The blurring of Contract and Tort: is there a need for

unification to the law of obligations or should the divisions

remain distinct.

https://southwales.academia.edu/CarlTaylor

For years academics theorised whether there truly is a

breakdown of the boundaries between contract and tort.

Competing opinions disseminate whether there is a need for

unification to the law of obligations  or whether the

divisions remain distinct but just blurred.  Whichever opinion

is held proffers judicial interpretation has muddied the

waters between these two distinct areas of obligations,

creating uncertainty within the law.

Consequently this paper will first appraise the prescribed

approach of deciding cases on categorisation  of founded

principles  set down by previous decisions to attain

certainty: hence formalistic adherence encumbered unjustly

law’s advancement through its rigidity.  Secondly consider the

increased use of tort of negligence through the development of

physical damage identifying inconsistent judicial

interpretation. Thirdly explore pure economic loss and the

judiciary’s willingness to develop new doctrines to fill

lacunas within other categories of law so to remove

inequitable principles overlooked by societal changes.

Fourthly conclude unification is not possible due to

inconsistent decision-making which obfuscates the law.

1

by Carl Taylor

More Info: Key Words: Contract law; Tort law; blurring; law of

obligation; boundaries; unification and; uncertainty

Publication Date: Nov 24, 2013

Publication Name: USW - LLM Assignment Paper

Research Interests:

Law, Jurisprudence, Contract Law, Legal Theory, Philosophy Of

Law, and 5 more

Table of Cases

UK Cases

Anns v Merton London Borough Council [1978] AC 728 (HL)

Carlill v The Carbolic Smoke Ball Co. Ltd [1893] 1QB 256 (CA)

Caparo Industries Plc v Dickman [1990] 2AC 605 (HL)

Commissioners of Customs and Excise v Barclays Bank [2006]

UKHL 28

Concord Trust v Law Debenture Trust Corp [2005] UKHL 27

Cattle v Stockton Waterworks Co. (1875) LR 10 QB 453

D & F Estates Ltd v Church Comrs for England [1989] AC 177

(HL)

Dallman v King (1837) 4 Bing NC 105; 132 ER 729

2

De La Bere v Pearson Ltd [1908] 1 KB 280 (CA)

Derry v Peek (1889) 14 App Cas 337 (HL)

Donoghue v Stevenson [1932] AC 562 (HL)

Dunlop Pneumatic Tyres Co. Ltd v Selfridge & Co. Ltd [1915] AC

847 (HL)

Edginton v Fitzmaurice (1885) 29 Ch D 459

Gartside v Sheffield Young & Ellis [1983] NZLR 37 (PC)

Grant v Australian Knitting Mills Ltd [1936] AC 85 (PC)

Greater Nottingham Co-operative Society v Cementation Piling

and Foundation Ltd [1989] QB 71

Hedley Byrne v Heller & Partners Ltd [1964] AC 465 (HL)

Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL)

Jackson v Mayfair Window Cleaning Co. Ltd [1952] 1All ER 215

(CA)

Junior Books v Veitchi Co [1983] 1 AC 520 (HL)

Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384

Murphy v Brentwood District Council [1990] 2 All ER 908 (HL)

Pearce v Brooks (1866) LR 1 Ex 213

Pinnel’s Case (1602) 5 Co Rep 117a

Robinson v National Bank of Scotland SC (HL) [1916] 154

Robinson v P E Jones (Contractors) Ltd [2011] EWCA Civ 9

3

Ross v Caunters [1980] Ch 297

Rush v Reid & Tompkins [1990] 1WLR 212

Scally v Southern Health and Social Services Board [1991] ICR

771 (HL)

Seymour v Maddox (1851) 16 LTOS 387; 16 QB 326

Simms Jones Ltd v Protochem Trading New Zealand Ltd [1993] 3

NZLR (PC) 369

Simpson v Thompson (1877) 3 App Cas 279 (HL)

Smith v Eric S Bush (A Firm); Harris v Wyre Forest DC [1990] 1

AC 831 (HL)

Spartan Steel and Alloys Ltd v Martin & Co. Ltd [1937] QB 27

Tai Hing Cotton Mill Lt v Lui Chong Hing Bank [1986] AC 80

(PC)

Tweddle v Atkinson [1861] 121 ER 762

Van Open v Trustees of Bedford School [1990] 1 WLR

White v Jones [1995] 2 AC 207 (HL)

Winterbottom v Wright (1842) 10 M & W 109; 152 ER 402

Table of Statutes

Statutes

Contract (Rights of Third Parties) Act 1999

Law Reform (Miscellaneous Provisions) Act 1934

4

Law Reform (Personal Injuries) Act 1948

Limitation Act 1980

Unfair Contract Terms Act 1977

Wills Act 1857

Workmen’s Compensation Act 1897

Official Publications

Law Revision Committee ‘Sixth Interim Report’ (Law Com Cmd.

