Commissioner of Police of the Metropolis v Lennon

The issue in this appeal is whether a duty of care was owed in respect of pure economic loss flowing from a failure to give advice. The parties were in a non-contractual relationship akin to that of employment. The claimant contended that he suffered financial loss as the result of a breach of duty to give him advice; that the duty situation arose from an express voluntary assumption of responsibility for handling specific transfer arrangements and continued entitlement to service allowances after transfer; and that he relied upon the defendant to perform, with due care and skill, the responsibility which was undertaken.

The claimant is a serving police officer pursuing a complaint of continuing economic loss against the Commissioner of Police of the Metropolis (the Commissioner). The case rests on the vicarious liability of the Commissioner for the handling of the arrangements for the transfer of the claimant to another force and for the failure of the Commissioner’s staff to give advice to the claimant about the preservation of his housing allowance entitlement.

In 1990 Mr Kevin Lennon, who was born in Northern Ireland in 1971, joined the Metropolitan Police Service (the MPS), for which the Commissioner is responsible. Mr Lennon was posted to Plaistow Police Station. In 1998 he successfully applied to join the Royal Ulster Constabulary (RUC), now known as the Police Service of Northern Ireland. In December 1998 Mrs Pam Bewley, a grade 10 personnel executive officer employed in the MPS at Plaistow Police Station, handled the arrangements for Mr Lennon’s transfer to the RUC. Her unit was primarily responsible for the administration of personnel functions within the division.

Mrs Bewley was informed by the RUC that Mr Lennon’s service with it would begin on 31 January 1999. Her response to a specific inquiry by Mr Lennon about his MPS allowances was that they would not be affected by his “taking time off work.” Under the arrangements made by Mrs Bewley for the transfer, Mr Lennon’s service with the MPS ceased on 11 January 1999. During the following three weeks Mr Lennon was not at work, believing that he was on unpaid leave from the MPS. But he was not on unpaid leave. He had left the service of the MPS on 11 January. There was a break in the continuity of his service.

If Mr Lennon’s transfer to the RUC had been arranged, as it could have been, so as to preserve continuity of his service over that period, he would have been entitled to retain in his future service with the RUC the benefit of a monthly housing allowance of £134.61 paid by the MPS in the past. Similarly, if he had been granted unpaid leave from the MPS for the period from 12 to 30 January 1999, he would have had a continuing entitlement to the housing allowance on transferring to the RUC. As matters turned out, however, the short gap in continuity of service with the two forces meant that he lost the housing allowance for all time.

In proceedings started against the Commissioner on 3 April 2002 Mr Lennon made a “claim in negligence arising from the manner in which [his] move from the MPS to the RUC was handled, leading to loss of housing allowance and other benefits.” He was unable to sue the Commissioner for breach of contract, as a member of a police force does not have a contract of employment: at common law he acts as an officer of the Crown and as a public servant who carries out his duties by virtue of his office as a constable. Mr Lennon sued in tort, contending that he had suffered economic loss in consequence of a breach of the duty of care owed to him by the Commissioner, arising from an assumption of responsibility to him for the handling of the transfer arrangements. Neither Mrs Bewley nor anyone else in the MPS had advised him of the adverse financial consequences of inserting the date, 11 January 1999 on a form giving notice of intention to transfer. There was a failure to give advice, which would have protected him from loss of his housing allowance resulting from an avoidable break in service continuity. Mr Lennon also claimed that express negligent misrepresentations had been made to him about the allowance position on a transfer.

HHJ Faber, sitting in the Central London County Court, gave judgment for Mr Lennon in the sum of £43,810.59, together with interest and costs, and refused permission to appeal. She held that the Commissioner had acted in breach of a duty of care owed to Mr Lennon. She rejected his claim that specific representations had been made to him by Mrs Bewley as to the effect on his allowances of his transfer to the RUC. An additional claim in respect of a reduced holiday entitlement was also dismissed and is not appealed by Mr Lennon.

