Patchett & Anor v Swimming Pool & Allied Trades Association Ltd

This is an appeal against a decision of His Honour Judge Worster (‘the judge’) in the Birmingham County Court which was handed down on 15 December 2008 and in which he held that the defendant (‘SPATA’) did not owe the claimants a duty of care in making certain statements on its website. The appeal is brought with the permission of Etherton LJ. The question in the appeal is whether SPATA owed the claimants a duty of care. The answer to that question depends almost entirely upon whether such a duty can be spelled out of the contents of the website, which must of course be considered in its context.

The facts are not in dispute and can be taken almost entirely from the judgment. The claimants are husband and wife. In the summer of 2006 they were looking for a contractor to build them a swimming pool in the garden of their home. SPATA is an incorporated trade association. It is a company limited by guarantee and is owned by the various organisations which make up its membership. It is well established and its membership includes most of the major swimming pool installers trading in the United Kingdom.

In his search for a contractor Mr Patchett came across SPATA’s website via Google and obtained the contact details of three member companies for direct quotations. One of the three was Crown Pools Limited (‘Crown’), the director of which was Mr Finley. Crown initially quoted £64,876 but, after some negotiation, Mr Patchett accepted Crown’s revised quote of £55,815, which included both the installation of the pool and the landscaping works.

Crown began the work but did not complete it. It is the claimants’ case that Crown did not carry out the work with reasonable skill and care. The claimants paid the instalments due under the contract but unfortunately, by the autumn of 2006, Crown was in serious financial difficulties. In the event Crown stopped work and on 20 November 2006 wrote to its customers saying that it was technically insolvent and that it had ceased trading. The claimants had the work completed by other contractors and say that they suffered financial loss as a result. Their total claim is for some £44,000, which is made up of the total sum paid to a new contractor, plus the amount that they had paid to Crown less the amount they would have paid to Crown if it had completed the contract.

The claimants’ case depends upon the contents of SPATA’s website. The Home Page has a series of drop down menus at the top, which include “SPATA INFORMATION” and “MEMBER SEARCH”. The webpage is headed in bold “WHO AND WHAT IS SPATA?” and has ten unnumbered paragraphs which were numbered for ease of reference at the trial and in the judgment. I adopt that numbering for the same reason. The paragraphs read:

As the judge observed at [6], in his witness statement at paragraphs (3) to (6), Mr Patchett said this:

Mr Patchett did not contact SPATA for the information pack and members list referred to in paragraph 8 of the webpage. Indeed there was no direct communication between Mr Patchett and SPATA at all. Before the contract was made Mr Finley showed Mr Patchett an example of Crown’s work. Mr Patchett was impressed. Crown was the only one of the three companies he asked to quote who could undertake both the pool installation and the landscaping works. The judge said that it was hard not to be impressed with Mr Patchett’s ability as a businessman.

Mr Patchett’s evidence was that he told Mr Finley that he was aware that Crown was a member of SPATA. He did not, however, make any inquiries about the SPATASHIELD cover. He had no details from SPATA (whether from the website or otherwise) as to the nature or terms of the cover and he appears never to have discussed SPATASHIELD with Mr Finley. None of the documents provided to him by Crown make any mention at all of SPATA membership or of the SPATASHIELD bond and warranty.

As the judge observed at [21] of his judgment, the claimants’ case relied upon paragraphs 1 and 6 of the webpage quoted above, which they said were negligent misstatements in that they were inaccurate and misleading because Crown was not a full member of SPATA, was not a sound and competent contractor, was not creditworthy, became insolvent and provided installations which did not benefit from the SPATA guarantee.

I will return further to the facts, the claimants’ case and the judge’s conclusions below but should first refer to the relevant legal principles.

I can take these relatively shortly because they are not in dispute. The judge set them out in some detail and it is not said on behalf of the claimants that he erred in any way in doing so. Their case is that, although the judge identified the correct legal principles, he failed to apply them correctly to the facts of this case.

The judge first referred to part of the speech of Lord Bingham in Commissioners of Customs and Excise v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181 at [4] to [8], where he summarised the tests applicable to tortious liability in negligence for pure financial loss. He said this at [4]:

The judge then said that of those tests the incremental test was of limited use. No-one had referred to any authority involving misstatements on a website (or he might have said elsewhere) which were relied upon for a similar purpose to those here. Both parties invited the judge to consider the question whether there was a duty of care in making the statements on the basis of the assumption of responsibility test or approach and the threefold test or approach. They did the same in this court.