5449 1937)

Law Commission, ‘Privity of Contract: Contract for the Benefit

of Third Parties’ (Law Com No.242 Cm. 3329 1996)

Law Commission ‘Limitation of Action: Item 2 of the Seventh

Programme of Law Reform: Limitation of Actions’ (Law Com No

270, 2001)

5

For years academics theorised whether there truly is a

breakdown of the boundaries between contract and tort.

Competing opinions disseminate whether there is a need for

unification to the law of obligations1 or whether the divisions

remain distinct but just blurred.2 Whichever opinion is held

proffers judicial interpretation has muddied the waters

between these two distinct areas of obligations, creating

uncertainty within the law. Consequently this paper will first

appraise the prescribed approach of deciding cases on

categorisation3 of founded principles4 set down by previous

decisions to attain certainty: hence formalistic adherence

encumbered unjustly law’s advancement through its rigidity.5

Secondly consider the increased use of tort of negligence

1 P S Atiyah, The Rise and Fall of Freedom of Contract (1st edn, Oxford University Press 1979); P S Atiyah, The Damage Lottery (1st edn, Hart Publishing 1997) and; Hedley S, ‘Contract, Tort and Restitution; or, cutting the legal system down to size’ (1988) 8 Legal Stud. 137.2A Burrows, Understanding the law of obligations: Essays on Contract, Tort and Restitution (1st edn, Hart Publishing 1998) ch1, 2-9. 3 Categorisation is referring specifically to the law of contract and law of torts.4 Principles refer to the individual rules within the categories such as the components making up a contract; offer; acceptance; consideration; binding promise; privity et al. 5 J Dawson, ‘Restitution or Damages’ (1959) 20 Ohio St. LJ 175, 187; “the well-known ailment of lawyers [is the] hardening of the categories.”

6

through the development of physical damage identifying

inconsistent judicial interpretation. Thirdly explore pure

economic loss and the judiciary’s willingness to develop new

doctrines to fill lacunas within other categories of law so to

remove inequitable principles overlooked by societal changes.

Fourthly conclude unification is not possible due to

inconsistent decision-making which obfuscates the law.

I

The fundamental principle of English nineteenth century

contract law was based on parties’ autonomy facilitating

absolute freedom to contract to serve their interests.6 The

courts’ approach was to enforce whatever agreement the parties

attained with the exception of illegality7 and

misrepresentation.8 This left little scope for claims for lost

chance arising from bad bargains or inequality of bargaining

power. The courts’ also upheld parties’ exercise of absolute

discretion in a contract by favouring determination of the

6 G H Treitel, An Outline of The Law of Contract (6th edn, Oxford University Press 2004) ch1, 3; “freedom of contract’ refers to the general principle that the law does not restrict the terms on which the parties may contract.”7 Pearce v Brooks (1866) LR 1 Ex 213: prostitute hired carriages for her trade in full knowledge of owner but failed to pay hire. Held: contract for immoral purposes and known by both parties therefore against public policy and unenforceable. 8 Edginton v Fitzmaurice (1885) 29 Ch D 459: Company director borrowed money on representation the loan was used for company building improvements when in fact used to pay off personal debts. Held - misrepresentation of actual intentions arising to false statement of material fact leading to actionable misrepresentation. cf Derry v Peek (1889) 14 App Cas 337 per Lord Herschell action in tort of deceit.

7

extent rather than how the discretion was exercised:9 therefore

upholding the will of the parties.10 The courts’ justification

was each party had come to the contract voluntarily.

This Victorian general theory of contract was founded on

entrepreneurism centred solely on individual wealth and market

economy with little or no allocation of risk to give rise to

fault-based liability. Voluntary assumption of risk was

applied to workers who shoulder liability for accidents at

work.11 The maxim volenti non fit injuria12 was used regularly when the

master was partially responsible.13 Even a theatre owner

escaped liability after an actor fell down an unfenced hole on

the premises because…he knew it was there.14 ‘Liability for

personal fault had undoubtedly appealed to the strongly

individualistic strain in Victorian moralising’15 until

legislation interposed.16

Consequently for justice and fairness to prevail in overcoming

unjust rigid principles of contract excluding remedy,

intuitive judicial activism took place. For instance, courts’

9 Dallman v King (1837) 4 Bing NC 105, 109 per Tindall CJ Held; court only considered the effect landlord’s unfettered discretion to approve repairs and not the arbitrary way he exercised it. 10 Treitel (n6) 7 ‘(the offeror) is willing to contract on terms stated, as soon as these are accepted by the person to whom the statement is addressed (offeree).’11 This later changed with the introduction of the Workmen’s Compensation Act 1897 where employers were liable to pay compensation where personal injury was caused to any of their workmen; see Cornish and Clarke (n13) 525-541 for an account of the Act’s effect.12 Latin: “to a willing person, injury is done.”13 W R Cornish and G de N Clarke, Law and Society in England 1750-1950 (1st edn, Sweet and Maxwell 1989) 499.14 Seymour v Maddox (1851) 16 LTOS 387.15 Cornish and Clarke (n13) 538.16 Law Reform (Personal injuries) Act 1948 s1; incorporating the recommendations of the Monckton Committee on Alternative Remedies.

