English law to recognise any jus quaesitum tertii7 causes some difficulties, but they are not relevant, here. Then there are cases where a person does not merely make a statement but performs a gratuitous service. I do not intend to examine the cases about that, but at least they show that in some cases that person owes a duty of care apart from any contract, and to that extent they pave the way to holding that there can be a duty of care in making a statement of fact or opinion which is independent of contract.”

11. As is clear from the judgment of the House of Lords the impartee must actually rely on the statement in acting (or, sometimes, failing to act) to his detriment causing loss.

Securities Trust Limited v Hugh Moore and Alexander Limited [1964]

12. Hedley Byrne very promptly made its way into Irish law in the same year by way of the High Court decision of Securities Trust Limited v Hugh Moore and Alexander Limited8 where the proposition at the heart of Hedley Byrne was accepted by Davitt P that:

“Circumstances may create a relationship between two parties in which, if one seeks information from the other and is given it, but other is under a duty to take reasonable care to ensure that the information is correct“9

13. The controversy in Securities Trust arose from a printing error contained in the articles of association of the defendant company where those articles were sent by the company to a shareholder in response to his request. The shareholder was a managing director of the plaintiff company, which, on foot of the inaccuracies in the articles, decided to invest money in the defendant company. The investment subsequently proved to be unprofitable and the plaintiff maintained an action for negligent misstatement for the loss suffered by the investor caused by the printing error upon which it relied in making the unprofitable investment decision. Ultimately the plaintiff’s action for negligent misstatement foundered upon the rock of “special relationship” (as described by Lord Morris above in Hedley Byrne) were Davitt P concluded that it could:

7 The concept of privity of contract (Jus quaesitum tertio), when the third party (tertius or alteri) is the intended beneficiary of the contract. 8 [1964] IR 417. 9 At page 421 of the judgement.

“hardly be seriously contended that the defendant company owed a duty of care to the world at large to take care to avoid mistakes and printing errors in the reprint of their Articles.” 10

Bank of Ireland v Smith [1966]

14. Two years later, the borders of negligent misstatement were again considered by the High Court in Bank of Ireland v Smith11. Here the defendant auctioneer published an advertisement for the sale of lands wherein it was inaccurately stated that a significant proportion of the lands had been under-sown with permanent pasture. The evidence in the case demonstrated that the plaintiff purchased the land, in part, on foot of this statement (which proved to be false). However, again the absence of special relationship caused the claim to fail where Kenny J rejected the argument that the auctioneer acting for the vendor or should have anticipated that any statement made by him about the property would be relied upon by the purchaser holding that liability could be imposed only where there was a relationship between the parties that was “equivalent to contract”, namely, where there was an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract.12

15. In the subsequent years, the tight rein on the cause of action of negligent misstatement imposed by the necessity for the connection between the imparter of the statement and the impartee to be a relationship “equivalent to contract” underwent a significant loosening.13

16. It might be further observed that a significant number of the judgements in this period tended to intertwine consideration of the tort of negligence (per the line of authority starting with Donoghue v Stevenson – liability for negligent acts) with the tort of negligent misstatement whereby it is sometimes difficult to accurately survey the exact position of the borders between the two torts.

10 See page 422 of the judgement 11 [1966] IR 646 12 See “Law of Torts”, McMahon and Binchy, Fourth Edition 2103, page 324 at paragraph 10.87, 13 See Curley v Mulcahy, High Court, McMahon J 21 December 1977; Wall v Hegarty [1980] ILRM 124, Finlay v Murtagh [1979] IR 570.

Caparo Industries Plc v Dickman [1990]

17. In the UK, matters developed with the decision of the House of Lords in Caparo14 which concerned a firm of accountants, the auditors of a public limited company, whom the plaintiffs accused of being negligent in the performance of their auditing duties where the auditors allowed the significant and material misstatement of the financial statements which were relied upon by shareholders in the company in their decision to purchase more shares, in the first instance, and then, in the second instance, to stage a successful takeover bid for the company. When the true financial picture of the company became apparent the plaintiffs sued for negligent misstatement for losses suffered in their investment. Lord Bridge stated:

“The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it.”

18. The House of Lords in Caparo were at all times cognisant of the proverbial “floodgate” threat inherent in negligent misstatement in the absence of an effective brake upon its application and stressed the necessity for the existence of a “special relationship” between imparter of the inaccurate statement and the impartee. Lord Bridge continued as follows:

“Hence, looking only at the circumstances of these decided cases where a duty of care in respect of negligent statements has been held to exist, I should expect to find that the ‘limit or control mechanism’ . . . rested in the necessity to prove, in this category of the tort of negligence, as an essential ingredient of the ‘proximity’ between the plaintiff and the

14 [1990] 2 A.C. 605

defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind (e.g. in a prospectus inviting investment) and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter upon that transaction or upon a transaction of that kind.”

Wildgust v Bank of Ireland [2006]

19. The factual matrix in Wildgust v Bank of Ireland15 involved a complex set of facts which pertained to the liability of an insurance company for an incorrect answer from the plaintiffs’ banker to an enquiry as to whether a premium for loan insurance had been paid. Bank of Ireland, when informed that the premium had not been paid, did not feel it incumbent upon it to contact the plaintiffs. The background context was that it was normal for the bank to pay the premium itself rather than let the policy lapse. As it transpired as a result of the error, a payment made by the plaintiffs had not been correctly processed and the policy lapsed causing injury to the plaintiffs. The plaintiffs’ case in the High Court failed on the basis that there had been no actual reliance by the plaintiffs on the incorrect statement as they were unaware of it at the time.

20. The issue of reliance was, perhaps, the dominant element of the judgements of Geoghegan J and Kearns J in the Supreme Court where the Supreme Court found that there was a “special relationship” between the plaintiffs and the defendant in circumstances where, if the statement made was incorrect, the policy could lapse to the detriment of both the bank and the plaintiffs who had a beneficial interest in the form of an equity of redemption in the policy.