As to assumption of responsibility, it is common ground that the test is objective and does not depend upon the subjective state of mind or intention of the claimant or, indeed, of the defendant. In Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 Lord Steyn put it thus at page 836:

This court considered that approach in Precis (521) Plc v William M Mercer Ltd [2005] EWCA Civ 114, [2005] PNLR 511. Arden LJ discussed the position at [20] to [24]. At [21] she quoted the above passage from Lord Steyn’s speech and said this:

Arden LJ also found assistance in the list of factors suggested by Sir Brian Neill in BCCI (Overseas Ltd v Price Waterhouse (No 2) [1998] PNLR 564 at 587-8. In summary form those factors were the precise relationship between adviser and advisee; the precise circumstances in which the information relied upon came into existence; the precise circumstances in which that information was communicated, considering the purpose or purposes of the communication both as seen by the adviser and as seen by the advisee, the degree of reliance which the adviser intended or should reasonably have anticipated would be placed on its accuracy and the reliance in fact placed on it; the presence or absence of other advisers; and the opportunity for disclaimers.

Although the judge correctly accepted that the facts and context of the communications between BCCI and Price Waterhouse were very different from those here, he said that Sir Brian Neill’s list of factors was of assistance. I agree.

The judge also correctly recognised that there was some overlap between the tests or approaches identified in the cases and summarised by Lord Bingham at [4] in the Barclays Bank case quoted above. In short the tests were not to be applied in isolation from one another. Thus, as the judge noted at [36], in Caparo Industries Plc v Dickman [1990] 1 AC 605 at 637 Lord Oliver said this of ‘voluntary assumption of responsibility’:

As to the threefold test, Lord Bingham said this at [6] in the Barclays Bank case:

The judge also referred to this passage in the speech of Lord Walker in the same case at [71]:

As the judge correctly observed at [39], there is no issue here about foreseeability. The issues are whether there was a sufficient proximity between the parties and whether it would be fair, just and reasonable to impose a duty of care upon SPATA. As to proximity, the judge quoted a further passage from the speech of Lord Bridge in Caparo at pages 620 to 621 in which he underlined two passages as follows:

The judge said that he had added emphasis to Lord Bridge’s description of defendants at opposite ends of the spectrum, which might be described as the ‘fully aware adviser’ and the ‘stranger’. This does seem to be to be a helpful contrast, although many defendants are likely to be somewhere in between. As appears below, it seems to me that that is the case here.

Finally, like the judge, I should refer to the speech of Lord Oliver in Caparo at page 638C-E, where he said this with regard to the principles in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465:

It is common ground that the principles to be derived from the cases to which he referred and which are set out above form the backdrop to a discussion of the issues in this case.

The strength of the claimants’ case is this. The purpose of the website was to encourage people who wanted to have a swimming pool installed to use a member of SPATA to carry out the necessary work. It was for that reason that the various representations were made. It must have been, and indeed was, reasonably foreseeable to SPATA that such people would rely upon the representations in order to decide what action to take. In these circumstances this was not a case of a website containing statements “to all and sundry for any purpose on which they may choose to rely” of the kind which Cardozo CJ had in mind. On the contrary, the representations were directed to a limited class of people, namely those considering having a swimming pool installed. The critical representations were those contained in paragraph (6) together with the further representation obtained from the downloaded list of members that Crown was a member of SPATA.

Thus it is said with force that the website represented that Crown was a member of SPATA, that members of SPATA have high standards, that Crown had been checked for creditworthiness and the quality of its work and that Crown was a member of SPATASHIELD, which was described as SPATA’s unique Bond and Warranty Scheme offering customers peace of mind that their installation will be completed fully to SPATA standards “come what may!”.

In these circumstances there was a sufficient relationship between SPATA and the claimants, as typical examples of those who would be expected to use the website to identify a SPATA member to install a pool, to satisfy both the test of proximity identified in the cases and the further test that it would be fair just and reasonable to impose a duty upon SPATA that it should take reasonable care to ensure that the representations it was making were true. It is further said that in all these circumstances SPATA must be taken to have assumed a legal responsibility to the claimants to take such care.

It is then said, as is common ground, that the claimants relied upon the representations on the website by choosing Crown and entering into the contract. It is further said that the representations were untrue in the respects referred to above and, in particular, because it did not make clear that there was more than one type of member and that Crown was only an affiliate member. In fact only full members were permitted to sport the SPATA logo. More importantly, it was only full members who underwent the checks and vetting referred to on the webpage and it was only full members who were covered by the SPATASHIELD Bond and Warranty scheme. SPATASHIELD was an insurance based scheme, with a maximum level of cover and a number of terms and conditions of cover potentially relevant to any claim Mr Patchett might have been able to bring under SPATASHIELD. Finally it is said that, as a result of SPATA’s breach of its duty to take reasonable care in making the representations, the claimants have suffered loss in the sum of about £44,000.

