WILDGUST V BANK OF IRELAND & NORWICH UNION INSURANCE HIGH COURT - 28 July 1998 MORRIS P: Counsel for the

Norwich Union Life Insurance Society ("Norwich Union") has applied at the close of the plaintiff's case for a non suit. This judgment is given on that application. In the particular and unusual circumstances of this case it appears to me that the following issues fall to be determined in Ruling that application:(a) Have the plaintiffs established any case against the Norwich Union on the evidence now before the court assuming such evidence was accepted by the court. (b) If so what case has been made out (again assuming that the evidence before the court is accepted). (c) If the plaintiffs have made out a case has this case been sufficiently pleaded so as to put the Norwich Union on notice of the case being made against them so as to allow them the opportunity to meet this case. (d) If the case made has not been adequately pleaded then what course should this court adopt in the interest of justice. Before turning to deal with the issues I believe it is necessary to set out in concise form the facts that are relied upon by the plaintiff to support the case made. In reciting these facts I do so on the basis that there is evidence to support a finding of these facts. The first named plaintiff is a business man and is the principal if not the sole shareholder in the second-named plaintiff company. That company, Carrickowen Limited was incorporated for the purpose of holding two commercial units in Industrial Estates in Coolock. The first-named plaintiff ("Mr Wildgust") and his late wife wished to create an arrangement whereby they would sublet smaller units within these commercial units at a rent sufficient to pay the mortgage on the property and thereby create a pension fund for themselves. With this intention they applied for and obtained from Hill Samuel Merchant Bankers a loan of 215,000 (which sum was subsequently increased by an additional 50,000) which loan was secured by the primary security of a mortgage over the property in favour of Hill Samuel and was backed by a personal guarantee from Mr Wildgust and the late Mrs Wildgust. As an additional secondary security Mr and Mrs Wildgust were required to obtain and assign to Hill Samuel a policy of insurance on their joint and several lives. All of these transactions were satisfactorily carried through. Mr Wildgust put in place an arrangement whereby the rents of the tenants occupying the sub-units were paid direct, in the first instance, into a company account with Allied Irish Banks but this arrangement was subsequently changed to one whereby the rents were paid into a company account in the Bank of Ireland at their Ballsbridge IEHC 225

branch and arrangements were made with the bank that the premiums on the life policy were to be discharged to Norwich Union by direct debit. The premiums were due monthly on the 23 of each month. A breakdown in the system occurred as a result of which the direct debit payment due on the 23 of March, 1992 was not paid. Mr Wildgust held the Bank of Ireland responsible for this fact. They were accordingly joined as defendants in the present claim however after the hearing had progressed for some days a settlement was reached between Mr Wildgust and the Bank of Ireland as a result of which they were struck out of the case. Because of the failure to discharge the premium due on the 23 of March, 1992 the Life Policy lapsed. The late Mrs Wildgust died on the 1 of January, 1993. The amount payable under the terms of the policy on her death was not paid as the Norwich Union claimed that the policy had lapsed. Mr Wildgust brings this action to enforce payment of that amount and claims that as a result of withholding payment consequential loss has been suffered by him and by his company. Turning now to the issues which I believe arise at this stage. (a) Have the plaintiffs established any case against the Norwich Union? The cases made on Mr Wildgust's behalf are; (a) It is alleged that in the contract of insurance which Mr and Mrs Wildgust entered into with Norwich Union there was an implied condition which required the Norwich Union to inform Mr Wildgust and Carrickowen Limited if a breakdown in the direct debit system occurred so that the monthly premium was unpaid. It is stated that neither Mr Wildgust nor his company were informed of this breakdown and the fact that the premiums had not been paid and accordingly there was a breach of contract on the part of the Norwich Union such as would entitle the plaintiffs to any damages which resulted. The claim that this term is to be implied into the contract is made on the basis that it is one that is so normal and natural and obvious that it would go without saying that it would be included. The conditions of the policy dated the 23/11/89 are silent as to any such provision. I can well understand that somebody entering into the policy with the insurance company might find it convenient to be reminded in the event of a default on his part in making payment of the premium however on the other hand I can see that an insurance company might well resist having an obligation to this effect imposed upon them simply because they would not wish to undertake that obligation. In my view notwithstanding the desirability or convenience of such a provision I can see no circumstance in which the obligation to provide the insured with notice of failure to pay a premium could be deemed to be part of the contract on the grounds that it was obviously the intention of both parties that it should be. . I am unable to identify, as fitting into that category, a term requiring the insurance