21. Kearns J, delivering the main judgement of the court, speaking of the development of the law in Hedley Byrne from the principles originally enunciated in Donoghue v Stevenson concluded that the former had extended liability to include pecuniary loss caused by a negligent misstatement on a very specific basis namely;

15 [2006] 1 IR 570

“That the law would imply a duty of care when a party seeking information from a party possessed of a special skill trusts him to exercise due care, and a party knew or ought to have known that reliance has been placed on his skill and judgement.”

22. In considering the synthesis of the leading English authority Caparo and the core Irish authorities on negligence of Ward v McMaster16 and Glencar Explorations plc v Mayo County Council (No2)17, Kearns J quoted from Keane CJ’s judgment in the Glencar as follows:

“There is, in my view, no reason why courts determining whether a duty of care arises should consider themselves obliged to hold that it does in every case where injury or damage to property was reasonably foreseeable and the notoriously difficult and elusive test of 'proximity' or 'neighbourhood' can be said to have been met, unless very powerful public policy considerations dictate otherwise. It seems to me that no injustice will be done if they are required to take the further step of considering whether, in all the circumstances, it is just and reasonable that the law should impose a duty of a given scope on the defendant for the benefit of the plaintiff, as held by Costello J. at first instance in Ward v. McMaster [1985] I.R. 29, by Brennan J. in Sutherland Shire Council v. Heyman (1985) 157 C.L.R. 424 and by the House of Lords in Caparo Industries plc. v. Dickman [1990] 2 A.C. 605.”

23. Kearns J continued at paragraph 56 et seq of his judgement:

“This most authoritative recent statement of the law in relation to the general duty of care in negligence is in itself a powerful reason for holding that the test in Caparo, if applicable, must apply with even greater force to cases of negligent misstatement and that Lord Bridge’s caveat at page 621 that an essential ingredient of the proximity between the plaintiff and the defendant in such circumstances must at the very least involve prove “that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind and that the plaintiff would be very likely to rely on it for the purposes of deciding whether or not to enter upon that transaction or upon a transaction of that kind.”

24. Kearns J continued at paragraph 57 of his judgment:

16 [1985] I.R. 29 17 [2002]1 IR 84

“This strikes me as a particularly appropriate restriction to apply to any duty of care arising in respect of negligent misstatement for all the reasons identified in the cases already considered and bearing in mind always the crucial distinction between words and statements on the one hand and deeds and conduct on the other. It seems obvious that this distinction is one which should not be elided. The question however is whether the principles in [Caparo], itself a case in negligent misstatement, should apply to cases of negligent misstatement in this jurisdiction, as distinct from cases of the general duty of care in negligence were application of those principles has been established by [Glencar].”

25. Ultimately Kearns J concluded:

“In a nutshell, I would interpret Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. in the light of what was stated in Caparo Industries plc. v. Dickman [1990] 2 A.C. 605 on the facts of this case.”

26. The Court then determined that the proper interpretation of the Hedley Byrne principles included a potential duty of care in negligent misstatement owed to more than just the person to whom the negligent misstatement was specifically addressed, stating:

“The “proximity” test in respect of a negligent misstatement must go further than that and include persons in a limited and identifiable class when the maker of the statement can reasonably expect, in the context of a particular enquiry, that reliance will be placed thereon by such a person or persons to act or not act in a particular manner in relation to that transaction.”

“Put shortly, the first plaintiff was a neighbour for the purposes of the law of negligence and an especially close one at that. There was no question here of the second defendant being liable to large numbers of perhaps unknown persons.”

27. Geoghegan J in his judgement expressed the view that the court’s finding relating to information given to a third party also affected by the incorrect information was only “a small extension” of the principle that a court might hold there was a special duty of care when a person, even one who was not the inquirer, was damaged as a consequence of an incorrect statement and where the existence of such an affected person, and the reasonable foreseeability of such damage, ought on an objective basis to have been present in the mind of the person imparting the information.

28. Geoghegan J further opined that apart from contractual or fiduciary relationships, a duty of care in the making of the statement may be held to arise in the context of other “special relationships” which the court may find to exist in particular cases.

29. Geoghegan J held that this duty might emerge when it was plain that the relationship was such that a party seeking information or advice was trusting the other party to exercise such a degree of care as the circumstances required, where it was reasonable for the party seeking information to do that and where the imparter of information gave advice when he knew, or ought to have known, that the inquirer was relying upon him.

MaGee [2016]

30. The relatively recent High Court decision of O’Malley J in Kevin and Grit McGee v Mark Alcorn and Michael Friel trading as Michael Friel Architectural Design & Surveying18 (“McGee”) is a formidable synthesis of the Supreme Court’s judgements in Ward V McMaster and in Glencar. 19 The case has attracted a lot of attention in the construction law world…..

31. In McGee, the Plaintiffs purchased a new house built by the first defendant, Alcorn, for the purchase sum of €430,000 in 2008. The second defendant (“Friel”), an architectural technician employed by Alcorn, provided two certificates to Alcorn - a “Certificate of Supervision” and a “Certificate of Compliance” – which, premised upon his periodic inspection during the currency of the works and upon their completion - warranted that the foundations were satisfactory and suitable in the context of the prevailing ground conditions; that good building materials and workmanship have been used throughout; that the property was structurally sound and constructed in accordance with good practice; and that the construction of the house was in substantial compliance with the Building Regulations. The certificates were provided by Alcorn to the plaintiffs as part of the transaction to acquire the house.

32. Serious cracks manifested in the house in 2009 and it was subsequently found, inter alia, that the foundations were wholly inadequate having regard to the prevailing ground conditions (or at all) being described by the Plaintiffs’ expert as “incredibly poor” and

18 [2016] IEHC 59 19 [2002]1 IR 94. The Court’s treatment of the Ward v McMaster test and the test set down in Glencar is discussed in Paul Gallagher SC’s paper referred to above at pages 12 and 13 thereof.

“pathetically bad”. In the circumstances of the case Alcorn had ceased trading and did not offer a defence to the claim.20 The plaintiff secured judgement against Alcorn and proceeded at trial against Friel in negligence.