The claimants’ case undoubtedly has some force. The judge however rejected it and I have reached the conclusion that he was correct to do so. Before I turn to the essential reasons for the judge’s conclusion, I should note the judge’s conclusion at [24] that there is a difference, which he described as an important difference, between the statements in fact made on the website and what Mr Patchett says he understood them to mean. It is an important difference. The judge was right to say that the question of duty of care depended on the basis of the statements actually made and the way in which they would be objectively understood. I agree with the judge that SPATA was not saying that its members (including Crown) were at all times creditworthy. No warranty was given. SPATA was saying that before each member joined, checks were carried out on its financial record and on its experience in the trade and there were inspections of its work. It was also saying that its work was subject to periodic re-inspections after joining. It was not saying that Crown would install the claimants’ pool in a sound and competent way; simply that its work had been checked in the past and had been up to SPATA standards.

That said, SPATA did make representations on its website which it expected, or at least hoped and reasonably foresaw, would be acted upon by people like the claimants, including representations that those on its members list would have the benefits of membership because there was no indication that there were different types of member. If the reader of the website read only the paragraphs quoted above and the list of members on the drop down list, he would reasonably think that all members had the benefits of membership described because he would not know that there was more than one type of member. The essential reason which the judge gave for holding that SPATA did not owe a duty of care to the claimants was that he held that, while SPATA no doubt knew that the representations on the website would be likely to be acted upon by people like the claimants, it would not expect them to do so without further enquiry. The judge held that the third of the criteria identified by Lord Oliver as arising out of Hedley Byrne v Heller, namely that it is known, either actually or inferentially, that the representation is likely to be acted upon by the advisee “without independent inquiry”, was not satisfied.

The principal reason it was not satisfied is that, when the website is read as a whole, it urges independent enquiry. Thus paragraph (8) is in these terms:

The judge referred at [29] to the cross-examination of Mr Brobyn of SPATA. Mr Brobyn accepted that, by supplying the details of members on the website, SPATA must be taken to expect potential customers to contact members directly but added that it was intended that the website would be taken as a whole, ‘not a bit here and a bit there’ and that more information would be obtained from SPATA. The judge in effect accepted that SPATA could reasonably expect potential customers to have regard to all the information potentially available from the website and not just part of it. For my part, I do not think that the judge erred in any way in reaching that conclusion.

It is I think appropriate to focus on a number of the points which emerge from the authorities discussed above. This is not a case where the circumstances fall within a situation in which an assumption of responsibility or liability has previously been held to exist: see [15] above.

If I focus on Sir Brian Neill’s list in [16] above, the position appears to me to be this. The precise relationship between SPATA and the claimants is simply that SPATA produced its website for people like the claimants but to my mind they are not in a relationship of adviser and advisee. While they are not entirely strangers because, as a trade association, SPATA directed its website to people like the claimants in the hope that they would enter into contracts with their members, like the judge at [41(ii)], I find it difficult to classify their contact in terms of a relationship, whether special or otherwise. For the same reason I do not think that there is sufficient proximity between the parties to give rise to a duty of care. The precise circumstances in which the information came into existence and was communicated on the website are described above and, to my mind provide no real support for an assumption of responsibility because, although the information was given voluntarily, by reason of paragraph (8) discussed above the degree of reliance which SPATA intended or should reasonably have anticipated would be placed on the accuracy of the statements in the website was limited by the advice in paragraph (8) that potential customers should obtain an information pack. As to reliance, while there was some reliance, the significance of it is much reduced by that same advice. So is the absence of other advisers and the opportunity for a disclaimer. SPATA could of course have included a disclaimer but it did include the advice in paragraph (8).

The judge said this at [13]:

The judge ultimately expressed his conclusion thus at [41 (viii)]:

The judge held that, if there was a duty of care, the claimants’ claim would fail in any event because he fixed contributory negligence at 100 per cent. He did so principally on the basis that it was negligent of the claimants not to make further enquiry about the bond and warranty scheme and that, if they had, they would have discovered that Crown was not covered because it was not a full member. It is not suggested on behalf of the claimants that they were not at fault but it is submitted by Mr McCracken on their behalf that they should not be held to be more than 25 per cent at fault. It appears to me that they were indeed at fault for not obtaining the information pack and, in particular, for not enquiring further into the bond and warranty scheme, which would be almost bound to be subject to various terms and conditions. In fact it only afforded cover for a maximum of 20 per cent of the contract price.