company to give notice of failure to pay the premium notwithstanding the fact that it appears to have been the practice for the Norwich Union to transmit to certainly some of the parties notice of the breakdown of the direct debit. Accordingly it is my view that no case has been made out under this heading. (b) The second case made on behalf of the plaintiffs arises out of a telephone conversation which Mr Kevin O'Hanlon, Manager of Hill Samuel, had with a representative of the Norwich Union Insurance Company on the 22 April, 1992. In his evidence Mr O'Hanlon said that prior to the 22 April, 1992 he had been aware of the fact that Mrs Wildgust, one of the insured lives, had been diagnosed with cancer and that on the 6 of April, 1992 Hill Samuel had received information that the direct debit on the policy had been returned unpaid. He said that he contacted Mr Wildgust who informed him that he had sent a cheque in settlement to keep the policy in order. Mr O'Hanlon said that on the 22 of April, namely the last date of the days of grace provided by the policy, he telephoned the Norwich Union and was informed that the cheque had been received and everything was correct and in order. On that basis he took no action. He said that if he had known that the premium remained unpaid then it would have been paid by Hill Samuel in order to keep the policy alive. He said that he was confident that this would have occurred particularly in view of Mrs Wildgust's state of health. It is submitted on behalf of the plaintiffs that in these circumstances there was negligence on the part of the Norwich Union in that their servant or agent gave Mr O'Hanlon incorrect information which they knew would be relied upon and that accordingly they are responsible for loss or damage resulting therefrom which were foreseeable. On behalf of the Norwich Union it has been submitted, inter alia, that there was no communication made to either of the plaintiffs in this case and accordingly a claim under the principles of Hedley Byrne v Heller ([1964] AC 465) cannot arise. Moreover it is submitted that it is apparent that Mr Wildgust was aware of the fact that there had been a breakdown in the direct debit machinery since he assured Mr O'Hanlon that the premium had been paid by cheque and therefore no reliance was placed by him on any representations made by the servant or agent of Norwich Union. With regard to the relevant law the plaintiff submits that on the principles enunciated by the Supreme Court in Ward v MacMaster [1989] ILRM 400 and in particular the judgment of McCarthy J, the elements necessary to create a situation in which liability can arise are firstly a duty of care and secondly reasonable forseeability. In his judgment in Forshall and Fine Arts and Collections Limited v Walsh and Others (unreported) 18 June, 1997 Mr Justice Shanley at page 64 of his unreported judgment deals with the circumstances in which a party seeking damages for negligent misrepresentation must establish in the following terms; "A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of which representation the person to whom it was made was induced to enter into a

particular agreement and suffered damage in consequence of the inaccurate representation. Closely aligned to the claim of negligent misrepresentation is the wider tort of negligent misstatement. In relation to negligent misstatement the first matter a plaintiff must establish is that the defendant owed him a duty." In Ward v MacMaster [1989] ILRM 400 McCarthy J considered that the duty of care arose from the proximity of the parties, the forseeability of damage in the absence of any compelling exemption based on public policy. In CaparoIndustries plc v Dickman [1990] BCLC 273 Lord Bridges in his speech to the House of Lords said; "What emerges is that in addition to the forseeability of damage necessary ingredients in any situation giving rise to a duty of care are that there should exist between the parties owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood" and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on the parties for the benefit of the other". While noting that the judgment of Shanley, J is under appeal at the present time nothing he has said in regard to this aspect of the law differs, in my view, from the law as established in Ward v MacMaster which I accept to be a correct statement of the law. Accordingly in approaching this matter on the basis of an application for a non-suit I am satisfied that the plaintiffs have presented the court with evidence which, if accepted, would establish that there was a negligent misstatement of fact by the servant or agent of the Norwich Union, that this statement was communicated to Hill Samuel and by reason of the relationship between Hill Samuel and the plaintiff (ie that or mortgagor and mortgagee) there was a proximity between the Norwich Union and the plaintiffs. I am also satisfied that evidence has been tendered which shows that damage as a result of misstatement was foreseeable. The fact that Mr Wildgust personally knew that the premium had not been paid is in dispute as he has given evidence, which the court could accept, that he believed he was in credit with his premium payment the fact that he did not rely on the Representations made by the Norwich Union is in my view of no relevance once Mr O'Hanlon of Hill Samuel did rely on these representations and damage resulted to the plaintiffs who were in proximity to Norwich Union the cause of action is established. Furthermore I am satisfied that the plaintiffs have adduced evidence before the court which if accepted could lead the court to conclude that the enquiry made of the Norwich Union of the 24 of April by Mr O'Hanlon was made by Hill Samuel in their capacity as the agents for Mr Wildgust and his company and that the making of a negligent misstatement to Hill Samuel equated in all respects to the making of the statement to the plaintiffs. Accordingly in my view evidence has been tendered to the court which would in the ordinary way result in a refusal of this application. However it now is necessary to consider the third issue namely whether this case has been pleaded. (c) This issue arises because from the outset Norwich Union has objected to the manner in which the plaintiffs have pleaded their case and in fact sought to have the

