Smith v Eric S Bush (A Firm) [1990] UKHL 1

"(2) . . . the local authority . . . shall satisfy themselves that the house ... to be acquired is ... or will be made in all respects fit for human habitation. . . 3(e) The advance shall not be made except after a valuation duly made on behalf of the local authority ..."

"I/We enclose herewith valuation fee and administration fee £22. I/We understand that this fee is not returnable even if the council do not eventually make an advance and that the valuation is confidential and is intended soley for the benefit of Wyre Forest District Council in determining what advance, if any, may be made on the security and that no responsibility whatsoever is implied or accepted by the council for the value or condition of the property by reason of such inspection and report. (You are advised for your own protection to instruct your own surveyor/architect to inspect the property). I/We agree that the valuation report is the property of the council and that I/we cannot require its production."

"1. Obtain report for district council from Midlands Electricity Board regarding electrics and carry out any recommendations. 2. Make good mortar fillets to extension."

"I accept that the society will provide me with a copy of the report and mortgage valuation which the society will obtain in relation to this application. I understand that the society is not the agent of the surveyor or firm of surveyors and that I am making no agreement with the surveyor or firm of surveyors. I understand that neither the society nor the surveyor or the firm of surveyors will warrant, represent or give any assurance to me that the statements, conclusions and opinions expressed or implied in the report and mortgage evaluation will be accurate or valid and the surveyor's report will be supplied without any acceptance of responsibility on their part to me."

"11. Repairs recommended as a condition of mortgage: No essential repairs are required. We noted a number of items of disrepair in the building which we have taken into account in our valuation, but which are not considered to be essential for mortgage purposes."

"( a ) of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;

"( b ) of any common law duty to take reasonable care or exercise reasonable skill ..."

"(1) A person cannot by reference to any contract term or to a notice . . . exclude or restrict his liability for death or personal injury resulting from negligence.

"(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness."

"did no more than to state what the legal position would be even if it were not there but it did emphasise the matter and took much of the sting out of the plaintiff's allegation, which was to the effect that once the building society had had a survey made and were willing to lend money, everything was all right and that she would not have entered on the transaction if they had not kept silent about the defects or been negligent in not discovering them. In view of the warning in the proposal form that grievance, if it were one, lost any of its justification."

"If the matter were free from authority, I should have said that they clearly did owe a duty of care to him. They were professional accountants who prepared and put before him these accounts, knowing that he was going to be guided by them in making an investment in the company. On the face of those accounts he did make the investment, whereas if the accounts had been carefully prepared, he would not have made the investment at all. The result is that he has lost his money."

"a duty to take care can only arise where the result of a failure to take care will cause physical damage to persons or property. ... I can understand that in some cases of financial loss there may not be a sufficiently proximate relationship to give rise to a duty of care; but, if once the duty exists, I cannot think that liability depends on the nature of the damage."

"A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought; or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require; or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require."

"the categories of special relationships which may give rise to a duty to take care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty, but include also relationships which . . . are 'equivalent to contract,' that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract."

"that a duty to use due care (where there was no contract) only arose when there was a voluntary assumption of responsibility . . . Lord Reid in H edley Byrne's case [1964] A.C. 465, 487 and ... Lord Devlin, at p. 529 ... used those words because of the special circumstances of that case (where the bank disclaimed responsibility). But they did not in any way mean to limit the general principle. In my opinion the duty to use due care in a statement arises, not from any voluntary assumption of responsibility, but from the fact that the person making it knows, or ought to know, that others, being his neighbours in this regard, would act on the face of the statement being accurate."

"I do not accept that, in all cases, the obligation to take reasonable care necessarily depends on the voluntary assumption of responsibility. Even if it did, I am far from satisfied that the council did not voluntarily assume responsibility in the present case. On the contrary, it seems to me that they certainly chose to undertake the duty of searching the register and preparing the certificate. There was nothing to compel them to discharge this duty through their servant."

"there must be an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract. Responsibility can only attach if the defendant's actions implied a voluntary undertaking to assume responsibility."

"all the circumstances obtaining when the liability arose or (but for the notice) would have arisen."

"by reference to ... notices which exclude . . . the relevant obligation or duty."

"fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen."

