Scope of Defendant’s Duty of Care
In two landmark cases regarding the scope of a defendant’s duty of care, two similarly constituted extended seven-justice Supreme Court panels today handed down judgments in cases which concerned, firstly, the duty in the context of a claim for clinical negligence and, secondly, professional advice given by accountants: Khan v Meadows [2021] UKSC 21; Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 – Lord Reed (President), Lord Hodge (Deputy President), Lady Black, Lord Kitchin, Lord Sales, Lord Leggatt, Lord Burrows
The court emphasised that its judgments – which will be of enormous interest to academics and practitioners alike – should be read together.
Each case examined the approach in SAAMCO[1] and how it was to be applied in different fields.
In Khan the claimant was given negligent medical advice when she sought to discover whether she was the carrier of a hereditary disease (haemophilia). She was told that the results were negative. In due course a son was born to her with severe haemophilia. He was later also discovered to suffer from autism which was not caused by or in any way related to haemophilia.
The claimant sought to recover the full damages of his care in relation to both conditions, arguing that if she had known about the haemophilia, she would not have had the child.
The issue in Manchester Building Society was negligent advice about “hedge accounting” given by Grant Thornton. Relying on the advice, the Society entered into long-term interest rate swaps as a hedge against the cost of borrowing to fund its lifetime mortgages business.
When Grant Thornton realised its error because of the severe mismatch between the negative value of the swaps and the value of the mortgages which were supposed to be hedged, the accounts showed substantially reduced assets and insufficient regulatory capital. Closing out the interest rate swap contracts early cost Manchester BS £32 million.
The Supreme Court dismissed Khan’s appeal but upheld Manchester’s appeal (reducing damages by 50% for contributory negligence), in each case unanimously.
The reasoning of Lord Leggatt and Lord Burrows differed in some respects from the five-Justice majority.
Lord Sumption explained in Hughes-Holland[2] that the idea of limiting the damages recoverable in the tort of negligence to those falling within the scope of the duty of care assumed by the defendant long pre-dated the decision in SAAMCO.
The majority in the instant appeals held that when a claimant sought damages from a defendant in the tort of negligence a series of questions arose:
- Is the harm (loss, injury and damage) which is the subject matter of the claim actionable in negligence? (the actionability question)
- What are the risks of harm to the claimant against which the law imposes on the defendant the duty to take care? (the scope of duty question)
- Did the defendant breach his or her duty by his or her act or omission? (the breach question)
- Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? (the factual causation question)
- Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant’s duty of care as analysed at stage 2 above? (the duty nexus question)
- Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause (including novus actus interveniens) in relation to it or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? (the legal responsibility)
The scope of duty principle was that a defendant was liable only for losses which fell within the scope of his or her duty of care to the claimant.
In Khan the Court rejected counsel’s submission that the scope of duty principle did not apply to claims arising out of clinical negligence. There was no sound basis for excluding clinical negligence from the ambit of the principle nor for confining the principle to cases involving pure economic loss arising in commercial transactions.
The scope of duty question gave a straightforward answer to the duty nexus question: the law did not impose on Dr Khan any duty in relation to unrelated risks (such as autism) which might arise in any pregnancy.
In any case, applying the SAAMCO counterfactual, if Dr Khan’s advice had been correct and all else remained the same, the child would have been born with autism.
The purpose of the advice or information was of central importance.
In Manchester, Grant Thornton’s negligent advice exposed the society to regulatory capital demands which the use of hedge accounting was designed to avoid.
That was a risk that Grant Thornton’s advice was supposed to allow the society to assess, and which its negligence caused the society to fail to understand. The loss suffered by the society therefore fell within the scope of the duty of care assumed by Grant Thornton, in light of the purpose of its advice.
Cases Cited in Judgment:
Scope of Duty of Care
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd; South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191
Parkinson v St James and Seacroft University Hospital NHS Trust [2001] EWCA Civ 530; [2002] QB 266
Groom v Selby [2001] EWCA Civ 1522
McFarlane v Tayside Health Board [2000] 2 AC 59
Chester v Ashfar [2005] 1 AC 134
Hughes-Holland v BPE Solicitors [2017] UKSC 21; [2018] AC 599
Robinson v Chief Constable of West Yorkshire Police [2018] UKSC 4; [2018] AC 736
Watson Laidlaw & Co Ltd v Pott Cassels & Williamson 1914 SC (HL) 18
Foreseeable Damage
Jolley v Sutton London Borough Council [2000] 1 WLR 1082
The Tort of Negligence
Dorset Yacht Co Ltd v Home Office [1970] AC 1004
Breach, Scope of Duty and Loss
Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39; [2008] AC 281
Gregg v Scott [2005] UKHL 2; [2005] 2 AC 176
Hicks v Chief Constable of the South Yorkshire Police [1992] 2 All ER 6
Roe v Minister of Health [1954] 2 QB 66
Overseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound) [1961] AC 388
Pure Economic Loss
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Caparo Industries plc v Dickman [1990] 2 AC 605
NRAM Ltd (formerly NRAM plc) v Steel [2018] UKSC 13; [2018] 1 WLR 1190; 2018 SC (UKSC) 141
McLoughlin v O’Brian [1983] 1 AC 410
Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310
Frost v Chief Constable of South Yorkshire Police [1999] 2 AC 455
SAAMCO Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (formerly Edward Erdman (an unlimited company) (No 2) [1997] AC 191, [1997] 1 WLR 1627
Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190
Aneco Reinsurance Underwriting Ltd (in liquidation) v Johnson & Higgins Ltd [2001] UKHL 51; [2001] 2 All ER (Comm) 929
Smith v Littlewoods Organisation Ltd [1987] AC 241; 1987 SC (HL) 37
Mitchell v Glasgow City Council [2009] UKHL 11; [2009] AC 874; 2009 SC (HL) 21
Michael v Chief Constable of South Wales Police [2015] UKSC 2; [2015] AC 1732.
Factual Cause of Harm (and the ‘but for’ test)
Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19; [2002] 2 AC 883
Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360
Remoteness of Damage
Overseas Tankship (UK) Ltd v Miller Steamship Co Pty (The Wagon Mound (No 2)) [1967] AC 617
Hughes v Lord Advocate [1963] AC 837; 1963 SC (HL) 31
McKew v Holland & Hannen & Cubitts (Scotland) Ltd [1969] 3 All ER 1621
Carslogie Steamship Co Ltd v Royal Norwegian Government [1952] AC 292.
Contributory Negligence
Stapley v Gypsum Mines Ltd [1953] AC 663
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673
Koch Marine Inc v D’Amica Societa di Navigatione ARL (The Elena D’Amico) [1980] 1 Lloyd’s Rep 75
Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12; [2007] 2 AC 353
The Accompanying Appeal
Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20
Wrongful Birth
Parkinson v St James and Seacroft University Hospital NHS Trust [2001] EWCA Civ 530; [2002] QB 266
Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52; [2004] 1 AC 30
McFarlane v Tayside Health Board [2000] 2 AC 59
Parkinson v St James and Seacroft University Hospital NHS Trust [2001] EWCA Civ 530; [2002] QB 266
Rees v Darlington Memorial Hospital NHS Trust [2003] UKHL 52; [2004] 1 AC 309
[1] South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191
[2] Hughes-Holland v BPE Solicitors [2017] UKSC 21; [2018] AC 599