second part of paragraph 4 of the Statement of Claim struck out. This application I refused on the assurance of counsel for the plaintiffs that evidence to support this plea would be tendered. I now turn to consider the case actually pleaded. Paragraphs 14, 15 and 16 of the Statement of Claim and paragraph 6A of the Notice for Particulars and Replies are relevant. Paragraph 14 of the Statement of Claim alleges that the defendants wrongfully and negligently and in breach of agreement and in breach of trust the Norwich Union terminated the policy and have wrongfully failed, refused and neglected to reinstate it in the absence of a clear medical report. The balance of that paragraph alleges that the Norwich Union, being aware of the medical condition of Margaret Wildgust embarked on a course of conduct "designed to avoid its obligations in relation thereto". Paragraph 15 alleges a "practice and custom in banking" for bankers to renew policies and paragraph 16 alleges that the defendants wrongfully failed and refused and neglected to reinstate the policies. As I read these paragraphs and paragraphs 6A of the Replies to Particulars I am unable to find any case based upon negligent misstatement or broadly based on the Hedley Byrne v Heller principle. Counsel for the Norwich Union has informed the court, and I accept, that had he been aware of the fact that the case would be run on the Hedley Byrne v Heller principle he would have met the case in a different way. In these circumstances I believe that it is unjust to the Norwich Union to require them to meet the case now made on the present pleadings. I am satisfied that, subject to the next paragraph hereof the action should be dismissed. (d) With regard to the fourth issue which arises in this case namely what steps the court should take in the interests of justice I am satisfied that if this case is merely struck out that the plaintiff will be deprived of the opportunity of seeking justice to which he may well be entitled. I believe that it is in the interests of justice that he should be allowed to amend his statement of claim to plead the case which he wishes to make. I believe that this relief should only be given on terms to the Norwich Union. Those terms would be that they would be allowed the costs of the days on which this matter has been at hearing on the basis of days at hearing (as opposed to costs of the action). I propose to make an order on the basis that the plaintiff seeks this relief, that he be allowed to deliver an amended Statement of Claim with all the consequential orders providing for Notices for Particulars and a Defence subject to the condition as to costs as set out above.

THE SUPREME COURT

Denham, J. Murphy, J. McGuinness, J. IESC 10; 1LRM 24

JUDGMENT of Mrs. Justice Catherine McGuinness delivered the 13th day of April 2000 (nem. diss.) 1. This is an appeal from the orders and judgment of the President of High Court whereby he dismissed the claim of the Plaintiffs/Appellants as set out in their statement of claim, granted liberty to the Plaintiffs/Appellants to amend their statement of claim to include a claim for negligent misstatement or a claim broadly based on the Hedley Byrne v Heller principle, and granted leave to the second named Defendant/Respondent to amend its pleadings accordingly. As a condition of the said amendment the learned President also ordered that the Plaintiffs pay to the second named Defendant their costs of the days on which the case had ready been at hearing 3. The proceedings were commenced against the first and second named Defendants by plenary summons issued on the 27th July 1993. The statement of claim was delivered on the 25th May 1994. Notices for particulars and replies were duly exchanged. The second named Defendant filed its defence on the 7th November 1994, the first named Defendant on 30th November 1994. There was a further exchange of particulars in regard to special damages in early 1998. The matter came on for trial before the President of the High Court on the 15th July 1998. It was at hearing on the 15th, 16th, 17th, 21st and 22nd July. On the 23rd July 1998 it was announced to the Court that a settlement had been reached between the Plaintiffs and the first named Defendant, the Bank of Ireland; the case was, however, to continue against the second named Defendant, Norwich Union. [*4] 4. At this point the learned President asked Counsel for the Plaintiffs to summarise the way in which the case as it then stood was put against the second named Defendant, saying that he felt that this might clarify the matter. Mr Bradley S.C. then restated the case against the second named Defendant (as set out at pages 4 to 8 of the transcript of the 23rd July) and replied to a number of questions put to him by the trial judge. At this stage stress was laid on the Plaintiffs' claim of negligent misrepresentation, or negligent misstatement, arising under the principles enunciated in the case of Hedley Byrne v Heller [1964] AC 465. 5. A number of further witnesses were then called on behalf of the Plaintiffs. At the close of the Plaintiffs' case Counsel for the remaining Defendant, Mr Sreenan S.C., made an application for a non-suit. Full and comprehensive submissions were made by Counsel on both sides and the learned President reserved his judgment until the 28th July 1998. On that day he gave judgment and made the order to which I have already referred. 6. In this appeal the Plaintiffs/Appellants seek the following orders: 6