33. O’Malley J’s considered the concept of the relationship as between the Plaintiff and Friel in finding the existence of a duty of care owed to the Plaintiffs under the principles as enunciated by McCarthy J in Ward v McMaster and pursuant to the test propounded by Keane CJ in Glencar. There was no issue of a disclaimer upon the certificates which might have complicated the analysis of the creation of duty of care as between the parties. Further, the authorities relied upon by both the parties presented to the Court stem in the main from the O’Donoghue v Stevenson line of authority (save and except for Wildgust, see below).

34. The Court concluded:

“135. On the facts of the instant case, I have no difficulty in finding the existence of a duty of care on either the approach of McCarthy J or Keane CJ

136. There was, in the first place, undoubtedly proximity between the plaintiffs and the second named defendant. In this respect I consider that the absence of a contractual relationship between the parties is immaterial. It is true to say that the certificates were supplied by the second named defendant to the builder, but the only conceivable purpose of them from the builder's point of view was for presentation to a prospective buyer. The second named defendant must have been aware of this, and there must have been implicit knowledge and indeed an assumption that such a person would rely upon the certificates – that is the purpose for which they were issued. This is particularly so in the case of the representation that the foundations were properly constructed. Having regard to the evidence in this case as to how the problem was identified – by the digging of large test holes around the house - this is not a matter that can readily be assessed by a potential buyer. By the same token, it was eminently foreseeable by a person in the second named defendant's position that if the foundations were in fact inadequate, there was likely to be loss occasioned to the buyer.

20 An unfortunately not irregular experience of plaintiffs in construction disputes in the past decade.

137. The alternative questions: “Is there any reason not to impose a duty of care in the circumstances?” and “Is it fair, just and reasonable to impose a duty of care in the circumstances?” both lead me, on the facts of the case, in the same direction. No argument has been made by the second named defendant that there are any policy considerations that would make the Court hesitate in finding that the duty exists. The class of persons to whom the duty is owed is easily defined – it is the purchaser to whom the certificate has been presented, since that is the person who will rely upon it. It is not necessary to go further in this case, and consider the possibility of open-ended liability to subsequent buyers years down the line.

138. I further consider that it is fair, just and reasonable to impose a duty of care towards purchasers on persons such as engineers and architects who provide certificates of this nature to builders. Most people buying a modern house, and most of the lenders to whom they will go for mortgages, will require such certificates and will rely upon them. Self- certification by a builder does not seem a realistic alternative. It is simply untenable to suggest that the person who holds himself out as professionally qualified to assess, and in a position to certify, the quality of the house and the workmanship of its construction, should not thereby be required to take care in giving such certification.”

35. It is noteworthy that the Court did not explicitly adopt an approach that separately framed its consideration of the tort of negligence vs. the tort of negligent misstatement. Rather, the court engaged in an illuminating consideration and synthesis of the Irish law of negligence and then proceeded, thereafter, to fold its analysis into a consideration of the Supreme Court’s judgement in Wildgust.

36. It might be noted that this approach adopted by the court may have been, in part, a function of the framing of the case in the pleadings where negligent misstatement was not explicitly pleaded by the Plaintiffs and where Friel had explicitly pleaded in his Defence that damages were not recoverable where the Plaintiffs’ claim as pleaded was confined to negligence which he maintained precluded recovery for pure economic loss and maintained this position in submissions at the trial of the matter.

37. The Court did not directly reject the cornerstone of the Defence’s submissions (that pure economic loss was irrecoverable in negligence), rather the Court, looking to the pleadings,

notice for particulars and the replies, concluded that there was sufficient therein to make out a plea of negligent misstatement21 and concluded:

“… It appears to me that in the circumstances, the combination of the statement of claim, the notice for particulars and replies thereto are adequate for the purpose of making a case of negligent misstatement. On the facts of the case, there can be little doubt as to whether the criteria for liability for negligent misstatement, as discussed in the authorities and most recently in Wildgust, have been met. Damages for economic loss are, therefore, recoverable.”

38. In view of the latter finding (of the existence of the plea of negligent misstatement having been made out in the pleadings) the Court did not consider it necessary to grapple with the (tentative) general principle that damages in negligence could only be awarded in respect of personal injuries or damage to property (not being the property, the subject of the litigation) where negligent misstatement was an acknowledged exception to this (tentative) principle (in addition to those matters falling within the categories identified in Siney v Dublin Corporation22 and Ward v McMaster).23

Walsh v Jones Lang Lasalle Limited [2017]

39. It was in the above context that the long running litigation of Walsh v Jones Lang Laselle Limited24 hoved into view.

21 O'Malley J noted that a similar issue had arisen in Wildgust v Bank of Ireland [2001] 1 ILRM 24 where the plaintiffs had not included a specific plea of negligent misstatement and where during the course of the High Court hearing it became clear that negligent misstatement was, in fact, the true basis of the plaintiffs’ case, the High Court had directed the plaintiffs to amend the statement of claim to include the specific plea of negligent misstatement. Looking to the judgment of McGuinness J in the Supreme Court in this discrete issue, O'Malley J concluded that the elements necessary to found the claim of negligent misstatement were contained in the statement of claim, the misstatement notice for particulars and replies thereto were adequate for the purpose of making a case of negligent. 22 In Siney v Dublin Corporation [1980] IR 400 the Supreme Court held a defendant local authority was liable in negligence in respect of an apartment provided under the Housing Act 1966, which contained defects rendering it unfit for human habitation where the damages were confined to the plaintiff’s possessions in the flat (there was no claim maintained for damages to rectify the defects in the property). 23 As noted, the Supreme Court in Glencar (Keane CJ) expressly reserved the question of whether economic loss was recoverable in negligence per se and expressly opted not to overrule the earlier cases of Ward v McMaster and Siney v. Dublin Corporation stating that : “I would expressly reserve for another occasion the question as to whether economic loss is recoverable in actions for negligence other than actions for negligent misstatement and those falling within the categories identified in Siney and Ward v. McMaster and whether the decision of the House of Lords in Junior Books Ltd. v. Veitchi Co. Ltd. should be followed in this jurisdiction.” It might be noted that Junior Books appears to have fallen into a jurisprudential cul de sac in England and Wales. Ni Fhlionn commented in her CBA paper op cit that “JustCite reveals that the case has not been followed in any subsequent decision of the Courts of England and Wales, although it has been followed in Singapore, Malaysia, and Ireland”. 24 [2017] IESC 38

40. As to the factual matrix, in the summer of 2000, the defendant (“Jones”) acted as the estate agent for the vendor of a two-storey commercial property located in the north inner city area of Dublin. Jones advertised the property and prepared a sales brochure. The plaintiff (“Walsh”) contacted Jones who provided him with a copy of the sales brochure during Walsh’s visit to view the property. The brochure generally described the property and contained specific measurement details of the floor area. However, these particulars materially overstated the measurement of the first floor area of the commercial property as 10,463 ft.² (by some 20% as it turned out25).