8

assumed a contract when one did not exist,17and even created

contractual obligations by turning a mere advertisement trade

puff into a reward.18 The courts’ justification to stretch

contractual reasoning was to give remedy where none existed.

Tort was still a developing theory of miscellaneous actions

‘lumped together in books.’19 Non-contractual harm was

increasingly being dealt with by courts within the tort of

negligence but only to compensate on for accidental injury to

person or property.20 The Georgian eighteenth century

generalisation of a concept of a duty owed to any neighbour

still remained concealed.21

The eliding boundaries between contract and tort did not

materialise until the turn of the twentieth century. Some

reasoning offered was the changing ‘role of the state in

protecting the weak and dependent’ 22 increasing tort liability

dependency and/or the increase of affluence amongst average

persons linked with growth of credit for material needs and

wants.23 These generated different types of contractual

relationships resulting in certain principles within the

Victorian law of contract in need of reform or abolished ‘root

17 De La Bere v Pearson Ltd [1908] 1 KB 280.18 Carlill v The Carbolic Smoke Ball Co. Ltd [1893] 1QB 256 (CA).19 M Lunney and K Ophilant, Tort Law: Text and Materials (3rd edn, Oxford UniversityPress 2008) 920 Cornish and Clarke (n13) 538.21 Buller’s, An Institute of the Law Relative to Trials at Nisi Pruis (1st edn, Buller’s Publication 1768)35-36; (4th edn, Buller’s Publication 1785) 25-26; ‘Every manought to take reasonable care that he does not injure his neighbour; therefore where-ever a man receives any hurt through the default of another, though the same were not wilful, yet if it occasionedby negligence or folly, the law gives him an action to recover damages for the injury so sustained.’22 M Furmston (ed), The Law of Tort: Policies and Trends in Liability for Damage to Property andEconomic Loss (1st edn, Duckworth & Co. Ltd 1986)132.23 ibid 132-33.

9

and branch:’24 consideration25 was not ‘justified on the

grounds it distinguishes between onerous and gratuitous

contracts;’26 Pinnel’s Rule27 rebuked as ‘one of the most

absurd doctrines which have succeeded in becoming established

as part of the English law of contract’ and, the rule of

privity28 being, ‘completely out of harmony with conditions of

modern commerce and industry.’ 29

Such admonishment that principled reasoning was completely out

of harmony with modern society clearly supported certainty may

come at a price by encumbering law’s advancement through its

rigidity:30 an essential requirement of the rule of law.

Unfortunately, with the exception of the privity rule some

sixty years later,31 none of the other recommendations made it

onto the statute books ‘leaving the courts by their very

function compelled to act as legislators.’32

This compulsion to leave reform to judicial pragmatism to fill

lacunas within the hardened principles is a burden. Parliament

through enacting legislation is better equipped to promote

24 Law Revision Committee ‘Sixth Interim Report’(Law Com Cmd. 5449 1937) in (1937) 1 MLR 2 97-110 under nine heads: i)-ix).25 Tweddle v Atkinson [1861] 121 ER 762; Consideration must pass from both sidesparty to the contract. Despite being named in an agreement if no consideration has passed there is no right to sue under the rule of privity.26 Law Revision Committee (n22)100.27 Pinnel’s Case (1602) 5 Co Rep 117a: part-payment of a debt can never satisfythe whole debt.28 Dunlop Pneumatic Tyres Co. Ltd v Selfridge & Co. Ltd [1915] AC 847 (HL) per Lord Haldane ‘only a person who is party to a contract can sue on it…’29 Law Revision Committee (n22)106.30 Dawson (n5)175.31 Contract (Rights of Third Parties) Act 1999.32 Lord Diplock, ‘The Courts as Legislators - Annual Dinner address on 26th March 1965’ (Birmingham: Holdsworth Club, University of Birmingham1965) 1, 2.

10

societal change. Nevertheless any reform was left to common

law through the development of the law of obligations of

contract and tort. The method of choice to overcome such

injustices was to ‘move beyond a conception of negligence

liability as a pre-existing relationship and adopt a

generalised theory of liability.’33

Therefore the question advanced is whether rejecting clarity

and rationality for judicial decision-making by pure intuition

will be a slide from the rule of law begetting uncertainty. 34

II

The leading pivotal tortious inroad to contract was Lord

Atkin’s35 creation of the tort of negligence expanding on

Buller’s eighteenth century concept, ‘Every man ought to take

reasonable care he does not injure his neighbour…’ 36 This

“neighbour test” based itself around an appropriate standard

of reasonable foreseeability not to harm a person where a duty

of care was owed. Any breach of such duty could give rise to a

cause of action in tort liability for negligently caused

physical harm.