(a) An order setting aside so much of the said judgment as directs the requirement on the part of the Appellants to amend the pleadings to reflect a claim upon the broader principles of Hedley Byrne v Heller . (b) An order setting aside so much of the said order of the High Court wherein the learned High Court Judge determined that the said pleadings did not disclose a claim based upon the negligence of the Respondent in relation to representations and statements made to third parties. (c) An order setting aside so much of the said judgment as to the grant of the costs of the hearing to date to the Respondent. (d) An order setting aside so much of the said judgment as refuses to grant a stay pending appeal in relation thereto. [*5] (e) An order in lieu thereof directing the continuation of the trial herein. 7. It will be seen from this that the Plaintiffs/Appellants do not seek to overturn the non-suit granted by the learned trial judge in respect of the other claims raised in the statement of claim. 8. The Defendant/Respondent opposes the appeal and seeks to uphold the order of the High Court. No cross-appeal has been brought by the Respondent. 10. Counsel for the Plaintiffs/Appellants, Mr Bradley . 15. Following Mr Bradley's opening of the case Mr Sreenan, Senior Counsel, for the second named Defendant.. The Issues 28. A number of issues arise on this appeal as follows: 1. Was the Plaintiffs claim in negligent misstatement pleaded with sufficient clarity and particularity in the statement of claim? 2. If not, were the Defendants, and in particular the second named Defendant, made sufficiently aware of the nature of this claim and of its factual background during the course of correspondence, by the pleadings generally, by Counsel's opening of the Plaintiffs case, and by the course of the proceedings viewed as a whole? 3. If the Plaintiffs claim was not in fact correctly pleaded, were the Defendants materially prejudiced in their defence and would they have continued to be materially prejudiced had the trial continued in the High Court before the learned President. 4. Should the trial in the High Court have continued, with or without amendment of pleadings? 5. The issue of costs.

Conclusions 34. I cannot accept that this in any way sets out a claim of negligent misstatement under Hedley Byrne principles. It does not state the duty of care owed by the second named Defendant to the Plaintiffs. It does not state that the communication in question was made to the Plaintiffs, or at least to agents of the Plaintiffs. It does not state that the Plaintiffs, or indeed Hill Samuel Bank Limited, relied on the communication or that Norwich Union knew that they would rely on it; nor does it clearly set out that the Plaintiffs acted to their detriment in reliance on the communication. It does not even set out that the communication was untrue. All of these things would be normal elements in the pleading of a claim [*18] negligent misstatement and are material facts rather than matters of law. Even given the subsequent details provided in the replies to particulars it could not be clear to the Defendant on the basis of the pleadings that they had to meet a claim of negligent misstatement. Mr Sreenan is, I consider, justified in arguing that paragraph 13 and the following paragraphs appeared to him to be part of the Plaintiffs' allegation of mala fides on the part of the second named Defendant. 35. Accordingly in my view the learned President of the High Court was correct in holding that on the pleadings he was "unable to find any case based upon negligent misstatement or broadly based on the Hedley Byrne v Heller principle.. 36. The learned President was, therefore, also correct in holding that it would be necessary for the Plaintiffs' to amend the pleadings if they were to pursue their claim under Hedley Byrne v Heller. 37. When one considers the course of the proceedings as a whole, however, it is more difficult to accept that the Defendant/Respondent was not, at least in a general way, aware of the nature of the Plaintiffs' claim. On 18th December 1992 Messrs Giles J. Kennedy & Company, Solicitors for the Plaintiffs, wrote to the Norwich Union setting out in broad outline the claims being made by the Plaintiffs. This letter stated, inter alia 38. The letter went on to set out the options open to the Plaintiffs. These included: "Option 2. Commence proceedings against the Norwich Union and is (sic) against the Bank of Ireland for breach of contract and negligence on the date of death of Margaret Wildgust for the loss and damage sustained, namely the sum insured on the policy and interest accruing thereafter after death. Our clients will be relying on the negligence and breach of contract of the Bank of Ireland, Ballsbridge, and the negligence and breach of contract to include breach of duty of your company in respect of the cancellation of the policy herein and in particular the negligent misrepresentations made to the Hill Samuel Bank and your failure to notify our client of cancellation of the policy within a reasonable time and that the debit remained unpaid. " ( my emphasis). 39. The second named Defendant received this letter well before the issue of the proceedings or the delivery of the Statement of Claim, and even before the unfortunate death of Mrs Wildgust in January 1993.

43. Should therefore, the Plaintiffs' claim of negligent misstatement be put back for a new trial or should there be a continuation of the trial before the President of the High Court? 44. It is not impermissible for pleadings to be amended during the course of a trial. Order 28 Rule 1 of the Rules of the Superior Courts provides as follows: [*21] "The Court may, at any stage of the proceedings, allow either party to alter or amend his endorsement or pleadings in such manner and on such terms as may be just, and also such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties. 45. While no one would suggest that amendment of pleadings in mid-trial is normally a desirable practice or should frequently be permitted, it was open to the trial judge in the instant case to take that course. In my view to put back the whole matter for a new trial, presumably before another judge, would be to place an undue burden on the Plaintiffs/Appellants which is not necessitated by the level of possible prejudice against the Defendant/Respondent arising out of the continuation of the current trial. 46. I would therefore direct that an amended Statement of Claim as directed by the President of the High Court in his order of 28th July 1998 be served on the Defendant/Respondent within 21 days. The Respondent may file an amended defence to that claim within 28 days from the date of delivery of the amended Statement of Claim. The matter should then with the least possible delay be listed before the learned President of the High Court with a view to continuing and concluding the current trial. 47. Given the conclusions which I have reached, it would seem the better course that the costs of the trial to date be treated as part of the costs of the proceedings as a whole, to be dealt with in his discretion by the learned trial judge at the conclusion of the trial. I would therefore allow the appeal in regard to costs.

