There are some cases which do not fit neatly into the requirement of reliance within a special relationship. For example, White v Jones (1995) rests on principles which make it difficult to reconcile with Hedley Byrne. It concerns a will which was made by the father of a family who deliberately cut his daughters out of his will after a quarrel but later became reconciled with them. He instructed his solicitors to change the will in order to give them £9,000 each as previously intended. However, the solicitors did nothing for a month, and the father again told them to amend the will, but they still did nothing and one month later the father died. The daughters succeeded in their action for economic loss against the solicitors in an appeal to the House of Lords, despite the fact that the daughters could not demonstrate that they had relied directly on the solicitors. The decision is rather surprising in the light of the previously restricted interpretation of Hedley Byrne in the recent past, though the case of
Ross v Caunters (1980), in which the facts were similar had also been decided in
favour of disappointed beneficiaries. In White v Jones (1995), there was sufficient proximity to form the basis of a duty of care.
In Gibbons v Nelsons (2000), it was held that a solicitor’s duty of care to an intended beneficiary of whom he was unaware was limited. The duty was only owed if the solicitor knew about both the benefit that the testator wanted to confer and the person or class of persons upon whom the benefit was
intended to be conferred. Similarly, in Worby v Rosser (1999), it was held by the Court of Appeal that a solicitor who is preparing a will is not under any duty of care to inquire whether the testator has capacity to make a will, nor must he or she ascertain whether or not the testator was being unduly influenced.
In Gorham v British Telecommunications plc (2000), the Court of Appeal held that, if an insurer owed a duty of care to a customer when advising about pensions and life assurance, it also owed a duty to the customer’s dependents, as intended beneficiaries.
It can be concluded that, as far as these rather specialised cases are concerned, there is not necessarily any need to establish ‘reliance’ within the special relationship.
In White v Jones (1995), Lord Goff argued that the usual reason for not allowing recovery for pure economic loss, that of fear of unlimited liability, did not apply here because the loss to the daughters was limited both in amount and in the number of potential claimants.
In Ministry of Housing and Local Government v Sharp (1971), a clerk in the land registry had negligently omitted to notice a planning charge and issued a clear certificate. This meant that the Ministry lost compensation to which it would have been entitled when the land was developed. The Court of Appeal held that the employers of the clerk were vicariously liable. The claimant was reasonably foreseeable. This was an extension of Hedley Byrne outside the traditional special relationship as the reliance was made by the purchaser in this case, yet a third party, the Ministry, was able to claim because that purchaser’s reliance on the statement had resulted in a loss to them.
These cases were distinguished in Clark v Bruce Lance & Co (1988). In this case, there was much less proximity between the parties and it is easy to see why the Court of Appeal were not prepared to extend the scope of liability.
The question of whether a duty to third parties existed was further considered in Possfund Custodian Trustee Ltd v Diamond and Others (1996). In this case, the issue was whether those responsible for a company’s prospectus owed a duty of care to subsequent purchasers of shares. The action was not struck out as there were arguments which could be made relating to proximity and reliance, and the issue as to whom the prospectus was aimed.
It is difficult to reconcile these cases with the Hedley Byrne requirements. They can perhaps be explained by the fact that the relationship between the claimants and the defendants is very close, and that only one person could possibly have suffered a loss. The possibility of indeterminate liability to a large number of different potential claimants does not therefore arise. See, also, Ross v Caunters (1980) where a lawyer failed to make a valid will for a client who wanted to benefit the claimant.
A more recent case in which these issues were considered by the House of Lords is Williams v Natural Life Health Foods Ltd (1998). The second defendant in this case had established a company to franchise various health foods and to run a shop of his own. The claimants, who wanted to obtain a franchise, contacted the company for information. They received a brochure and prospectus, which indicated that the second defendant was experienced and highly successful; relying on this, they proceeded to obtain a franchise. The claimants claimed damages, from both the company and the second defendant, for pure economic loss suffered after their shop failed to make a profit. As the company had gone into liquidation, the proceedings were eventually brought only against the second defendant.
The House of Lords held that the action must fail, on the basis that there was no special relationship between the claimant and the second defendants. At no stage in the negotiations at the pre-contract stage had the claimants had any contact with the second defendant, and there were no personal dealings of a direct or indirect nature between them which could have indicated that the second defendant has assumed any responsibility for the claimants’ affairs. They had relied on statements made by the company, but there was no evidence that they had ever relied on the second defendants to take steps to safeguard their position as franchisers. Lord Steyn did, however, state that there is a ‘gap-filling’ function of the law of tort, and that this arises especially in cases in which the law of contract proves wanting because the rules of privity of contract prevent justice from being done.