This is an appeal by the Commissioner against the judge’s order dated 24 June 2003. Laws LJ granted permission on the basis that the points taken by the Commissioner on the issue of liability were "eminently arguable, and the case is of some importance.” Mr Pitt-Payne, appearing for the Commissioner, argued the appeal solely on the question whether, in connection with the transfer to the RUC, the Commissioner owed a duty to give advice to Mr Lennon about his housing allowance. The Commissioner has not appealed against any of the judge’s detailed findings of facts or against any of her rulings on the questions of breach of duty, causation, contributory negligence or quantum.

The high quality of the arguments on each side and the excellence of the judgment under appeal deserve to be mentioned. The hearing, which was completed comfortably within a day, was the adversarial system and the case law method seen at its best. The concise, well-crafted legal arguments evidenced “the rational strength of English Law” (Professor FH Lawson’s phrase) in its cautious approach to, and common sense treatment of, claims in negligence for pure economic loss.

In March 1998 Mr Lennon applied to join the RUC. In the course of a two-day assessment in November 1998 he was told by an RUC recruiting sergeant, to whom he put the question, that he would be entitled to keep his allowances, as he would be transferring from the MPS to the RUC. By a letter in mid-December the RUC informed Mrs Bewley that Mr Lennon had been provisionally accepted and that he would enter the Training Centre on 31 January 1999. When she informed Mr Lennon of the position on 15 December, he asked her what he had to do. She told him to “leave everything to her.” She also told him that he should establish with the line managers, Sgt Plaskett and Inspector Faulkner, what annual leave and rest days he had left and what his leaving date should be. He saw them later on the same day. He explained the practical arrangements that he had to make for the move. He had no annual leave left. Sgt Plaskett suggested he might consider taking unpaid leave. He told him that he should deal with Mrs Bewley in relation to his transfer, as he believed that that was one of her areas of responsibility. Mr Lennon was not advised to apply for unpaid leave and he did not do so.

A few days before 23 December 1998 Mr Lennon had a short discussion with Mrs Bewley about the practicalities of his move. She told him that he could leave the MPS whenever he wanted to. Knowing that he needed some days off to make the move, he asked her whether “taking time off work” would affect his allowances. She told him (he said) not to worry, to leave it to her, she had done hundreds of transfers and to go ahead and make his arrangements. She told him that the time off would not affect his allowances, as he was transferring to another force. She did not advise him to make a formal request for unpaid leave nor did she advise him of the consequences of a break in the continuity of service with the MPS and RUC.

By a letter of 21 December 1998 Mrs Bewley informed the RUC that Mr Lennon would be transferring from the MPS to the RUC on 11 January 1999. The same date was also given by her in a fax on 21 December to the MPS finance department. Mrs Bewley was unable to explain at trial why that date, rather than 31 January 1999, was given. In fact during a discussion between Mrs Bewley and Mr Lennon to sort out the details of the transfer Mr Lennon signed a form dated 23 December, giving midnight on 11 January as the date for which he gave notice of his intention to leave the MPS to join the RUC. In the discussion Mr Lennon had asked Mrs Bewley when he should return his warrant card, uniform and radio to her. She told him he could return them whenever he wanted to. He suggested 11 January, which would give him several weeks to get sorted out in Northern Ireland prior to joining the RUC. She gave him a Form No 8485 (Notice of Intention to Transfer to another Home/Police Force) to sign. She advised him to put 11 January as his leaving date. She did not advise him of the effect that the insertion of that date would have on the continuity of his service or on his housing allowance. Mr Lennon’s understanding was that he was no longer required to turn up at Plaistow Police Station. He mistakenly believed that he was still a member of the MPS until he joined the RUC on 31 January and that he would not lose his housing allowance. If he had been told that he would lose his housing allowance, he would not have left the MPS on 11 January. On that day he returned his warrant card and said goodbye to his work colleagues before sailing for Northern Ireland on 15 January.