HIGH COURT

IEHC 223

Judgment of Mr. Justice Frederick Morris delivered on the 17th day of August 2001 This matter came before the Court and was at hearing for seven days in July 1998. In the course of the Application for a non suit Counsel on behalf of the Second Named Defendant objected to the manner in which the Plaintiff had pleaded the case and submitted that insofar as the Plaintiff had any case to make (and he denied that he had such a case) it lay in negligent misstatement broadly based on the Hedlev Byrne v Heller principle. He submitted that no such case was pleaded. He submitted that it would be unjust in the circumstances to allow the Plaintiff to maintain such a case at that stage because had he appreciated that this case was to be made then his approach to the case and that of his clients might well have been different. I took the view that the case as pleaded did not adequately identify the cause of action as negligent misstatement. However in the interests of justice I directed that the Plaintiff be permitted to amend the Statement of Claim so as to adequately plead this cause of action. From that Ruling the Plaintiff appealed to the Supreme Court and by Order of the Supreme Court of the 3rd April 2000 it was ordered that the Plaintiffs appeal be allowed insofar as it awarded the Second Named Defendant the cost of the action to date but it ordered nevertheless that the Plaintiff deliver an amended Statement of Claim in accordance with my Judgment that is to say so as to adequately plead the claim under negligent misstatement. The Court further directed that the matter be referred back to me to continue the hearing. Accordingly the hearing of this matter before me recommenced on the 10th July. The Facts of the Case The issue of fact which gives rise to this action is as follows: It is alleged that a Mr. Kevin O'Hanlon who was the Manager of Hill Samuel became aware of the fact that there had been a breakdown in the payment of the direct debit to the Norwich Union Insurance Company by the Bank of Ireland because Hill Samuel were among the persons to whom default notice was sent. He says that he telephoned Mr. Wildgust to enquire about payment of the premium and was told by him that the premium had been paid. Subsequently he says that he telephoned the Norwich Union on the 22nd April 1992 to enquire about the payment of this direct debit and he was told that the cheque for the premium had been received and that everything was "correct and in order." He says that in reliance upon this he took no action. In fact the premium had not been paid. He said that if he had known that the premium remained unpaid then it would have been paid by Hill Samuel in order to keep 10

the policy alive. He said that he is sure that this would have occurred particularly in view of Mrs Wildgust's ill health. It is alleged on behalf of the Plaintiff that the information given to Mr. O'Hanlon constituted a negligent misstatement of fact as a result of which the policy was allowed to lapse and the Plaintiff has suffered loss and damage. It is denied on behalf of the Norwich Union Insurance Company that the telephone call described by Mr. O'Hanlon or any such call was ever made.. I am of the view from the totality of Mr. Wildgust's evidence that he became aware that the policy had lapsed at the end of June 1992 when he got his statements. What emerges from Mr. Wildgust's evidence is: (a) At no stage up to the time when the policy lapsed was Mr. Wildgust aware of the telephone conversation between Mr. O'Hanlon and the Norwich Union or of any information given to Mr. O'Hanlon by the Norwich Union (b) Mr. Wildgust believed at all times that the Bank of Ireland were in sufficient funds or otherwise obligated to him to discharge the direct debits due to the Norwich Union as premiums on the policy. (c) At no stage did or could Mr. Wildgust have placed any reliance upon any statements made by the Norwich Union to Mr. O'Hanlon. The Law since Ward v McMaster & Glencar Exploration plc and Andaman Resources plc, Applicants and the County Council of the County of Mayo, Respondents Since I delivered Judgment on the application for a non suit on the 28th July 1998 the Supreme Court has considered the law in this Jurisdiction having regard to the decision of the Supreme Court in Ward v McMaster & Glencar Exploration plc and Andaman Resources plc Applicants and the County Council of the County of Mayo Respondents. In his Judgment delivered the 19th July 2001 (unreported) Chief Justice Keane considered the approach of McCarthy J. in Ward v McMaster and contrasted it to what he described as the more cautious approach favoured in Caparo Industries plc v Dickman and Sutherland Shire Council v Heyman and having done so, summarising the law had this to say: "There is in my view, no reason why courts determining whether a duty of care arises, should consider themselves obliged to hold that it does in every case where injury or damage to property was reasonably foreseeable and the notorious difficulty and elusive test of "proximity" or "neighbourhood" can be said to have been met, unless very powerful public policy considerations dictate otherwise. It seems to me that no injustice will be done if they are required to take the further step of considering whether, in all the circumstances, it would be reasonable that the law should impose a duty of a given scope on the Defendant for the benefit of the Plaintiff, as held by 11