If I were apportioning responsibility on the footing that SPATA owed a duty of care, I would not go as far as saying that they were wholly to blame but would hold that the claimants were 75 per cent responsible. However, the judge treated this aspect of the case, not so much as one of contributory negligence, but as a pointer to the fact that it was not sensible or just to hold that SPATA owed the claimants a duty of care.

In all the circumstances, for my part, I do not think that it can fairly be held that SPATA assumed a legal responsibility to the claimants for the accuracy of the statements in the website without the further enquiry which the website itself urged. It is common ground that, if the claimants had asked for and obtained an information pack, they would have learned the true facts. They would have learned that Crown was only an affiliate member and that, as such, Crown was not the subject of the checks referred to and its customers would not have the benefit of the SPATASHIELD bond or warranty. In these circumstances there was not a sufficient relationship of proximity between SPATA and the claimants for these purposes and it would not be fair just and reasonable to hold that SPATA owed them a duty to take care. Moreover, it is I think of some relevance that it is not suggested that to hold that SPATA owed a duty of care to the claimants would only be only a small increment or development from existing case law. It would I think be an unwarranted extension of that law, even though nothing I have said is intended to detract from the conclusion that it is important that information put into the public domain is accurate.

When application was being made for permission to appeal it was suggested that special considerations apply to representations on websites. I do not think that the mere fact that the representations were contained on a website supports the conclusion that a duty of care is owed. As ever, all depends on the circumstances. Some websites are interactive and it may be possible, applying the principles outlined above, to conclude in particular circumstances that a duty is owed. However, I agree with the judge that that is not the case here.

For these reasons I would dismiss the appeal. This makes it unnecessary to consider the issue of quantum. The judge held that the claimants just satisfied him that, if there was a breach of a duty of care, it was causative of the loss but held that the correct measure of their loss was the 20 per cent they would have recovered under the SPATASHIELD scheme, namely £11,630. I am not at present persuaded that that is correct. It would be correct if the claim were based on a contractual warranty but this is a claim in tort and the measure of damages should surely be based on the assumption that the representations had not been made. If they had not been made, the claimants would not have contracted with Crown at all and the measure of their loss seems to me to be based on a calculation along the lines pleaded by the claimants and referred to above. The precise figures would have to be left to agreement or referred to a judge. On my analysis they would then have to be reduced by 75 per cent to reflect the degree of contributory negligence. However that may be, I would dismiss the appeal.

I agree that this appeal should be dismissed for the reasons given by the Master of the Rolls. I too would like to emphasise that no different legal principles apply to misrepresentations on a website than to those anywhere else in the public domain.

I have some sympathy with the appellants because some of what SPATA said on the website, taken on its own, was untrue or at least was liable to give a false impression, in particular in that Crown was only an affiliate member and as such would not have been subject to the same vetting as a full member and was not subject to the SPATASHIELD bond and warranty scheme. However, what is crucial is to look at the statements made by SPATA as a whole, and those statements included reference to an information pack supplied by SPATA. The judge found that a potential customer would be expected to ask for and obtain the information pack and I agree with him. As the judge said, had Mr Patchett asked for the information pack and the list of members referred to on the website, it would have become immediately apparent that Crown was not a full member and was not covered by SPATASHIELD.

Whilst SPATA was in error in failing to distinguish between full and associate members in the drop down list of members on the website, this is insufficient to establish liability in this case because the reader’s attention was drawn to the information pack at which a potential customer would be expected to look and which furnished the relevant information.

Accordingly I conclude that SPATA did not owe the claimants a duty to care in the circumstances of this case.

I have come to a different conclusion from that of the Master of the Rolls and Scott Baker LJ. I will briefly explain why. I gratefully adopt the Master of the Rolls’ exposition of the facts and the law which, as he says, is not controversial. It is the application of the law to the facts of the case which gives rise to the disagreement between us. Thus I agree with and adopt paragraphs 1 to 24 of the Master of the Rolls’ judgment.

The question is whether SPATA owed a duty to the appellants to take reasonable care to provide accurate information on their website. If they did owe that duty, they breached it by stating that Crown was a member of SPATA and thereby implying that the representations made about members applied to Crown. It is accepted that the appellants relied on the representation. So, if SPATA owed a duty of care, there will be liability to the appellants, subject of course to any finding of contributory negligence.

