• In the case of Spring v Guardian Assurance 1994 3 ALL ER 129 it was found that a duty of care can be owed not only to the direct recipient of the misstatement but also to a person reasonably relying upon it.

Facts of the Case

  • The claimant, who was an appointed company representative of the first defendants for the purpose of selling their investment products, was dismissed from the position of sales director and office manager by the second and third defendants who had been taken over by the first defendants.
  • The plaintiff then sought to sell the products of another company.
  • Under the rules of the regulatory body Lautro, the company was required to seek, and the first defendants to supply, a reference for the claimant.
  • In consequence of the unfavourable reference supplied the company refused to appoint the claimant as a company representative.
  • In an action by the claimant for damages, the judge held that the defendants had been under a duty of care to the claimants, that the reference given had constituted a negligent misstatement and that the defendants were accordingly liable to the claimant in negligence, but he dismissed the claimant’s claim based on malicious falsehood and breach of contract.
  • The Court of appeal allowed an appeal by the defendants and dismissed a cross appeal by the claimant.

Issues in Spring v Guardian Assurance 1994 3 all er 129

  • Was D liable to C in negligence for the economic loss suffered by C.

Held by House of Lords

  • Appeal allowed

Lord Woolf

  • When former employer provides an employment reference it is not only for the assistance of the third-party recipient but also its former employee.
  • Furthermore, when such a reference is provided by an employer, the employee relies upon him to exercise due skill and care in the preparation of the reference before making it available to the third party.
  • “In this case the plaintiffs employers were in breach of that implied term. Although the person actually writing the reference was not negligent, she delegated the task of ascertaining the facts to others, and, as is the case with the employer’s duty to exercise reasonable care for the safety of his employee, the employer cannot escape liability by so delegating his responsibility.  It only remains for me to underline what I anticipate is already clear, that is, that the views which I have expressed are confined to the class of
    case with which I am now dealing. Some of the statements I have made D I appreciate could be applied to analogous situations. However, I do not intend to express any view either way as to what will be the position in those analogous situations. I believe that they are better decided when, and if, a particular case comes before the court. This approach can lead to uncertainty which is undesirable. However, that undesirable consequence is in my view preferable to trying to anticipate the position in relation to £ other situations which are not the subject matter of this appeal. I would allow this appeal and remit the case to the Court of Appeal so that that court can deal with the question of causation.”  P.354