Costello J. at first instance in Ward v McMaster, by Brennan J. in Sutherland Shire Council v Heyman and by the House of Lords in Caparo Industries plc v Dickman. As Brennan J. pointed out there is a significant risk that any other approach will result in what he called a "massive extension to a prima facie duty of care restrained only by undefinable considerations" With this Judgment the remainder of the Supreme Court were in agreement. Accordingly when McCarthy J. said in Ward v McMaster "Whilst Costello J. essentially rested his conclusion on the "fair and reasonable " test, I prefer to express the duty as arising from the proximity of the Parties, the foreseeability of the damage and the absence of any compelling exemption based upon public policy. " This is no longer the full test. I must add the further factor of asking myself "is it just and reasonable that the law should impose a duty of a given scope on the Defendant for the benefit of the Plaintiff?" I am satisfied that this is the appropriate test in cases where negligent misstatement is alleged. It is submitted on behalf of the Plaintiff by Mr. Bradley S.C., that it is unrealistic to attempt to separate the coinciding interest of Hill Samuel and the Plaintiff since each had an identical and corresponding interest in ensuring that the policy remained in place and accordingly a misrepresentation made to Hill Samuel must, he submits, prejudice Mr. Wildgust since without this misrepresentation the policy would have been renewed by Hill Samuel. In my view the one major insurmountable difficulty for the Plaintiff is that at no stage did he, Mr. Wildgust become aware of the fact that the misstatement had been made by the Norwich Union nor did he place any reliance upon it. He was not misled by the misstatement because he was not aware of it. He was not prejudiced by it. It was not until two months later that he became aware of the fact that the premium had not been paid. In my view the misstatement in no way influenced or contributed towards the conduct of the Plaintiff. It did not influence him or cause him to act to his detriment. I do not believe that it would be reasonable that the law should impose a duty on the Defendant for the benefit of the Plaintiff in these circumstances. In my view to do so would, as Brennan J., said in Capara Industries Limited plc v Dickman be a "massive extension of a prima facie duty of care" which is not my understanding of the law in this Jurisdiction.

12

THE SUPREME COURT Denham J. Geoghegan J. Kearns J.

IESC 19

JUDGMENT of Mr. Justice Geoghegan delivered the 22nd day of March 2006 This is an appeal by the above-named appellants/plaintiffs from an order of the High Court (Morris P.) dated 15th October, 2001 dismissing an action for damages for negligence against the above-named respondent/second-named defendant. There is also a cross-appeal by the said respondents against the particular costs order made in the High Court and I will return to that in due course. I gratefully adopt the full account of the relevant facts in the case as well as its complex procedural history set out in the judgment about to be delivered herein by Kearns J. I will content myself by giving a shorthand account of the salient facts as found by the trial judge The law If the former President is correct in his view that reliance by the actual plaintiff on the truth of an incorrect statement negligently made is an essential ingredient of liability in all cases of negligent misstatement then this appeal must obviously be dismissed. Having read all the relevant authorities, I am not satisfied that such personal reliance is always essential. The facts of this particular case are most unusual and I have not come across any reported case sufficiently analogous to this case as to be of definitive assistance. The wide interpretation of Donoghue v. Stevenson [1932] A.C. 562 in relation to liability for negligence prevalent until recently made it important to make a sharp distinction between negligence in act on the one hand and negligence in a statement on the other hand. Pragmatically, some kind of control mechanism was necessary in relation to liability for negligent misstatement as otherwise an action might lie at the suit of large numbers of people influenced and reasonably foreseen to be influenced by the erroneous statement. By contrast a negligent act will for the most part foreseeably damage only a small category of people. The more recent English case law coming from the House of Lords with particular reference to Caparo Industries v. Dickman [1990] 2 A.C. 605 has introduced a third element into liability for negligence in addition to reasonable foreseeability and proximity and that is reasonableness in the imposition of a duty of care. That principle has been endorsed albeit obiter by Keane C.J. in his judgment in this court in Glencar Exploration Plc v. Mayo County Council (No. 2) [2002] 1 I.R. 84. The different route ultimately traversed by the courts in England in relation to negligent statements was partly based on the necessity for a control mechanism for the reason which I indicated and partly because of pre Donoghue v. Stevenson authorities which were not mentioned and still less expressly overruled by that case. Those earlier authorities would not be binding in this jurisdiction and now that the concept of reasonableness in imposing a duty of care