41. Walsh relied upon the measurement contained in the brochure in the calculation of his bid(s) in relation to the property premised upon the anticipated commercial rent that could be charge per square foot of the commercial property. Walsh’s offer was accepted and he entered into a contract of sale with the vendor to purchase the property on 9 August 2000 for a contract sum of £2,342,000 which completed on 28 September 2000.

42. After the completion date Walsh instructed his chartered surveyor to measure the total floor area of the property and discovered the material inaccuracy contained in the brochure where the actual measurement of the first floor was 8,575.5 ft.². A key issue of contention in both the High Court and subsequently in the Supreme Court was the presence of a disclaimer contained within the brochure at the bottom of the first page in very small print as follows:

“Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers\lessees should satisfy themselves as to the correctness of the information given.”

43. Walsh sued Jones in the High Court by way of plenary summons claiming that Jones owed Walsh a duty of care in preparing and making available the brochure to Walsh which included a duty to ensure that the information and particulars provided to Walsh would be accurate and that all reasonable skill and care would be used by Jones in providing such information and particulars. Walsh further claimed that Jones knew or ought to have known that Walsh would rely upon the contents of the brochure; that Jones had expressly represented that it had taken every care in the preparation of the particulars in the brochure and that, by reason thereof, Jones had assumed responsibility for the contents

25 No evidence was adduced as to how this error had occurred.

of the brochure to Walsh. Particulars of breach of duty and negligence including negligent misstatement were set down in the statement of claim asserting an alleged failure on the part of Jones to take reasonable care in relation to the preparation and contents of the brochure.

44. Jones pleaded in its defence that it owed no duty of care to Walsh to ensure that the details in the brochure were accurate claiming that there was no special relationship between the parties and where the disclaimer expressly advised Walsh to satisfy himself as to the correctness of the information contained in the brochure. Jones further claimed under the Glencar principles that would be unfair, unjust and unreasonable for the court to impose upon the defendant a duty of care circumstances.

45. As can be seen from the head note of the High Court judgment, it was held by Quirk J in finding for Walsh and awarding him damages in the sum of €350,000 as follows:

i. The proximity test in respect of a negligent misstatement included persons in a limited and identifiable class when the maker of the statement could reasonably expect, in the context of a particular enquiry, that reliance will be placed thereon by such persons to act or not to act in a particular manner, potentially to their detriment, in relation to that transaction. Glencar Explorations plc v Mayo County Council (No. 2) [2002] 1 IR 84 followed.

ii. That the information contained within the brochure prepared and published by the defendant was directed towards a very specific, limited and identifiable category of persons for the express purpose of influencing that limited number of identifiable people to purchase the property. It was therefore to be expected that potential purchasers would rely upon the information contained within the brochure or when deciding whether or not to offer to purchase. Therefore, the relationship between the plaintiff and the defendant was sufficiently proximate to give rise to a special relationship. Wildgust v Bank of Ireland [2006] IESC 19, [2006] 1 IR 570 followed.

iii. That the presence of the “waiver” within the brochure and its precise terms were insufficient to exclude the defendant from liability to the plaintiff in respect of

negligence by the defendant in the incorrect measurement of the floor area of the property and negligent misstatement on the part of the defendant in publishing the incorrect measurements of the floor area. If the defendant wished to reserve to itself the right to publish within its sales brochure, precise measurements which were, in fact, grossly inaccurate and relieve itself of liability to the category of persons to whom the brochure and its contents were directed, then there was an obligation upon the defendant to draw to the attention of the plaintiff and other prospective purchasers to the fact that the seemingly precise measurements published were likely to be wholly unreliable and should not be relied upon in any circumstances. By including within its brochure or a sentence in small print claiming to have taken particular care in the preparation of all of the particulars within the brochure or but advising prospective purchasers to satisfy themselves as to the correctness of the information given the defendant failed to discharge that obligation.

iv. That, in the circumstances of this case, there was a duty upon the defendant to ensure that the information which it provided was reasonably accurate. The loss and damage claimed on behalf of the plaintiff was a loss which was reasonably foreseeable by the defendant and the imposition upon the defendant of such a duty was not unfair, unjust or unreasonable.

46. In the course of its judgement the High Court made a number of telling findings of fact and/or inferences from the evidence that:

i. The total rental income recoverable from commercial property will often be the principal factor in the calculation of value; ii. The floor area of a commercial premises is an important factor in establishing the total rental income from the property; iii. Jones knew, or ought to have known that Walsh would estimate the value of the property premised upon the floor area of that property; iv. The overstatement of the floor area of the property would give rise to an inflated estimate of the rental income recoverable; v. Walsh had been generally aware of the disclaimer contained in the brochure but could not recall whether he had read it with any care;