"It is a valuation and not a survey, but any valuation is necessarily governed by condition. The inspection is, of necessity, a limited one. Both the expert surveyors who gave evidence before me agreed that with a house of this size they would allow about half-an-hour for their inspection on site. That time does not admit of moving furniture, or of lifting carpets, especially where they are nailed down. In my judgment, it must be accepted that where a surveyor undertakes a scheme valuation it is understood that he is making a limited appraisal only. It is, however, an appraisal by a skilled professional man. It is inherent in any standard fee work that some cases will colloquially be 'winners' and others 'losers,' from the professional man's point of view. The fact that in an individual case he may need to spend two or three times as long as he would have expected, or as the fee structure would have contemplated, is something which he must accept. His duty to take reasonable care in providing a valuation remains the root of his obligation. In an extreme case ... a surveyor might refuse to value on the agreed fee basis, though any surveyor who too often refused to take the rough with the smooth would not improve his reputation. If, in a particular case, the proper valuation of a £19,000 house needs two hours' work, that is what the surveyor must devote to it. The second aspect of the problem concerns moving furniture and lifting carpets. Here again, as it seems to me, the position that the law adopts is simple. If a surveyor misses a defect because its signs are hidden, that is a risk that his client must accept. But if there is specific ground for suspicion and the trail of suspicion leads behind furniture or under carpets, the surveyor must take reasonable steps to follow the trail until he has all the information which it is reasonable for him to have before making his valuation."

"the intending mortgagor feels that the building society, whom he trusts, must employ for the valuation and survey competent qualified surveyors; and, if the building society acts upon its surveyor's report, then there can be no good reason why he should not also himself act upon it. The consequence is that if, after inspection by the building society's surveyor, an offer to make an advance is made, the applicant assumes that the building society has satisfied itself that the house is valuable enough to provide suitable security for a loan and decides to proceed by accepting the society's offer. So, if Mr. Yianni had had an independent survey, he would have been exceptional in the experience of the building societies and of those employed to carry out surveys and valuations for them."

"in so far as it stated that the property provided adequate security for an advance of £12,000, would be passed on to the plaintiffs, who, notwithstanding the building society's literature and the service of the notice under section 30 of the Building Societies Act 1962, in the defendants' reasonable contemplation would place reliance upon its

"3.10 There will inevitably be claims of financial loss arising out of the provision of conveyancing services. A bad mistake can result in a purchaser acquiring a property which

"An authorised practitioner must not contractually limit its liability for damage suffered by the client as a result of negligence on its part."

"For the purposes of this part of this Act, 'negligence' means the breach - ( a ) of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract; ( b ) of any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty); ( c ) of the common duty of care imposed by the Occupiers' Liability Act 1957 or the Occupiers' Liability Act (Northern Ireland) 1957."

"In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to allow

"To the extent that this part of this Act prevents the exclusion or restriction of any liability it also prevents - ( a ) making the liability or its enforcement subject to restrictive or onerous conditions; ( b ) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his purusing any such right or remedy; ( c ) excluding or restricting rules of evidence or procedure; and (to that extent) sections 2 and 5 to 7 also prevent excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty."

"Our recommendations in this part of the report are intended to apply to exclusions of liability for negligence where the liability is incurred in the course of a person's business. We consider that they should apply even in cases where the person seeking to rely on the exemption clause was under no legal obligation (such as a contractual obligation) to carry out the activities. This means that, for example, conditions attached to a licence to enter on to land, and disclaimers of liability made where information or advice is given, should be subject to control . . . . "

"In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to allow

"I/we enclose herewith valuation fee & administration fee £22.00. I/we understand that this fee is not returnable even if the council do not eventually make an advance and that the valuation is confidential and is intended solely for the information of Wyre Forest District Council in determining what advance, if any, may be made on the security and that no responsibility whatsoever is implied or accepted by the council for the value or condition of the property by reason of such inspection and report. (You are advised for your own protection to instruct your own surveyor/architect to inspect the property). "I/we agree that the valuation report is the property of the council and that I/we cannot require its production."

"... I conclude that, in this case, the duty of care would arise if, on the evidence, I am satisfied that the defendants knew that their valuation of 1, Seymour Road, in so far as it stated that the property provided adequate security for an advance of £12,000, would be passed on to the plaintiffs, who ... in the defendants' reasonable contemplation would place reliance upon its correctness in making their decision to buy the house and mortgage it to the building society."

"Responsibility can only attach if the defendant's act implied a voluntary undertaking to assume responsibility. Were it otherwise a person who offered to an expert any object for sale, making it clear that he was unaware of its value and that he was relying on the other to pay a proper price, could sue the other should he later discover that he had not received the full value even though the purchaser had made no representation that he was doing any more than look after his own interests. Nor can any class of persons who to the knowledge of another habitually fail to take precautions for their own protection in a business relationship cast upon another without his consent an obligation to exercise care for their protection in such transaction so as to protect them from their own lack of ordinary business prudence. Generally, a mortgage contract in itself imports no obligation on the part of a mortgagee to use care in protecting the interests of a mortgagor. . . .

"But in so far as the facts of this case are clearly within the area of contemplation in the Hedley Byrne case, I have no doubt that the condition precedent to liability is that the executive should have indicated to the plaintiffs, or so acted as to mislead them into believing, that the executive was accepting responsibility for its opinion."