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appears to be accepted, concepts which run through the English case law relating to negligent misstatements and negligent misrepresentations such as reliance by the plaintiff on the truth of the statement, assumption of risk by the maker of the statement, special relationship, relationship analogous to contract, or even for that matter the will-o-the-wisp concept of proximity may not be all that necessary. For the purposes of this case however, I am prepared to assume that the law of negligent misstatements is a separate code from the law of negligent acts. This has the advantage that I do not have to consider the law relating to the recoverability of damages for economic loss arising from negligence in general as it has always been accepted that such loss is recoverable if it derives from an actionable negligent misstatement. The tort of negligent misstatement has its origins in England in Hedley Byrne and Co. Limited v. Heller and Partners Limited [1964] A.C. 465. It has an even earlier link with the famous minority Court of Appeal judgment of Denning L.J. (as he then was) in Candler v. Crane, Christmas and Co. [1951] 2 K.B. 164. As Kearns J. has pointed out, at an early stage Hedley Byrne was accepted by the Irish High Court as representing the law in this jurisdiction also (see Securities Trust Limited v. Hugh Moore and Alexander Limited [1964] I.R. 417 (Davitt P.) and Bank of Ireland v. Smyth [1966] I.R. 646 (Kenny J.). There has not been much discussion or analysis of the problems however in this court. The most relevant case law is essentially a succession of judgments from the House of Lords. In his speech in Hedley Byrne Lord Reid cited with approval a passage from the speech of Viscount Haldane LC in Naughton v. Lord Ashburton [1914] A.C. 932. He clearly indicated that quite apart from contractual or fiduciary relationships a duty of care in the making of a statement may arise from other special relationships which the courts may find to exist in particular cases. Lord Reid attached considerable importance to the expression other special relationships and he went on to observe as follows at p. 486: I can see no logical stopping place short of all those relationships where it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him. In Hedley Byrne the only relationship alleged was the relationship between the enquirer and the person giving the information. Hence the emphasis on reliance by the enquirer. It is, however, a small extension of this and justified in my view by later case law, that where a person who is not the enquirer is damaged as a consequence of the wrong answer and where the existence of such a person and the reasonable foreseeability of such damage ought to have been present in the mind of the person giving the information, there was a special relationship with that person also which gave rise to a duty of care.. The case from which I found the greatest assistance is White v. Jones [1995] 2 A.C. 207 and in particular the speech of Lord Browne-Wilkinson. This is the famous case in which the House of Lords held by a majority that the assumption of responsibility by a solicitor to his client who had given instructions for the drawing up of a will for execution extended to an intended beneficiary under the proposed will in circumstances where the solicitor could foreseeably foresee that a consequence of his negligence might be a resultant loss of the intended legacy without either the testator

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or his estate having a remedy against him; and that accordingly in the circumstances the plaintiffs were entitled to the relief sought. Interestingly, though perhaps irrelevantly, the Irish High Court (Barrington J.) had long before that made a similar decision in Wall v. Hegarty [1980] ILRM 124. I say irrelevantly because the importance of White v. Jones lies more in the further analysis by the Law Lords of the principles underlying Hedley Byrne. With reference to that case, Lord BrowneWilkinson at p. 272 made the following observation: since this House was concerned with cases of negligent misstatement or advice, it was inevitable that any test laid down required both that the plaintiff should rely on the statement or advice and that the defendant could reasonably foresee that he would do so. In the case of claims based on negligent statements (as opposed to negligent actions) the plaintiff will have no cause of action at all unless he can show damage and he can only have suffered damage if he has relied on the negligent statement. Nor will a defendant be shown to have satisfied the requirement that he should foresee damage to the plaintiff unless he foresees such reliance by the plaintiff as to give rise to the damage. Therefore, although reliance by the plaintiff is an essential ingredient in a case based on negligent misstatement or advice, it does not follow that in all cases based on negligent action or inaction by the defendant it is necessary in order to demonstrate a special relationship that the plaintiff has in fact relied on the defendant or the defendant has foreseen such reliance. If in such a case careless conduct can be foreseen as likely to cause and does in fact cause damage to the plaintiff that should be sufficient to found liability. That quotation does not fully avail the appellant in this case. However, he does place some of the apparent principles enunciated in Hedley Byrne in the context of the particular facts of that case. At p. 274 Lord Browne-Wilkinson says the following: The law of England does not impose any general duty of care to avoid negligent misstatements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable. However, such a duty of care will arise if there is a special relationship between the parties. Although the categories of cases in which such special relationship can be held to exist are not closed, as yet only two categories have been identified namely (1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tendered skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice. In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiffs affairs or by choosing to speak. If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon. In the words of Lord Reid in Hedley Byrne [1964] A.C. 465, 486 he has accepted a relationship which requires him to exercise such care as the circumstances require i.e. although the extent of the duty will vary from category to category, some duty of care arises from the special relationship. If interpreted literally those words again do not establish a case for the plaintiff but if the underlying principles are adopted I think that they do. The essence of this case was that the person in the Norwich Union giving the information in response to the request ought to have known that it would be relied on at least by the respondent and that if the statement was incorrect, the policy could lapse to the detriment not just of Hill Samuel but to their customer who was paying the premiums and who had a beneficial