It was not until April 1999 that he discovered that there was a problem with his housing allowance because of a gap in service. When he asserted that he believed that unpaid leave had been agreed, it was pointed out that an application for unpaid leave had to be made in writing and that he had not made any such application. It was accepted that, if he had applied, his application would have been considered and it would have been granted. The MPS pointed out that it was the fixing of 11 January 1999 as his leaving date that caused all the difficulties.

In her full and careful judgment the judge identified the areas in which there was a difference in recollection between Mr Lennon and Mrs Bewley. She found Mr Lennon to be “ a much more credible witness” than Mrs Bewley. The judgment set out the evidence summarised in the above chronology and contained the following key findings ( paragraphs 37 et seq.) The MPS does not appeal against any of them.

On each aspect of liability the judge summarised the submissions on law and fact and stated her conclusions. Although the appeal is confined to the duty of care issue, reference to the relevant conclusions on the other aspects of liability puts the issue in its proper context.

Duty of Care

Breach of Duty

Causation

Contributory negligence

The general principles governing the existence of a duty of care not to cause pure economic loss to another by careless acts or omissions are laid down in the following cases cited in argument: Hedley Byrne v. Heller [1964] AC 465; Midland Bank v. Hett Stubbs & Kemp [1979] Ch 384; Caparo Industries PLC v. Dickman [1990] 2 AC 605; Scally v. Southern Health [1992] 1 AC 294; Spring v. Guardian Assurance [1995] 2AC 296; White v. Jones [1995] 2 AC 207 ; Henderson v. Merrett [1995] 2 AC 145; BCCI v. Price Waterhouse [1998] Lloyd’s Rep Bank 85; Outram v. Academy Plastics [2001] 1CR 367; Newall v. Ministry of Defence [2002] EWHC 1006; and Hagen v. ICI Chemicals [2002] IRLR 31.

The position taken by Mr Millar QC on behalf of Mr Lennon was that this case is clearly covered by the principles laid down nearly forty years ago by the House of Lords in Hedley Byrne and that the opposing arguments of the Commissioner were aimed at a case, which had never been advanced on Mr Lennon’s behalf, namely that of a wide, non-contractual duty on the part of an employer, or similarly placed person, to take the positive step of giving advice to protect an employee, or similarly placed person, from economic loss.

In Hedley Byrne Lord Morris of Borth-y-Gest laid down the governing principle in these terms at p502-503-

“ …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 they 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.”

In such cases the starting point, as indicated by Lord Browne–Wilkinson in White v. Jones at p272, is to ask the question

“in the absence of any contractual or fiduciary duty, what circumstances give rise to a special relationship between the plaintiff and the defendant sufficient to justify the imposition of the duty of care in the making of statements?”

Lord Browne-Wilkinson explained that such circumstances can include reliance in cases of negligent statements of advice and the assumption of responsibility for the task. He said at p.274

“ 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, viz. (1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tenders 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 plaintiff’s affairs or by choosing to speak. If he does 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] AC 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”

As was held by Oliver J in Midland Bank at p. 417 and by Lord Goff in Henderson at p. 181E-F the duty of care arising in special relationship covers acts of omission, as well as acts of commission. Midland Bank was a case of a claim in tort brought by a client against his solicitor for failing to register an option as a land charge. Oliver J referred to

“.. a common law duty not to injure their client by failing to do what they had undertaken to do and which, at their invitation, he relied on them to do.”

Mr Millar submitted that the judge correctly applied the Hedley Byrne principle: the Commissioner injured Mr Lennon financially by failing to handle with due skill and care the arrangements for his transfer to the RUC which, through Mrs Bewley, he had undertaken to handle and on which, at her suggestion, Mr Lennon had relied. There was a special relationship between Mr Lennon and the Commissioner. There was an express voluntary assumption of responsibility by the Commissioner, acting through staff with, and with access to, special knowledge and skill, and on whom Mr Lennon relied to carry through the particular matter undertaken with due skill and care. This case was not complicated by policy considerations, such as the spectre of indeterminate liability to an indeterminate number of persons which has led the courts to proceed with caution in imposing a general duty of care in cases of pure economic loss.