The decision’s enormity established concurrent liability

enabling claimants to choose which action was most beneficial

to settle claims for a breach of a general duty of care. Thus

tortious action overlapped into contractual obligations 33 Lunney & Olliphant (n19)14.34 Burrows (n2) Ch2 16; submitted “to reject the discipline of clarity and rationality imposed by categorisation is to slide from the rule of law into potential disastrous regime of decision-making by pure intuition.”35 Donoghue v Stevenson [1932] AC 562 (HL) 580 ‘neighbour test’.36 Buller’s (n21).

11

whether a contract exists between the parties or not37

resulting, in a weakening of the rule of privity. Lord

Buckmaster dissenting38 remonstrated cases against the privity

rule ‘should be buried so securely their perturbed spirits

shall no longer vex the law.’ Hitherto the law of negligence

remained steeped in the rule of privity of contract to control

any floodgate action feared by Lord Arbringer CB in Winterbottom

v Wright.39

Nevertheless Lord Atkin’s intuitive decision imposed a general

duty on manufacturers not to injure their ultimate end-users

from defective produce: therefore filling a lacuna within the

rigid contractual decision of Winterbottom v Wright40 which denied

similar liability for negligently caused injury due to absence

of privity. Lord Atkin’s pioneering tortious skirmish eliding

the boundaries of contract not only changed the “privacy

fallacy” but also the legal landscape by switching, ‘the

entire law of product liability from contract to tort.’41

Arguably Lord Atkin’s success hinged on both judicial and

public consensus on delivering a standard of care society

expected. Moreover, Lord Devlin promulgated judicial activism 37 Jackson v Mayfair Window Cleaning Co. Ltd [1952] 1All ER 215, 217-18: per Barry J.successful claim to sue in tort for damages when a chandelier being cleanedfell causing further property damage. Held: Whether in pursuance of a contract or otherwise-they are under an obligation not to damage that property as a result of their negligence. 38 Donoghue (n35) 576. 39 Winterbottom v Wright (1842) 10 M & W 109 per Lord Abringer CB cautioned; ‘There is no privity of contract between these parties…Unless we confine the operation of such contracts as this to the parties who entered them, the most absurd and outrageous consequences, to which I can see no limit, would ensue…’ 40 ibid.41 B Markesinis, S Deakin and A Johnston, Tort Law (7thedn, Oxford University Press 2013) 21.

12

can only be permissible on the basis of community consensus

when everybody agrees with the law made.42 Consequently the

neighbour test became the general principle whereby foresight

of harmful interference became the central benchmark.

Regrettably what transpired was exuberant expansion of the

“neighbour test” resulting in unsettled law. Creative

judicial interpretation began framing the initial test for

negligent physical damage from manufacturers of food produce

to include non-food goods.43

In Anns v Merton London Borough Council44 Lord Wilberforce widened the

possibility of duty of care owed in a two-part test. If

foreseeable damage was established and, no policy grounds

existed, a cause of action on tort would follow. Further, His

Lordship considered it was irrelevant to analysis the novel

situational facts from previous cases where a duty was held to

exist.45 Thus, in this instance sufficient proximity could be

established for a duty to be owed by a Local Authority to its

tenant irrespective of no physical harm occurring.

This simple “two-part” test unlimitedly broadened the tort of

negligence to include foreseeability of economic loss.46

Judiciary highlighted contextual difficulty on reconciling the

decision of proximate relationship with the pre-existing

42 Lord Devlin, ‘Judicial Activism’ (1975) 28 Current Legal Problems 1, 2. 43 Grant v Australian Knitting Mills Ltd [1936] AC 85 (PC) per Lord Wright; claimant brought an action against the respondent, claiming damages he had contracted dermatitis from the improper condition of underwear purchased byhim.44 [1978] AC 728 (HL).45 ibid 751.46 Junior Books v Veitchi Co [1983] 1 AC 520 (HL).