vi. Walsh had noted that Jones had stated in the brochure that it had taken “every care” and that he relied upon the reputation of Jones as a firm of the utmost probity; vii. None of the other 10 or 12 potential investors who looked at the property carried out their own measurement surveys; viii. Jones was a large firm in existence for a considerable period of time, who are justifiably acquired an excellent reputation for competence, probity and integrity in its business dealings. Jones held itself out as a company with particular skills and expertise in the commercial property markets both in Ireland and elsewhere. Jones relied upon its reputation for excellence in order to encourage prospective customers to avail of its services. ix. The brochure was expressly designed to attract the attention of potential purchasers, in order to encourage them to bid or tender against one another for the property; x. The brochure was an integral part of the tendering process with the explicit intent of maximising the price which potential purchasers would pay xi. The brochure was issued with the implicit motivation of maximising the fee which Jones would obtain upon the sale of the property. xii. Potential purchasers would rely upon the information contained in the brochure when deciding whether or not to purchase; xiii. The brochure had been published by Jones for the express purpose of influencing a limited number of identifiable persons, and the publication of the disclaimer was immaterial to that fact xiv. Walsh was among the persons to whom the brochure was expressly directed; xv. Walsh had been influenced by the information published within the brochure and had relied upon its contents including the measurements when calculating his precise bid or tender for the purchase of the property; xvi. The general and\or approved practice in the Dublin market was not to conduct individual personal measurements of the floor area of commercial properties prior to purchase.

47. The High Court’s decision was appealed to the Supreme Court which was premised, inter- alia, on the core contention that the High Court had failed to appreciate the legal import of the disclaimer contained in the brochure which negatived an essential element necessary for the finding of a duty of care as between Walsh and Jones (namely the

assumption of the duty to Walsh to accurately carry out the measurement of the property).

48. Sitting as a court of five, the Court was split 3 to 2 with the Honourable Justices O’Donnell and Laffoy (delivering written judgements for the majority) and with the Honourable Justice O’Malley concurring, finding in favour of Jones and allowing the appeal. The Honourable Justices McKechnie and MacMenamin dissented upholding the judgement of the High Court and dismissing the appeal.

49. A key and perhaps determinative dividing line between the approaches adopted by the majority and the minority in the Supreme Court was each’s consideration of the import and application of the rule in Hay v O’Grady26. McMenamin J in his dissenting judgement at paragraph 10 thereof states as follows:

“This appeal, in my view hinges on findings of fact made by the trial judge these are to be assessed with references to the tests set out by McCarthy J in Hay v O’Grady27 and Northern Bank Finance Corporation v Charlton28. It is common feature of both judgements that such findings, when supported by credible evidence should not be disturbed by an appeal court. I consider that this appeal is, essentially, a “fact case”, in particular as regards the judge’s finding as to the state of knowledge of Mr Walsh, and finding as to market custom. The judge’s assessments of the context and content of the disclaimer clause were reasonable.”

50. The above cornerstone of the dissenting minority’s approach may be contrasted with the statements of O’Donnell J in his written judgement at paragraph 18 which states:

“There is an undeniable attraction in taking the approach of treating this case as an individual instance having no broader implications for the law and capable of being decided on its own facts by reference to the well-known principles of Hay v O’Grady which sets out the limitations of appellate review.”

51. O’Donnell J continued in paragraph 19:

26 [1992] IR 210 which is considered a keystone of the Supreme Court’s approach to appellate matters that if "the findings of fact made by the trial judge are supported by credible evidence, the Court is bound by those findings". However, see the recent decision of the Court of Appeal in Lynch v Cooney & Winkworth [2016] IECA 1 for further discussion by Hogan J. 27 [1992] IR 210 28 [1979] IR 149

“However, this case proceeded to hearing and was determined in favour of the plaintiff. Again, if it were permissible to take a broad brush approach to this case, then the result is certainly not one which is demonstrably unfair. Jones Lang Lasalle did not deny that it was careless in providing inaccurate measurements, something which was well within its expertise. Furthermore, the waiver upon which it now relies stated that “every care” had been taken. Again, therefore, if it were permissible to approach this case is simply one more instance of the “wilderness of single instances” of the law of negligence and raising no broader issue, it would not call for much judicial attention. However, this appeal, whether viewed narrowly or broadly, raises important issues of law which this court cannot, at least in my view, and should not properly avoid.”

52. A similar ethos is perhaps more implicitly present in the opening paragraph of Laffoy J’s judgment where the learned judge states:

“For just over half a century, starting with the decision of the House of Lords in Hedley Byrne & Co. v. Heller & Partners Limited [1964] A.C. 465 (“Hedley Byrne”), the law on liability in tort for negligent misstatement has been evolving in the United Kingdom. In general, the developments in the United Kingdom have been followed in this jurisdiction. However, a very fundamental question which arises on this appeal, namely, if, in what circumstances and to what extent a disclaimer of responsibility absolves a defendant supplier of information from liability for economic loss incurred by a plaintiff recipient of the information due to what would otherwise be negligent misstatement on the part of the defendant, has not previously been determined by this Court.”

The Judgment of Laffoy J

53. Having set out a detailed consideration of the facts of the matter in paragraph 34 to 65 of the judgement Laffoy J undertook a comprehensive review of the core authorities which most importantly included a detailed consideration and application of the principles propounded in the following:

 Hedley Byrne,  Caparo Industries Plc v Dickman [1990] 2 A.C. 605  McCullagh v Lane Fox & Partners [1996] P.N.L.R. 205  Glencar Exploration Plc v Mayo County Council (No. 2) [2002] 1 I.R. 84,  Wildgust v Bank of Ireland [2006] 1 I.R. 570

54. In paragraph 50 of her judgment Laffoy J commented that McCullagh was the authority “which factually bears most resemblance to this case” which the learned judge considered represented the proper approach to be adopted in this jurisdiction.