Mr Pitt-Payne challenged the judge’s conclusion on the duty of care point on a number of grounds.

Novelty

Mr Pitt-Payne’s main criticism was that the judge’s decision broke new ground and that it involved a radical departure from the existing law. I do not agree. No new category of duty situation is created by the decision. The particular facts found by the judge bring the case within the Hedley Byrne principle, as applied in later decisions of the highest authority. It is now well established that liability in tort for pure economic loss can arise from the negligent carrying out of a task undertaken pursuant to an express voluntary assumption of responsibility, on which the claimant has relied. In those circumstances it is unnecessary for the court to consider specifically whether it would be fair, just or reasonable to impose a duty of care. The test laid down for the existence of a duty has already been passed by judicial decisions admitting such cases to the category of recognised duty situations: see Henderson at p. 181D per Lord Goff.

Professional adviser

Mr Pitt-Payne pointed out that this was not a case of an undertaking of responsibility for the giving of advice by, or of reliance on, a person in a calling or profession. That was an important feature of the facts in the Midland Bank case, which was heavily relied on by the judge, and it was singled out for particular mention by Lord Bridge in Caparo at p. 619B-D. Mrs Bewley was not a professional adviser. She was not employed in the MPS to give advice to others in the MPS about terms and conditions of service, service allowances or transfers. She had been cleared of the charge of making a positive negligent misstatement that the choice of 11 January would preserve Mr Lennon’s entitlement to housing allowance with the RUC. She had not received any positive request from Mr Lennon for advice about the choice of 11 January as his leaving date and she was not under any positive duty to give him advice as to the choice of leaving date. The case accordingly fell outside the Hedley Byrne principle .

Lord Goff decisively disposed of the professional adviser point in Spring v. Guardian Assurance (the case of an employer’s duty of care in relation to the giving of a character reference) when he held at p.318D-E that the principle recognised in Hedley Byrne rested

“..upon an assumption or undertaking of responsibility by the defendant towards the plaintiff, coupled with reliance by the plaintiff on the exercise by the defendant of due care and skill.”

Lord Goff held that the duty of care was not even limited to the provision of information and advice. The “special skill” spoken of in Hedley Byrne was “ to be understood in a broad sense, certainly broad enough to include special knowledge.” The principle may apply to a case in which the defendant has access to information and fails to exercise due care and skill in “drawing on that source of information for the purpose of communicating it to another.” (see p.318G-H). Similar points on the breadth of “the governing principle” of assumption of responsibility underlying Hedley Byrne and the broad approach to the concept of “special skill” were made by Lord Goff in his speech in Henderson v. Merrett delivered later in the same month as Spring: see p178B- 181F.

In my judgment, Mrs Bewley expressly assumed responsibility in a particular transaction, namely the transfer of Mr Lennon from the MPS to the RUC, for giving advice to Mr Lennon in relation to a particular type of loss, namely the loss of the housing allowance, which he had expressly raised with her. Although she was not a professional person or a professional adviser, she occupied a managerial position in the MPS. She had, or had access to, special complex knowledge concerning the effect of transfers on service allowances of that kind. She led Mr Lennon to believe that he could leave it to her and rely on her to be responsible for handling the arrangements. She did not tell him, as she could easily have done if the matter was outside her area of responsibility, to seek advice elsewhere, such as the Police Federation. Those features of the case were sufficient to attract the duty to give him advice in respect of the very type of loss about which he had expressed his concern to her and which he actually suffered as a result of her failure to advise him of the implications of completing the Form No 8485 by inserting 11 January 1999 as his leaving date.