13

principles from the neighbour test: giving rise to uncertainty

of the nature and scope within the new principles.47 This

blurring between negligent economic losses and negligent

physical damage became unpalatable enough to see such cases

‘slowly whittled away.’ 48

A retreat from Anns decision came with its overruling in Murphy

v Brentwood District Council.49 Lord Keith considered Lord Wilberforce

had inconsistently applied the neighbour test set for

negligent physical harm to further encapsulate cases where

pure economic loss was recognised: 50 in absence of injury any

loss was economic thus unrecoverable unless assumed

responsibility is found under the Hedley test.51

Nevertheless the current position for claims of pure economic

loss in such cases has reverted back into a contractual

liability with the overruling of Murphy’s decision.52 In Robinson v

P E Jones53 Lord Jackson clearly reasoned contractual and tortious

liabilities are distinct: contractual obligations arise from

consensual parties whereas tortious duties are imposed by law

on policy grounds54. Accordingly foreseeable damage or injury 47 D & F Estates Ltd v Church Comrs for England [1989] AC 177 (HL) per Lord Oliver and Lord Bridge.48 S Hedley, ‘Recovering Lost Legacies: White v Jones in the Lords,’ [1995] 1Web JCLI http://webjcli.ncl.ac.uk/articles1/hedley1.html accessed 19 November 2013.49 Murphy v Brentwood District Council [1990] 2 All ER 908 (HL).50 ibid 919, per Lord Keith, ‘In my opinion it must now be recognised that, although the damage in Anns was characterised as physical damage by Lord Wilberforce, it was purely economic loss.51 Hedley Byrne v Heller & Partners Ltd [1964] AC 465 (HL); a duty of care established through a special relationship arising from a voluntary assumption of responsibility when imparting advice/information to another who later relies upon it to his/her detriment.52 Robinson v P E Jones (Contractors) Ltd [2011] EWCA Civ 9. 53 Ibid.54 ibid [76].

14

caused to other property or persons by a defective product

would only be recoverable through tort providing the contract

does not reasonably exclude such loss.55 This decision clearly

undermined the concurrent liability debate by declaring, in

absence of assumed responsibility in a contract, there is no

liability in tort.56

Such competing division within judicial interpretation is

muddying the waters between two distinct areas of obligations.

In defence of fairness, the sympathetic judiciary are

pragmatically attempting to navigate unchartered waters within

the law of obligations to find remedy in tort where remedy in

contract was/is denied.

III

The second leading pivotal tortious inroad to contract arose

from the decision in Hedley Byrne v Heller.57 This decision expanded

tort of negligence to encompass pure economic loss caused by

negligent misstatement. Unlike the catholic approach of Lord

Atkin’s, the Hedley duty of care relied on a special

relationship arising from a defendant’s voluntary assumption

of responsibility when giving advice or a service.

Nevertheless this expansion of negligence into misstatement

was not taken lightly. There was a potential of opening the

55 Nota Bene: Unfair Contract Terms Act 1977 s2(1) death or personal injury can never be excluded per se.56 Robinson (n49) [83] per Jackson LJ.57 Hedley (n51).

15

floodgates from unscrupulous claims of mere utterances.58

Therefore Lord Reid in Hedley, expanding on earlier case

dicta,59 reasoned a mere statement required imposition of a

special relationship to establish a duty of care.

Lord Morris in Hedley further explained a special relationship

is capable of existing where someone with special skills gives

assistance to another whom then relies upon it, ‘irrespective

of contract.’60 Thus any claim for pure economic loss for a

breach of duty would be able to be framed in tortious

liability concurrent with contract. Furthermore this decision

permeated previous contractual decisions where pure loss of

profit through interruption of services or physical damage was

held too remote for damages capable in breach of contract.61

A more significant judicial assault on contract was put

forward by Lord Devlin in Hedley by acknowledging a promise

given without consideration to perform a service can be

recoverable in tort if performed negligently.62 Therefore

dismissing for not being law any claim gratuitous acts did not

amount to performing a service under contract for lack of 58 Hedley (n51) 483 per Lord Reid; ‘there is good sense behind our present law that in general an innocent but negligent misrepresentation gives no cause of action.’59 Robinson v National Bank of Scotland SC (HL) [1916] 154, 157per Lord Haldane. 60 Hedley (n51) 494-495 per Lord Morris; ‘…though gratuitously, to give deliberate advice (I exclude what I might call casual and perfunctory conversations) they would be under a duty to exercise reasonable care in giving it. They would be liable if they were negligent although, there beingno consideration, no enforceable contractual relationship was created.’61 Cattle v Stockton Waterworks Co. (1875) LR 10 QB 453 per Blackburn J and approvedin House of Lords decision in Simpson v Thompson (1877) 3 App Cas 279 (HL); see also Spartan Steel and Alloys Ltd v Martin & Co. Ltd [1937] QB 27 per Lord Denning’s later decision permitting a claim for loss of profit from the consequence of physical damage but not ‘economic loss independent of physical damage.’ 62 Hedley (n51) 526 per Lord Devlin; ‘A promise given without consideration to perform a service cannot be enforced as a contract by the promisee; but if the service is in fact performed and done negligently, the promisee can recover in an action of tort…’

16

consideration.63 This not only reflects the current position of

the Law Commission’s Report on the similar reform64 but also

the Law Revision Committee Report in 1937.65 In furtherance

Lord Devlin elucidated the concept as, a special relationship

equivalent to contract but absent of consideration whereby an

assumption of responsibility arises.66 Nevertheless, other than

the few models identified67 the categories afforded a special

relationship offered little guidance to the scope of

categories affected.

Both Lord Roskill68 and Lord Griffiths69 in subsequent cases

rebuffed their Lordships’ explanations in Hedley as unhelpful.