55. In McCullagh, the plaintiff viewed a property in London, having seen a magazine advertisement which describe the relevant property as having “gardens of nearly 1 acre”. At the viewing, a director of the defendant estate agents who were handling the sale orally represented to the plaintiff that the site occupied “0.92 of an acre” and, at the conclusion of the viewing, handed the plaintiff a copy of the particulars of the property (drafted by the defendant estate agent) which also stated that the area of the site was 0.92 acres. The plaintiff promptly made an offer on the property which was accepted by the vendor. Subsequent to the purchase of the property, the plaintiff discovered that the plot site was only 0.48 acres and sued the estate agent in negligence. The estate agents relied upon a disclaimer in their particulars document.29

56. In paragraph 52 of her judgment Laffoy J quoted with approval a statement at page 222 of Hobhouse LJ’s judgment as follows:

“Thus the relevance of the disclaimer is to negative one of the essential elements for the existence of the duty of care. It negatives the assumption of responsibility for the statement. It implicitly tells the recipient of the representation that if he chooses to rely upon it he must realise that the maker is not accepting responsibility for the accuracy of the representation. The disclaimer is part of the factual situation which the court has to take into account in deciding whether or not the defendants owed a duty of care to the plaintiff. Put another way, the question is whether the plaintiff was entitled to treat the

29 When compared to the somewhat enigmatic disclaimer set down in small print in the Jones brochure, the disclaimer in McCullagh was significantly more clear and exclusionary in its terms as follows:

1. These particulars do not constitute, not constitute any part of, and offer of contract. 2. All statements contained in these particulars, as to this property, I made without responsibility on the part of Lane Fox or the vendors or leasers. 3. None of the statements contained in these particulars, as to this property, are to be relied on as statements, or representations of fact. 4. Any intending purchasers must satisfy themselves by inspection, or otherwise, as to the correctness of each of the statements contained in these particulars. 5. The vendors to not make or give, and neither Lane Fox nor any person in their employment, has any authority to make or give any representation or warranty whatsoever in relation to this property.

representation as one for which the defendants were accepting responsibility. This is primarily a factual question.”30

57. In relation to the issue of assumption of responsibility by the imparter of the statement Laffoy J referred to page 237 of Hobhouse LJ judgment which stated:

“The right approach, as is made clear in Hedley Byrne, is to treat the existence of the disclaimer as one of the facts relevant to answering the question whether there had been an assumption of responsibility by the defendants for the relevant statement. This question must be answered objectively by reference to what a reasonable person in the position of Mr. McCullagh would have understood at the time that he finally relied upon the representation. In this context, it is obvious that the statement that the acreage of the property is 0.92 was a statement that was taken from the particulars, and that the defendants were not assuming responsibility for that statement. The mere fact that Mr. Scott, when showing Mr. McCullagh round the property, gave the same information to Mr. McCullagh, would not lead a reasonable person to conclude that the defendants were thereby choosing to assume responsibility for the statement which they said, in the particulars, they were not assuming responsibility for. The submission that such a conclusion would be reasonable is unreal. It was not supported by any evidence. Mr. McCullagh said (surprisingly) that he had not bothered to read the particulars, but he also said that he knew that they would contain disclaimers of the type which they, in fact, did. The submission was further inconsistent with paragraph 5 of the disclaimer. The essence of the law of negligence is the application of objective standards of reasonableness. By those standards, it is clear that the defendants were not assuming responsibility for the accuracy of the statement about the acreage. The position might be different if the representation had been about something not, or not expected to be, included in the particulars.’31

58. Premised on the review of the authorities and, in my view, most significantly by the judgement of Hobhouse LJ in McCullagh, Laffoy J determined that the High Court had failed to adequately consider the import of the disclaimer in which Jones made it clear that the particulars in the brochure or were not warranted and that Walsh was aware of the disclaimer stating at paragraph 69 of her judgment that:.

30 see page 222 of the judgement. 31 see page 237 of the judgement.

“Where the person giving information in so doing has expressly included a disclaimer in the brochure or advertising and, in my view, the core issue in determining whether a duty of care exists is whether the existence of the disclaimer by reference to its terms has the effect that there is no assumption of responsibility for the task of furnishing correct information on the part of the estate agent giving the information to the recipient. If it has that effect, a duty of care is not owed to the recipient.”

59. Laffoy J continued at paragraphs 68 and 72 of her judgement that the effect of a disclaimer must be determined objectively having regard to the words used in the disclaimer.

60. In paragraph 79 of her judgement the learned judge concluded:

“The point on which I fundamentally disagree with the reasoning in the judgment of the High Court, which ultimately led to what I consider to be the incorrect conclusion that [Jones] owed a duty of care to [ Walsh] and was in breach of that duty, was the failure, having considered the matter objectively, to recognise that there was no assumption of responsibility on the part of [Jones] in relation to the task of furnishing accurate internal measurements to Mr. Walsh and that the consequence was that the law imposed no duty of care on Jones. As such recognition should have been the starting point in the process of determining whether a duty of care was owed by [Jones] to [Walsh] and whether liability for negligent misstatement lay on Jones, the controversies in relation to the findings of fact made by the trial judge raised on the appeal do not have to be resolved, even if they could, or should, be.”

The Judgment of O’Donnell J

61. The judgement of O’Donnell J is founded principally upon the judgments in Hedley Byrne and McCullagh. A key concept of O’Donnell J’s judgement which echoes throughout his consideration of the authorities is set down at the end of paragraph 20 and paragraph 21 where the judge states:

“21…. in my view, the importance of recalling that the starting point of the analysis in Hedley Byrne v. Heller [1964] A.C. 465 was that normally a party does not owe a duty in tort to another in respect of statements made by them. This is an important distinction. In the area of actions it can be said the starting point is normally “duty of care unless”, whereas for statements it is a case of “duty of care only if”.

The Broad or Narrow Approach to Liability

21 The narrow version of the plaintiff’s claim depends solely on the interpretation of the waiver for the purposes of the traditional law of negligent misstatement. The question here is whether the relationship between the parties is sufficient to create a duty of care and a disclaimer can be an important piece of evidence in that regard. The plaintiff’s case, on this narrow version, is simply that the terms of the waiver here are not sufficient to mean that a duty of care did not arise. A broader version of the claim, which appears to be discernible at points in the judgment of the High Court and in the submissions made to this Court, would, however, involve a significant development of the law, and a blurring of the distinction between negligent misstatement and the law of negligent acts, if not its removal. In the context of this case, these two approaches have significant differences for the analysis of the waiver clause. On the traditional principles of negligent misstatement, a waiver is relevant when considering whether a duty of care arose at all. A waiver is interpreted fairly broadly in considering whether the defendant can be said to have assumed, as between itself and a plaintiff, the risk of error. However, if the case is approached on the basis that there was an existing duty of care by reason of the proximity of the parties, then the waiver becomes a clause excluding or limiting liability to which courts have traditionally applied a very strict analysis. It is clear, therefore, that the manner in which the case is approached may have significant, indeed decisive, impact on the outcome.”

