Spring -v- Guardian Assurance Plc and Others; HL 7-Jul-1994

The plaintiff, who worked in financial services, complained of the terms of the reference given by his former employer. Having spoken of his behaviour towards members of the team, it went on: ‘his former superior has further stated he is a man of little or no integrity and could not be regarded as honest . . Since 1 January 1989, Messrs Spring and Parker shared all their commission earnings on a 50:50 basis and left owing the company some £12,000 in funding which to date has not been repaid. This matter is now in the hands of solicitors. The current lapse ratio is running at 18 per cent and this is only for policies written since March of this year. Since their departure, we have found a serious case of mis-selling where the concept of ‘best advice’ was ignored and the policies sold yielded the highest commissions.’ The judge at trial had found these allegation ill founded, and the reference: ‘motivated by leaping to a conclusion – of dishonesty and lack of integrity – careless of the true facts of the case.’
Held: An employer was liable for a negligently given and damaging reference given on behalf of an employee. A duty of care was owed to a former employee. The notion of a ‘master and servant’ relationship has become obsolete. The changes which have taken place in the employment and employee relationship, impose greater duties on the employer than in the past, whether by statute or judicial decision, to care for the physical, financial and even psychological welfare of the employee. A duty of care in providing a reference continues even though the relation of employer and employee may have finished. The principle in Hedley Byrne rested ‘upon an assumption or undertaking of responsibility by the defendant towards the plaintiff, coupled with reliance by the plaintiff on the exercise by the defendant of due care and skill.’ The burden of proving malice is a heavy one and it may be extremely difficult to establish.
As to whether damages should be payable for a negligent mis-statement, Lord Lowry said: ‘The defendants’ second argument (which, in order that it may prevail, must be made to stand independently on its own feet) is that, even if one concedes foreseeability and proximity and even if it would otherwise be just and reasonable for the plaintiff to recover under the head of negligence, public policy dictates that the person who has been the subject of a negligent misstatement shall not recover. The argument is grounded on the proposition that the maker of the misstatement, provided he has acted in good faith, must, even if he has been negligent, be free to express his views in the kind of situation (including the giving of any reference) which is contemplated by the doctrine of qualified privilege which is part of the law of defamation.
This argument falls to be considered on the assumption that, but for the overriding effect of public policy, a plaintiff who is in the necessary proximate relation to a defendant will be entitled to succeed in negligence if he proves his case. To assess the validity of the argument entails not the resolution of a point of law but a balancing of moral and practical arguments. This exercise could no doubt produce different answers but, for my own part, I come down decisively on the side of the plaintiff.
On the one hand looms the probability, often amounting to a certainty, of damage to the individual, which in some cases will be serious and may indeed be irreparable. The entire future prosperity and happiness of someone who is the subject of a damaging reference which is given carelessly but in perfectly good faith may be irretrievably blighted. Against this prospect is set the possibility that some referees will be deterred from giving frank references or indeed any references. Placing full reliance here on the penetrating observations of my noble and learned friend, Lord Woolf, I am inclined to view this possibility as a spectre conjured up by the defendants to frighten your Lordships into submission. I also believe that the courts in general and your Lordships’ House in particular ought to think very carefully before resorting to public policy considerations which will defeat a claim that ex hypothesi is a perfectly good cause of action. It has been said that the public policy should be invoked only in clear cases in which the potential harm to the public is incontestable, that whether the anticipated harm to the public will be likely to occur must be determined on tangible grounds instead of on mere generalities and that the burden of proof lies on those who assert that the court should not enforce a liability which prima facie exists. Even if one should put the matter in a more neutral way, I would say that public policy ought not to be invoked if the arguments are evenly balanced: in such a situation the ordinary rule of law, once established, should prevail.’

Court: HL
Date: 07-Jul-1994
Judges: Lord Slynn of Hadley, Gough, Lord Woolf
Links: Independent, Times, Gazette, Bailii,
References: [1995] 2 AC 296, [1994] IRLR 460, [1994] ICR 596, [1994] UKHL 7, [1994] 3 All ER 129, [1994] CLC 766, [1994] 3 WLR 354
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