Academic opinions reproached the decision purporting ‘[n]ever

has there been such a judicial jamboree…where…their lordships

had been on a trip to Mount Olympus and perhaps smoked a joint

on the bus.’70

Not all commentators were critical of the decision. One

proponent acknowledged the Hedley decision adopted the law of

63 ibid.64 Law Commission, ‘Privity of Contract: Contract for the Benefit of Third Parties’ (Law Com No.242 Cm. 3329 1996), 73, Part VI; Third Party Rule and Consideration. 65Law Revision Committee (n22) 100; ‘cannot be justified on the grounds that it distinguishes between onerous and gratuitous contracts, or between contracts and arrangements notintended to have legal consequences’.66 Hedley (n51) 528-9 per Lord Devlin;‘…to include also relationships… equivalent to contract…where there is an assumption of responsibility…in which, but for the absence of consideration, there would be a contract.’67 Banker, solicitors and their respective clients.68 Caparo Industries Plc v Dickman [1990] 2AC 605 (HL) 628.69 Smith v Eric S Bush (A Firm); Harris v Wyre Forest DC [1990] 1 AC 831 (HL) 864-5.70 T Weir, ‘Errare Humanum Est’, in P Birks (ed), Frontiers of Liability, (Vol 2 OxfordUniversity Press 1994) 103, 107 ‘Never has there been such a judicial jamboree as Hedley Byrne where one almost has the feeling that their lordships had been on a trip to Mount Olympus andperhaps smoked a joint on the Bus. Something certainly went to their heads, presumably not the merit of the claim, which they dismissed.’

17

negligence as ‘an interstitial, gap-filling role to make good

deficiencies in the law of contract by rectifying damage

caused by promises the law of contract cannot enforce.’71

Although the above non-promissory justification is embraced by

the judiciary concerning negligent misstatement, its

justification becomes less palatable and more confusing when

confronted with negligent performance of a beneficial service.

The conceptual difficulty is the failure through omission or

negligent performance of beneficial services to bring about a

spes successions72 for a client. The conundrum is, if it has not

made a man better off nor has it made him worse off then, is

it truly a wrong worthy of being recognised as pure economic

loss capable of compensation73 or is simply a breach of

contract offering nominal damages.

The issue becomes more intensified where the negligent

performance arises from a contractual relationship for the

benefit of a third party. Prior to 199974 the rigid

contractual rule of privity simply excluded third parties from

bringing a cause of action for a failure to benefit under a

contractual agreement for lack of consideration.75 In context

failed Wills produced claims by disappointed third party

beneficiaries for seeking compensatory awards for failure to

71 K Barker, ‘Unreliable assumption in the modern law of obligation,’ (1993) LQR 461, 462.72 Latin: hope of succeeding.73 White v Jones [1995] 2 AC 207 (HL) per Lord Goff.74 Contract (Rights of Third Parties) Act 1999 s1(a)(b).75 Tweddle v Atkinson [1861] 121 ER 762; Consideration must pass from both sidesparty to the contract. Despite being named in an agreement if no consideration has passed there is no right to sue under the rule of privity.

18

benefit arising from omissions by solicitors. The legal

obstacle was solicitors’ duty of care owed was only extended

to living clients through their retainer: offering the normal

contractual nominal damages to remedy a defect within the

Will. In furtherance after death of a client all causes of

actions vested in the deceased survived for the benefit of

his/her Estate.76

The inherent problem was two-fold: a deceased Estate could not

bring an action as it had suffered no loss and; intended

beneficiaries named in a Will were barred both by statute77 and

the contractual rule of privity.78 Therefore on death of a

client no redress for a solicitor’s negligence would be

afforded to any intended beneficiaries deprived of their

rightful inheritance: hence an injustice within the law.

This was addressed in Ross v Caunters79 where a negligent omission

by a solicitor during preparation of a client’s Will failed to

pass to the intended beneficiary the subsequent inheritance.80

Therefore to find liability the court need to intuitively

overcome the contractual boundary of privity.

Lord Megarry VC constructed the solicitor’s liability not

around the Hedley principle81 of an assumption of responsibility

76 Law Reform (Miscellaneous Provisions) Act 1934 s1.77 Ibid.78 Dunlop Pneumatic Tyres Co. Ltd v Selfridge & Co. Ltd [1915] AC 847 (HL) per Lord Haldane ‘only a person who is party to a contract can sue on it…’79 [1980] Ch 297, 303.80 Wills Act 1857 s15; attestation of a Will by a beneficiary’s spouse wouldinvalidate a gift to the beneficiary.81 Hedley [n51] a special relationship arising from a voluntary assumption ofresponsibility where it would be reasonably foreseeable the act or advice given would give rise to reliance by the recipient to their detriment.