62. O’Donnell J undertook a thorough review of the judgments of the House of Lords in Hedley Byrne - where the impugned communication had been subject to a disclaimer - and highlighted important elements from the Law Lords’ speeches as follows:

Lord Reid at pp 482-484:

i. “... Donoghue v Stevenson. That is a very important decision, but I do not think that it has any direct bearing on this case….. Apart altogether from authority, I would think that the law must treat negligent words differently from negligent acts.”32

32 see paragraph 25 of O'Donnell J’s judgement.

ii. “It would be one thing to say that the speaker owes a duty to a limited class, but it would be going very far to say that he owes a duty to every ultimate consumer acts on those words to his detriment.”33

iii. “In general an innocent but negligent misrepresentation gives no cause of action.”

iv. “The most natural requirement would be that expressly or by implication from the circumstances the speaker or writer has undertaken some responsibility.”34

63. O’Donnell J further highlighted Lord Reid’s statement at page 492 of the judgment which makes an important distinction between disclaimers provided prior to the assumption of responsibility and an exemption clause purporting to excuse a party from liability which he or she already owes (in contract or in tort):

v. “In the case of a contract it is necessary to exclude liability for negligence, but in this case the question is whether an undertaking to assume a duty to take care can be inferred; that is a very different matter.”

63 Reviewing the judgement of Lord Devlin O’Donnell J highlighted the statement at page 533 of the judgement:

vi. “A man cannot be said voluntarily to be undertaking a responsibility if at the very moment when he is said to be accepting it he declares that in fact he is not. The problem of reconciling words of exemption with the existence of a duty arises only when a party is claiming exemption from a responsibility which he has already undertaken or which he is contracting to undertake.”35

64. Reviewing the judgement of Lord Pearce O’Donnell J highlight the statement at page 540:

vii. “I do not, therefore, accept that even if the parties were already in contractual or other special relationship the words would give no immunity to a negligent

33 At page 492 34 It should be noted that the responsibility spoken of herein has been interpreted as being the responsibility to undertake a task not legal responsibility per se. 35 See paragraph 31 of O'Donnell J’s judgement.

answer. But in any event they clearly prevent a special relationship from arising. They are part of the material from which one deduces whether a duty of care and a liability for negligence was assumed.”

65. O’Donnell J declined to distinguish McCullagh on the basis that the disclaimer in that case was more extensive than the disclaimer under consideration by the court; rather, in keeping with his analysis of the judgment in Hedley Byrne the judge characterised the disclaimer not as an exemption clause (to exclude liability arising from an extant duty of care) but rather as part of the evidence as to whether a duty of care had arisen at all. It might be posited that, pursuant to the informal law of unintended consequences, that this decision might stand alongside the main thrust of the Court’s clarification of the law of negligent misstatement. The disclaimer in Jones was noticeably weak (see McMenanim J’s unequivocal comments in relation to same in the minority dissent). By comparison, the McCullagh disclaimer McCullagh was encompassing and clear. The majority’s finding of fact in relation to the Jones’ disclaimer, upon an objective interpretation, is likely to be a key practical lodestone for defendants to negligent misstatement actions into the future.

66. O’Donnell J concluded that the judgement of the High Court ran together its analysis of a claim for a negligent act (namely the measurement or non-measurement of the second floor of the commercial property) and a claim for negligent misstatement (contained in the particulars of the property) where the trial judge misstepped in his examination by proceeding upon the assumption that there existed a duty of care and, only then, looking to the disclaimer to consider whether it was sufficient to exclude that duty of care.

67. At the heart of O’Donnell J’s judgment to allow the appeal is his conclusion that the High Court’s approach was more appropriate to the consideration of an exemption clause or disclaimer which seeks to limit a contractual or tortious liability that already existed and that this approach in the context of negligent misstatement represented a significant movement away from Hedley Byrne which mandated that a disclaimer should be considered earlier in the analysis as part of the evidence as to whether a duty of care arose in the first place:

“The approach in the High Court appears to be based upon a blurring of the distinction between liability for negligent act and liability for a negligent statement which was

identified in Hedley Byrne v Heller and the succeeding case law, and in doing so, reliance on the decision of the Supreme Court in Wildgust.”

68. O’Donnell J further concluded in paragraph 51 of his judgment that the High Court failed to properly objectively interpret the disclaimer in the above legal context. Interpreting the disclaimer objectively, and reading it as a whole, O’Donnell J concluded that the disclaimer, when so analysed objectively, was not immaterial and that it was evidence pursuant to traditional Hedley Byrne principles that Jones expressly disclaimed the assumption of a duty of care to Walsh and was, therefore, not in breach of such a duty where Jones had not assumed responsibility in relation to the task of furnishing accurate internal measurements of the relevant property.

The Dissent – Judgment of MacMenamin J 69. As stated above McMenamin and McKechnie JJ dissented from the majority view tacking strictly in accordance with the principles of Hay v O’Grady not to disturb the factual conclusions and inferences from evidence drawn by the trial judge.

70. Throughout his dissenting judgment McMenamin J consistently framed his consideration of the appeal from the standpoint of the findings of fact and (in his view) reasonable inferences upon the evidence made by the trial judge.

71. The second key stage of the dissent is McMenamin J’s consideration of the language of the disclaimer. McMenamin J allowed that if the disclaimer had been clear to the objective reader it would operate to avoid liability under the Hedley Byrne principles.

72. However, crucially, McMenamin J disagreed with the conclusions of Laffoy J and O’Donnell J in their objective interpretation of the language of the disclaimer and expressed agreement with the views of the trial judge, concluding that the disclaimer clause was objectively ambiguous in the sense that, while it conveyed an invitation (to intending purchasers to satisfy themselves as to the accuracy of its particulars), it also contained a representation that acceptance of the invitation was hardly necessary.