In deciding whether SPATA owed a duty of care, the test to be applied is, I think it is agreed, whether, objectively considered, the information in the website creates a relationship of a sufficient degree of proximity between the parties and whether in all the circumstances, including that degree of proximity, it is fair just and reasonable to impose a duty of care.

As to proximity, the SPATA website was directed at people who intended to install a swimming pool and were seeking to choose a suitable contractor. The purpose of the website was to encourage those people to choose a SPATA member. I agree therefore that the representations were not directed ‘to all and sundry for any purpose on which they may choose to rely’. On the contrary, the representations were directed at a particular class of person whom SPATA wished, for commercial reasons, to attract to use its members. In those circumstances, I would say that there was a considerable degree of proximity and the real question for determination is whether (bearing in mind that degree of proximity) it is fair, just and reasonable to impose a duty of care on SPATA.

It seems to me that the essential message of the website, as it would be understood by the ordinary reasonably careful person who intended to install a swimming pool, is that SPATA is a responsible organisation who can be relied on for advice as to which installers are competent and financially sound. The website presents SPATA as trustworthy. It presents itself in the role of a regulator, setting standards (see paragraph 5) and vetting installers before they are allowed into membership (see paragraph 6). It is entirely foreseeable that the intended pool purchaser would rely on SPATA as being knowledgeable and trustworthy.

As I understand it, both the Master of the Rolls, Scott Baker LJ and the judge below accept that those factors take the appellants a considerable way towards establishing that it would be fair just and reasonable that SPATA should be under a duty of care. Yet the decision of the judge (endorsed by the Master of the Rolls and Scott Baker LJ) is to the contrary. The judge had two reasons for so deciding, only one of which is endorsed by two members of this Court. The reason why two members of this Court hold that it is not fair just and reasonable to impose the duty is that they are of the view that, when read as a whole, the website should not be taken as inviting reliance without further enquiry, that is without applying for and reading the information pack referred to in paragraph 8 of the website. It seems to me that, absent that feature, both my colleagues would be prepared to hold that it was fair just and reasonable to impose the duty.

The Master of the Rolls is of the view that paragraph 8 encourages application for the information pack and envisages that there will be no reliance on any information on the website without the additional information in the pack. Paragraph 8 provides:

With great respect, I cannot agree that this paragraph does more than offer the further information which may be gathered from the pack. The first sentence offers a list of members in the customer’s area. But the customer does not need the information pack to find the list of members. He merely clicks on the appropriate button of the toolbar and chooses his area. He is then shown the list of members in that area.

The second sentence tells the customer that the pack will give him advice about how to deal with the contractor – what questions to ask at various stages. The contractor might or might not feel that he needs such advice. It is not clear to me what purpose the second sentence of paragraph 8 is intended to serve. It may be that certain questions have to be asked in order for the SPATASHIELD insurance to be effective. I know not. But there is nothing in paragraph 8 to suggest a link between the need to obtain the information pack and the availability of the insurance scheme.

There is nothing in paragraph 8 which would suggest to the reader that it was necessary to obtain the information pack in order to make a further check on the credentials of the members listed on the website. There is nothing to suggest that the information pack might in any way limit the reliance which the customer can place upon the statement that a particular installer is a member of SPATA and is therefore a good contractor to engage. Nor is there anything to suggest that the information pack is necessary as a check on the accuracy of the information provided on the site itself. Of course, if the information pack had been requested and read, the customer would have discovered the mistake made on the website and would have found out that Crown was not a member of SPATA. But that fact should, in my view, be put out of mind, when considering whether, on an objective reading, there was an expectation that the customer would not rely on the website without the information pack.

I do not accept that, objectively considered, this website was merely ‘the first step in the process’. The customer was given an option whether to ask for the further information in the pack. In my view, on reading the website, the customer might ask himself whether he needed the information pack and might well decide that he did not.

For that reason, I respectfully disagree with the other members of the Court. I would hold that, objectively construed, the website invites reliance on the qualities inherent in membership without further inquiry.

The judge was of the view that the appellants had been grossly negligent in failing to make enquiries as to the availability of SPATASHIELD insurance. I agree that he was negligent. I think he might also be thought to have been careless not to notice that Crown’s quotation did not show the SPATA logo. But, in my view, those matters go to contributory negligence and do not, as the judge seemed to have thought, extinguish SPATA’s breach of duty. I would agree with the Master of the Rolls that, if there was primary liability on SPATA, the appropriate reduction for contributory negligence would be 75%. I also agree with the Master of the Rolls’ observations about damages. However, in view of the conclusions of the other members of this Court, those issues are academic.