The House of Lords by majority allowed an appeal by the plaintiff, Graham Spring, reversed the decision of the Court of Appeal (Independent, 26 January 1993; (1993) 2 All ER 273) and restored the decision of Judge Lever QC, sitting as a High Court judge on 20 December 1991, who held the defendants, Guardian Assurance plc, Corinum Holdings Ltd, Corinum Mortgage Services (Cirencester) Ltd and Guardian Royal Exchange Assurance plc, were liable in damages for negligent misstatement in giving the plaintiff a bad work reference.
The plaintiff had worked as a representative for the Corinum companies but was dismissed after their sale to Guardian Assurance. He applied to work for the insurance company Scottish Amicable. As required by rule 3.5 of the Lautro (Life Assurance and Unit Trust Regulatory Organisation) code of conduct a reference was supplied by Guardian to Scottish Amicable. The reference was, the judge said, 'so strikingly bad as to amount to . . . the 'kiss of death' to his career in insurance. Scottish Amicable wanted no truck with the man it described'.
The plaintiff claimed damages for malicious falsehood, breach of an implied term of contract, and negligence. The judge found the malice claim not made out, and held there was no contract between the plaintiff and either Guardian Assurance or Guardian Royal Exchange, and there was no implied term in his contract with Corinum that they should provide him with a 'full, frank and truthful' reference, 'prepared using reasonable care'.
But on the question of negligence, the judge held the defendants did owe the plaintiff a duty of care in providing a reference, knowing that a bad one might damage his prospects of employment, and that they were in breach of that duty.
Bernard Livesey QC and Witold Pawlak (Elliott & Co, for Bevans, Bristol) for the plaintiff; David Eady QC and Gerard Clarke (Clifford Chance) for the defendants.
LORD GOFF said both Guardian Assurance and Corinum owed a duty of care to the plaintiff in respect of the preparation of the reference. The source of that duty lay in the principle derived from Hedley Byrne & Co Ltd v Heller & Ptrs Ltd (1964) AC 465, viz an assumption of responsibility by those companies to the plaintiff in respect of the reference, and reliance by the plaintiff upon the exercise by them of due care and skill in its preparation.
Subject to the question of defamation, an employer who provided a reference for one of his employees to a prospective future employer would ordinarily owe a duty of care to the employee in preparing the reference. The employer was possessed of special knowledge, derived from his experience of the employee's character, skill and diligence in the performance of his duties while working for the employer.
All the elements requisite for the application of the Hedley Byrne principle were thus present.
Where the relationship was that of employer and employee, the duty of care could also be expressed as arising from an implied term of the contract of employment, that due skill and care would be exercised in providing any reference. But in this case this added nothing to the duty of care arising under the Hedley Byrne principle, and so might be applicable as a tortious duty, either where there was no contract between the parties, or concurrently with a contractual duty to the same effect.
The fact that the plaintiff in this case was (or had been) a company representative and not an employee made no difference. Although Guardian Assurance, who provided the reference, had no contractual relationship with the plaintiff, they still owed him a duty of care in tort, under the Hedley Byrne principle.
Having so held, his Lordship saw no reason why the duty should be negatived because, if the plaintiff were instead to bring an action for damage to his reputation, he would be met by the defence of qualified privilege which could only be defeated by proof of malice.
LORD LOWRY, Lord Slynn and Lord Woolf all agreed that the defendants were liable in negligence and (excepting Lord Lowry) breach of contract. Lord Keith gave a dissenting judgment.