73. McMenamin J concluded that not every disclaimer would operate to negative the assumption of a duty of care by an imparter of information and proceeded to distinguished the core authority relied upon by the majority, McCullagh, on the basis that

the terms of the disclaimer in that case “were crystal clear” as opposed to the purported disclaimer relied upon by Jones which was ambiguous and opaque in circumstances where a highly reputable firm had represented that they had taken every care in preparing measurements.

Commentary 74. The judgement of the Supreme Court in Walsh is of exceptional importance and direct relevance to the construction industry where at nearly every stage of construction activity - up to and including the sale of completed properties - reliance is placed upon the statements of experts and advisers which are often relied upon by third parties outside the privity of contract.

75. The three written judgements handed down by the court bring a valuable clarity to the tort which often provides a plaintiff with the clearest route to recovery for pure economic loss in circumstances of building defects which have been certified by an inspecting or supervising professional.

76. While each case can only be judged upon its merits the following tentative legal conclusions might be drawn from the Supreme Court’s analysis:

i. The judgment of the Supreme Court is in no way confined to disclaimers or exception employed by estate agents and, in view of the approach adopted by Laffoy J and O’Donnell J, is a broadly applicable clarification of the law of negligent misstatement;

ii. In the analysis of a disclaimer in the context of a claim for negligent misstatement brought by a third party (such as a house purchaser) the disclaimer will not be interpreted as an exemption clause (designed to exclude and/or limit liability for an extant duty in contract or in tort) but rather shall be considered as part of the body of evidence to be considered by a tribunal to determine whether there was an assumption by the imparter to perform the task (i.e. provide accurate measurements) and, ultimately, whether a duty of care exists at all;

iii. The existence of a disclaimer, even if the language contained therein is relatively weak, can be evidence that no duty of care is assumed by the imparter in relation to the statement relied upon;

iv. The existence and the objective interpretation of a disclaimer is a fulcrum point in deciding whether a claim in negligent misstatement is likely to succeed;

v. The existence of a disclaimer may be sufficient, depending on the particular circumstances, to negative the existence ab initio of a duty of care for negligent misstatement;

77. Over and above the foregoing, applying a granular construction focus, the clarification of the tort of negligent misstatement and disclaimer provided by the Supreme Court in Walsh does have particular relevance in relation to issues of liability arising from and in relation to the Building Control (Amendment) Regulations, 2014 (“BC(A)R”).36 I would tentatively opine that strictly applying the approach of the Supreme Court in Walsh to MaGee (which involved negligent certification) that the High Court would have reached the same conclusion.

78. A consideration of the potential liability arising from BC(A)R has been the subject of significant analysis by the Construction Bar Association and others previously. Of particular note is the detailed and empirical consideration contained in the paper presented by John Trainor, Senior Counsel to the Construction Bar Association on 14 December 2016 entitled “The Civil Liability of Certifiers – Under the Building Control (Amendment) Regulations of 2014\15”. (hereinafter “the Trainor Paper”)

[A copy of this paper is also available on the Codex along with a video recording capturing the erudition of John Trainor SC’s presentation to the Association. In addition, a copy of the paper has been made available for download on the public section of the CBA website at http://www.cba-ireland.com/resources/ practices for the ease of attendees.]

79. A significant, although by no means the only, focus of the paper is a consideration of O’Malley J’s judgement in McGee and the implications arising therefrom for liability under the system of self-certification envisaged by BC(A)R.

80. Paragraph 7.10 on page 19 of the Trainor Paper states that the certificates of compliance on completion are in a mandatory statutory form and are required to be used with no

36 SI 9 of 2014

entitlement for ad hoc modification or qualification. At footnote 20 at the bottom of the same page it states:

“Enquiry with the building control section of DCC suggests that the certificates are perused for format and rejected if not strictly in accordance with the statutory form such as e.g. not signed, or if they include words of qualification or any additions. Other BCA’s presumably do likewise.”

81. On the coming into force of the original 2013 regulations the then Minister for the Environment, Community and Local Government, Phil Hogan TD stated that the BC(A)R Certificates would provide:

“Clear, unambiguous statements on statutory forms stating that each of the key parties to a project certifies that the works comply with the building regulations and that they accept legal responsibility for their work.”

82. It is certainly clear that BC(A)R certificates may be accessed by the public and that the system is designed such that the certificates are intended to be made available and relied upon by third parties (for example, prospective purchasers of those properties).

83. I further note Mark Sanfey’s SC’s statement towards the conclusion of his outstanding article entitled “The Implications of the New Building Regulations for Design and Construction Professionals” published in the Bar Review, Volume, 21 February 2016 where he states:

“It is clear from the statutory framework of certification by specific professionals in the construction process, and the fact that those certificates may be accessed by the public, that the certificates are intended to be documents that will be procured and relied upon by any subsequent titleholder. In this way, professionals may expect that their liability on foot of the certificates will extend far beyond any contractual relationship that they may have in relation to the works, with all the implications for the professional indemnity insurance that that may have.”

84. While the extent of the change in liability risk for Certifiers under BC(A)R, if any,37 remains to be determined by our courts. It is to be anticipated that in circumstances of defects manifesting in properties certified under BC(A)R that plaintiffs will seek redress against those certifiers in negligent misstatement.

85. In light of the illuminating written judgements of our Supreme Court in Walsh, it is starkly notable that the statutory certificates (strictly required to be in a statutory format and, as such) will not and cannot contain any express words disclaiming an assumption of responsibility on the part of the certifier to third parties with whom the court may well find the certifier has a “special relationship” and owes a duty of care in negligent misstatement.

- END -

Disclaimer (wholly without irony): This is a lecture paper only. No liability is accepted in respect of its contents or omissions. Specialist legal advice should be obtained before any decision is taken in respect of any of the matters discussed or referred to in it.

37 Please see the Trainor Paper particularly at pages 29 et seq therein where John Trainor SC explores (and advances) a number of powerful arguments and searching questions which might support a finding by our courts that civil liability in negligent misstatement ought not to follow ipso facto negligent certification under BC(A)R.