19

but more in line with the neighbour rule from Donoghue v

Stevenson.82 Confusingly the court found the solicitor liable

for harmful interference and not a failure to benefit. The

decision resulted in any subsequent claim for pure economic

loss due to negligent omission being framed in reliance

damages in tort for harmful interference rather than extending

to third party beneficiaries expectancy damages for failure to

benefit.83

Arguably fairness prevailed with the emergence of tortious

liability for negligent omission blurring contractual

boundaries by overcoming the rule not to acknowledge pure

economic loss.84

Nevertheless Ross v Caunters85was distinguished in White v Jones86

based on similar facts of duty of care owed to beneficiaries

whilst preparing a Will. This time the Hedley principle was

extended to the intended beneficiaries. Lord Goff asserted a

more objective evaluation on whether the solicitor should be

held in law to have reasonable foreseeability to accept

responsibility regardless to whether he did.87 Further, after 82 Donoghue (n35). 83 Midland Bank v Hett, Stubbs & Kemp [1979] Ch 384: solicitor failed to register the client’s interest of buying a farm which resulted in the failure to purchase. Claimant was not worse off for no service rendered by solicitor but rather in a worse position than if the solicitor had registered the option to purchase. Claimant sued for expectancy damages of the value of the farm due to a failure to benefit.84 Cattle v Stockton Waterworks Co. (1875) LR 10 QB 453 per Blackburn J approved in Simpson & Co v Thompson (1887) 3 App Cas 279 (HL).85 [1980] Ch 297.86 [1995] 2 AC 207 (HL).87 ibid 268 per Lord Goff ‘…remedy under the Hedley Byrne principle by holding that the assumption of responsibility by the solicitor towards his client should be held in law to extend to the intended beneficiary who (as the solicitor can reasonably foresee) may, as a result of the solicitor's

20

an express assumption of responsibility was not availing Lord

Goff was willing to imply one.88 This clearly contradicted Lord

Morris’s account in Hedley where voluntary assumed

responsibility is the subjective state of mind of the

defendant and not to be imposed by law.89 Nonetheless Lord

Goff’s justification was to apply practical justice to the

role solicitors play in society drawn from dicta from

Commonwealth judiciary.90

Unconvinced Lord Mustill (dissenting) expounded courts should

‘not to act as a second-line disciplinary tribunals imposing

punishment in the shape of damages.’91

Such judicial prevarications of the rationale of merging tort

into contract boundaries has obfuscated the true reasoning

behind both decisions in Ross v Caunters92 and White v Jones:93 a

pragmatic approach to overcome the rigid contractual

principles of privity and consideration.94

negligence, be deprived of his intended legacy…’88 White (n86) 269 per Lord Goff ‘(3) Such assumption of responsibility will of course be subject to any term of the contract…It is true that such a term would be most unlikely to exist in practice; but as a matter of principle it is right that this largely theoretical question should be addressed.’89 Hedley (n51) 529 per Lord Morris ‘I do not understand any of your Lordships to hold that itis a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is aresponsibility that is voluntarily accepted or undertaken…’90 Gartside v Sheffield Young & Ellis [1983] NZLR (PC) 37, [43] per Cooke J‘…to deny an effective remedy in a plain case would seem to imply a refusal to acknowledge the solicitor’s professional role in the community…’ 91 White (n83) 278 per Lord Mustill, ‘the purpose of the courts when recognising tortious acts and their consequences is to compensate those plaintiffs who suffer actionable breaches of duty, not to act as a second-line disciplinary tribunals imposing punishment in the shape of damages.’92 [1980] Ch 297. 93 [1995] 2 AC 207.94 Tweddle v Atkinson [1861] 121 ER 762; Consideration must pass from both sidesparty to the contract. Despite being named in an agreement if no consideration has passed there is no right to sue under the rule of privity.

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IV

Concurrent liability in the area of judicial decision-making

has caused controversy and uncertainty amongst the judiciary

on whether liability in contract and tort should truly co-

exist. The problem lies where courts are permitted to impose a

general duty for failure to comply with a reasonable standard

of care rather than based on a breach of contractual

obligations. This can benefit claimants by circumventing

statutory limitations rules for bringing an action in contract

for the more favourable extending time-limit in negligent tort

actions:95 though parity has been called for through reform.96

Undoubtedly during negotiations parties set express or implied

terms in the contract for risk allocation in advance thus

unquestionably reflecting the price paid for the bargain

entered. Any failed term the parties could not agree upon

should ‘…not [be left] open to the courts to impose a duty of care…not contained in

any express or implied terms of the contract.’ 97 For the courts to give

95 Limitation Act 1980 ss 2 (breach of contract) and 5 (tort) primary limitation period of six years from the date of the cause of action; Where claimants are out of time in breach of contract if a duty of care in tort can be established there is a secondary limitation period for tort of negligence being three years from date of discovery being section 14A tortious negligence causes of action.96 Law Commission ‘Limitation of Action: Item 2 of the Seventh Programme of Law Reform: Limitation of Actions’ (Law Com No 270, 2001) 4 ‘…we proposed to resolve the problems identified above by applying a single, unified, limitations regime as far as possible to all causes of action…’97 Rush v Reid & Tompkins [1990] 1WLR 212 per Ralph Gibson LJ; see also cases; Greater Nottingham Co-operative Society v Cementation Piling and Foundation Ltd [1989] QB 71 held; court refused to apply a duty of care to meet an absence of a contractual remedy; Scally v Southern Health and Social Services Board [1991] ICR 771 and; Van Oppen v Trustees of Bedford School [1990] 1 WLR 235 held; failure to extend insurance cover in absence of any express term undertaken the schoolowed no duty in tort to extend insurance cover to pupils.