The Commissioner’s remaining arguments skirted around the edges of employment law. As there was no contract of employment between Mr Lennon and the Commissioner it was impossible to imply a contractual term putting the Commissioner under a duty to provide advice to Mr Lennon about his housing allowance: cf Scally v. Southern Health where the House of Lords implied a term in the contracts of employment of junior doctors that they would be informed of changes to their statutory superannuation scheme of which they could not be expected to be aware. It was also said by Lord Bridge in that case (at p 177) that

“If a duty of the kind in question is not inherent in the contractual relationship, I do not see how it could possibly be derived from the tort of negligence.”

The relationship between Mr Lennon and the Commissioner was analogous to that created by a contract of employment. Mr Pitt-Payne argued that it was not fair, just or reasonable to impose on an employer a general duty of care to give advice to an employee in order to protect him from economic loss. The same should apply between the Commissioner and Mr Lennon. In financial matters the relationship was, as in the case of employment, essentially antagonistic. An employer is concerned with the protection of his own economic interests. In general the normal and reasonable expectation is that an employee would look after his own economic interests. If he needed advice on financial matters, he would not normally expect to obtain it from his employer, but would look in other directions, such as to his trade union.

Mr Pitt-Payne relied strongly on the decision of this court in Outram. The defendant company was both the employer and the trustee and administrator of the company pension scheme. It failed to give advice to an employee, who had resigned from the company and ceased to be a member of the scheme, about his option to rejoin the pension scheme when he was re-employed by the company. It was held, dismissing a claim by the employee’s widow for financial loss, that there was no general duty on the employer (or on the trustee) to provide information or advice to an employee about his rights under the pension scheme, such as whether or not to apply to re-join the scheme, in order to prevent economic loss. Tuckey LJ, with whom the other two members of the court agreed, said at p 372-

“ Looking more generally at the nature of the duty alleged, it is, of course, a duty to avoid causing economic loss. Secondly, if there is a duty, breach of it will result in liability for an omission (failure to advise) in circumstances where it is not alleged that the company were asked or expressly or impliedly assumed any contractual responsibility to give such advice. As a general rule the common law does not impose liability in tort for what are called “pure omissions”. In this respect it should be noted that in all the “advice”cases some advice had been given. The courts have had to decide whether it was given in circumstances which required the adviser to take care or whether a duty to do so, which was admittedly owed to some, was also owed to others. When advice has been given and a duty is owed the duty may be breached by omission but our case is one where no advice was given so it is one of pure omission.”

Tuckey LJ went on to hold (on p 373 paragraphs 21-24) that the claim was bound to fail, as it was not alleged that the duty of care was contractual and, following Scally, a duty of care in tort is only co-extensive with the contractual duty. The company had not held itself out to give pension advice to the employee and was not asked to do so. It was not under a duty to tender advice of its own volition. It had not assumed responsibility to provide pension advice. No duty to give advice had been held to exist in analogous circumstances.

The case of Outram is, in my judgment, distinguishable. It was not claimed that the employer in Outram was under a contractual duty to give pension advice or that the employer had, either expressly or impliedly, made an assumption of responsibility to give pension advice, on which the employee would rely: see para 19 on p.372. It was not even alleged that the employee had ever asked the employer company for advice about his pension or that the company had made a negligent misstatement about it.

Mr Lennon does not invoke a general non-contractual duty of care positively to give advice to protect him from economic loss. The striking feature of this case is that the duty of care arises from an express assumption of responsibility for a particular matter, on which Mr Lennon relied. Responsibility was undertaken by the Commissioner, acting through Mrs Bewley, for the handling of the transfer arrangements. If not carefully handled, the transfer could have an adverse impact on the housing allowance, to which Mr Lennon was entitled while he had continuity of service. In my judgment, there is nothing in this case to prevent the Hedley Byrne principle from applying to an omission to give advice in such circumstances, even where the parties are in the relationship of employer and employee or in a situation akin to employment or equivalent to another kind of contract: see for example, Hagen at paras 84-89, where it was held that there was a tortious as well as contractual duty of care in connection with information supplied to employees regarding the transfer of the undertaking in which they were employed.

For the above reasons I would dismiss the appeal.

I agree.

I also agree.