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interest in the form of the equity of redemption in the policy. I fail to see how that did not amount to a special relationship. Put shortly, Mr. Wildgust was a neighbour for the purposes of the law of negligence and a specially close one at that. There is no question here of the respondent being liable to large numbers of perhaps unknown persons. In my view, the respondent is liable to the appellants and I would, therefore, allow the appeal. The terms of the order can be discussed with counsel. On the amended pleadings there are issues of contributory negligence both directly and vicariously by reason of the involvement of the Bank of Ireland. I express no views on these matters as they were not raised in argument. As regards the cross-appeal that is essentially a costs matter which can be dealt with when the costs of the appeal as a whole are being considered by the court.

JUDGMENT of Mr. Justice Kearns delivered the 22nd day of March, 2006

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This case raises an important point of law concerning the scope of liability for negligent misstatement. In particular, it gives rise to an important question as to whether a claimant, under the principles of law established in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, may recover damages in circumstances where he is not the person to whom a negligent misstatement is addressed, has not relied upon it, but nonetheless has suffered loss and damage because an intermediary to whom the negligent misstatement was addressed was in consequence prevented from acting, as he most assuredly would have done, to protect both the claimant and the intermediary from the loss which in fact occurred. In a judgment Wildgust v. Bank of Ireland, delivered on the 28th July, 1998, Morris P. summarised the background facts of this case in the following manner . . Decision As was noted by Keane C.J. in Glencar Exploration plc. v. Mayo County Council (No.2) [2002] 1 I.R. 84 at 136:The decisions in both Donoghue v. Stevenson [1932] A.C. 562 and Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 have been considered and adopted by our courts in a number of cases and unquestionably represent the law in this jurisdiction. An appropriate starting point therefore is to remind oneself of precisely what was decided by these two cases, firstly, in relation to the tort of negligence generally and secondly, in relation to the more narrowly defined tort of negligent misstatement However, in Glencar Exploration plc. v. Mayo Co. Co. (No 2) [2002] 1 I.R. 112, Keane C.J. having considered both the judgments of Henchy J. and McCarthy J. in Ward v. McMaster, expressed the view at p. 138 that:it is not clear that the observations of the latter in relation to the two stage test in Anns necessarily formed part of the ratio of the decision. Given the far reaching implications of adopting in this jurisdiction a principle of liability in negligence from which there has been such powerful dissent in other common law jurisdictions, I would not be prepared to hold that further consideration of the underlying principles is foreclosed by the dicta of McCarthy J. in Ward v. McMaster. He thus concluded at p. 139:There is, in my view, no reason why courts determining whether a duty of care arises should consider themselves obliged to hold that it does in every case where injury or damage to property was reasonably foreseeable and the notoriously difficult and elusive test of proximity or neighbourhood can be said to have been met, unless very powerful public policy considerations dictate otherwise. It seems to me that no injustice will be done if they are required to take the further step of considering whether, in all the circumstances, it is just and reasonable that the law should impose a duty of a given scope on the defendant for the benefit of the plaintiff, as held by Costello J. at first instance in Ward v. McMaster [1985] I.R. 29, by Brennan J. in Sutherland Shire Council v. Heyman (1985) 157 C.L.R. 424 and by the House of Lords in Caparo plc. v. Dickman [1990] 2 A.C. 605..

From the foregoing it is apparent that I favour an interpretation, or adaptation if needs

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be, of the Hedley Byrne principles which would include more than just the person to whom the negligent misstatement is addressed. The proximity test in respect of a negligent misstatement in my view must go further than that and include persons in a limited and identifiable class when the maker of the statement can reasonably expect, in the context of a particular inquiry, that reliance will be placed thereon by such person or persons to act or not act in a particular manner in relation to that transaction. As I accept the submission of plaintiffs counsel that Mr Wildgust and Hill Samuel had virtually an identical interest in preserving the policy and that both formed such an identifiable class, either of whom could have acted to prevent Mr. Wildgusts loss, I believe it is just and reasonable to ascribe to the respondents a duty of care with regard to Mr Wildgust in such circumstances. In a nutshell, I would interpret Hedley Byrne in the light of what was stated in Caparo on the facts of this case. This not a case where it is sought to read into Mr Wildgusts contract some implied term at variance with those expressly stated with regard to the requirement to pay the premiums in the manner stipulated. On the contrary, the negligent misstatement may be seen as a collateral representation, altogether outside the terms of the contract, which suggested that a particular contractual obligation had in fact been discharged. I would allow the appeal herein.

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