"But its inherent jurisprudential weakness in any ordinary situation is clear. Suppose that A approaches B with a request for a loan to be secured on a property or chattel -

"It may be, but I agree that we should not decide this general question on the present appeal, that the particular circumstances of purchasers of houses with the assistance of loans from building societies or local authorities are capable of leading to a different analysis and conclusion."

"In this case the document called a valuation was sent by the defendants direct to the agents of the plaintiff for the purpose of inducing the plaintiff and his co-trustee to lay out the trust money on mortgage. It seems to me that the defendants knowingly placed themselves in that position, and in point of law incurred a duty towards him to use reasonable care in the preparation of the document called a valuation."

"Secondly, to whom do these professional people owe this duty? I will take accountants, but the same reasoning applies to the others. They owe the duty, of course, to their employer or client; and also I think to any third person to whom they themselves show the accounts, or to whom they know their employer is going to show the accounts, so as to induce him to invest money or take some other action on them. But I do not think the duty can be extended still further so as to include strangers of whom they have heard nothing and to whom their employer without their knowledge may choose to show their accounts. Once the accountants have handed their accounts to their employer they are not, as a rule, responsible for what he does with them without their knowledge or consent. . . The test of proximity in these cases is: did the accountants know that the accounts were required for submission to the plaintiff and use by him? That appears from the case of Langridge v. Levy [(1837) 2 M. & W. 519] as extended by Cleasby, B. in George v. Skivington; [(1869) L.R. 5 Ex. 1, 5] and from the decision of that good judge, Chitty, J., in Cann v. Willson, [(1888) 39 Ch. D. 39] which is directly in point."

"It will be noticed that I have confined the duty to cases where the accountant prepares his accounts and makes his report for the guidance of the very person in the very transaction in question. That is sufficient for the decision of this case. I can well understand that it would be going too far to make an accountant liable to any person in the land who chooses to rely on the accounts in matters of business, for that would expose him to 'liability in an indeterminate amount for an indeterminate time to an indeterminate class': see Ultramares Corporation v. Touche [(1951) 255 N.Y. Rep. 170] per Cardozo, C.J."

"A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require."

"This seems to me to be a typical case of agreeing to assume responsibility."

"My Lords, it seems to me that if A assumes a responsibility to B to tender him deliberate advice, there could be a liability if the advice is negligently given. I say 'could be' because the ordinary courtesies and exchanges of life would become impossible if it were sought to attach legal obligation to every kindly and friendly act .... Quite apart, however, from employment or contract there may be circumstances in which a duty to exercise care will arise if a service is voluntarily undertaken."

"Leaving aside cases where there is some contractual or fudiciary relationship, there may be many situations in which one person voluntarily or gratuitously undertakes to do something for another person and becomes under a duty to exercise reasonable care. I have given illustrations. But

"My Lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise."

"I think, therefore, that there is ample authority to justify your Lordships in saying now that the categories of special relationships which may give rise to a duty to take care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty, but include also relationships which in the words of Lord Shaw in Nocton v. Lord Ashburton [ (1914) AC 932 , 972] are 'equivalent to contract,' that is, where there is an assumption of responsibility in circumstances which, but for the absence of consideration, there would be a contract. Where there is an express undertaking, an express warranty as distinct from mere representation, there can be little difficulty. The difficulty arises in discerning those cases in which the undertaking is to be implied. In this respect the absence of consideration is not irrelevant. Payment for information or advice is very good evidence that it is being relied upon and that the informer or adviser knows that it is. ... "I do not understand any of your Lordships to hold that it is a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is a responsibility that is voluntarily accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction. In the present case the appellants were not, as in Woods v. Martins Bank Ltd [[1959] 1 Q.B. 55] the customers or potential customers of the bank. Responsibility can attach only to the single act, that is, the giving of the reference, and only if the doing of that act implied a voluntary undertaking to assume responsibility."

"I shall therefore content myself with the proposition that wherever there is a relationship equivalent to contract, there is a duty of care. Such a relationship may be either general or particular. Examples of a general relationship are those of solicitor and client and of banker and customer .... Where, as in the present case, what is relied on is a particular relationship created ad hoc, it will be necessary to examine the particular facts to see whether there is an express or implied undertaking of responsibility. I regard this proposition as an application of the general conception of proximity."

"2(2). In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness. . . .

"11(3) In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen ....

"13(1) To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents - ( a ) making the liability or its enforcement subject to restrictive or onerous conditions; ( b ) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy; ( e ) excluding or restricting rules of evidence or procedure; and (to that extent) sections 2 and 5 to 7 also prevent excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty."

"For these reasons I agree with the judgments of Nourse L.J. and Caulfield J . that the effect of the Unfair Contract Terms Act 1977 on the disclaimer of responsibility and warning is of no relevance to the present case. One never reaches that issue, since it arises only if the existence of a duty of care and a breach of it have first been established."