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such effect would debatably interfere not only with the

bargain positions of the parties but with the historical

approach for minimal interference to the parties’ freedom to

contract.

Therefore any blurring of boundaries has been vociferously

rejected by purists of the division of the law of obligations.

Any such liability arising from a breach of a duty of care

should be decided within the historical precedent principles

of the categories of their respective law of obligations or,

left to parliament to legislate.

This formalistic approach continually raises tension within

the judiciary when the question arises to what extent should

contractual liability exclude causes of actions in tort

between the contracting parties. Lord Scarman98 clearly opposed

the pragmatic development of concurrent liability believing

there was no ‘advantage of the law’s development in searching

for a liability in tort where the parties are in a contractual

relationship.’ 99 Equally in a Commonwealth High Court decision

Tipping J expressed, ‘if the parties have chosen a contractual

bed they should ordinarily be expected to lie in it alone,

without the seductive company of tort.’100

In disagreement Lord Goff101 established a negligent

professional service can establish a duty of care which

98 Tai Hing Cotton Mill Lt v Lui Chong Hing Bank [1986] AC 80 (PC); case concerning customers duties towards their banks and liability arising from forged cheques.99 ibid 107.100 Simms Jones Ltd v Protochem Trading New Zealand Ltd [1993] 3 NZLR (PC) 369, 381.101 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL).

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coexists alongside contractual obligations.102 However His

Lordship accepted the general law of tort would not be

permitted to circumvent or escape a contractual limitation or

exclusion clause inserted into a contract.103

Perhaps this acceptance was to appease those judges against

concurrent liability. Thus by identifying parties can contract

out tortious duty through exclusion or limitation clauses,

albeit subject to statutory reasonableness,104 assert the

parties’ autonomy remains. Still, the debate concerning

concurrent liability existence was seemingly settled by

Henderson.105

However, Lord Scott in Concord Trust106 rekindled the debate by

contending if a contract has not imposed a contractual duty it

would be difficult to argue a tortious duty was owed.107 This

decision disquieting the concurrent liability position did not

pass unnoticed. Lord Bingham attempted in his obiter in a later

case108 to re-establish the original position by explicitly

inserting concurrent liability can co-exist with contract.109

Nonetheless more recently Lord Jackson110 followed a similar

contractual rationale as Lord Scott maintaining both contract

102 ibid 193.103 Henderson (n101) 193.104 Unfair Contract Terms Act 1977 s4 (1)(2) Unreasonable indemnity clauses;s11 ‘The reasonableness test’.105 Henderson (n101).106 Concord Trust v Law Debenture Trust Corp [2005] UKHL 27 per Lord Scott. 107 ibid [38].108 Commissioners of Customs and Excise v Barclays Bank [2006] UKHL 28 per Lord Bingham.109 ibid [19] ‘It is clear...that a duty of care in tort may co-exist with a similar duty in contract or a statutory duty…’110 Robinson v P E Jones (Contractors) Ltd [2011] EWCA Civ 9, [76] per Lord Jackson.

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and tort obligations are distinct: therefore unless excluded

tortious liability does not run concurrent with contract.111

This clearly leaves the concurrent liability debate in a very

awkward and inconsistent position. Such uncertainty within the

judiciary could not justify any proposal for unification to

the law of obligations. Then again there is no consistent

evidence this is what the judiciary wish as most recent

concurrent liability decisions seemingly include the will of

the parties to reasonably exclude the general law of tort;

thus upholding parties’ autonomy.

In conclusion through the lacklustre of parliamentary reform

fairness within the law had no other ally than a pragmatic

‘regime of decision-making by pure intuition.’112 Such

decision-making developed tortious liability as a tool to

overcome the rigidity of the historic law of contract,

especially in the area of privity and consideration. The only

indictment against this form of decision-making is the

apparent blurring of the boundaries between the law of

obligations of contract and tort which sometimes brings

uncertainty within the law. Even so, this rejection of the

disciplines of clarity and rationality has not seen a slide

from the rule of law. In fact the result has been quite

noteworthy: an antiquated Victorian law of contract based on

individualism of the few now progressing into a more

practicable doctrine in the twenty first century for the

masses.111 ibid [83] per Jackson LJ. 112 Burrows (n2) ch1, 2

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