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The Jersey Law Review – October 2006

SHOULD JERSEY FOLLOW SOUTH AUSTRALIA? DEVELOPMENTS IN LIABILITY FOR NEGLIGENT ADVICE

Jeremy Cousins

1       This article examines the development of the law of liability in negligence for the giving of advice, since the “controversial”[1] decision of the House of Lords in South Australia Asset Management Corporation v York Montague Ltd.[2]  It considers, in the particular context of Jersey, and its law of tort and approach to precedent, whether some problematic aspects of that decision should, or need be, followed.  It begins with a consideration of the background to the decision, analyses its principles and application, and then considers the decision from the Jersey perspective.

Background

2       Determining the extent of liability for negligence was relatively straightforward following the decision of the Court of Appeal[3] in In re Polemis.[4]  In the words of Scrutton LJ -

“… if the act would or might probably cause damage, the fact that the damage it in fact causes is not the exact kind of damage one would expect is immaterial, so long as the damage is in fact caused sufficiently directly by the negligent act, and not by the operation of independent causes having no connection with the negligent act, except that they could not avoid its results. Once the act is negligent, the fact that its exact operation was not foreseen is immaterial.”

3       This approach held sway[5] for forty years until the Privy Council decided Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (The Wagon Mound),[6] by which, in the words of Viscount Simonds, delivering the opinion of the Board, “foreseeability becomes the effective test”. In terms Viscount Simonds acknowledged that the decision was driven by considerations that “it does not seem consonant with current ideas of justice or morality that, for an act of negligence, however slight or venial, which results in some trivial foreseeable damage, the actor should be liable for all consequences, however unforeseeable and however grave, so long as they can be said to be “direct”.”

4       In Jersey, foreseeability became firmly established as the relevant test; see for example decision of the Court of Appeal in Denney v Hodge.[7] The Jersey courts have repeatedly applied the test since that time, as for example in West v Lazard Bros. & Co. (Jersey) Ltd.[8]

5       However, since the decision in The Wagon Mound, it has become increasingly difficult to identify a principle which provides an answer to the question of the extent of a defendant’s liability for a negligent act. The strive to identify that principle continues. A return to the harsh rigours of Polemis is not acceptable for the reasons expressed by Viscount Simonds.

The South Australia case

6       The difficulty in finding a just solution to the extent of a wrongdoer’s liability was highlighted by the facts which gave rise to the decision of the House of Lords in the South Australia case.[9] Several defendant valuers negligently overvalued property. Lenders made loans based upon the valuations; the loans would not have been made if the lenders had known the true values of the properties. The property market fell, and the borrowers defaulted. Damages were claimed against the valuers on the basis of the entire losses, including those arising from the market fall, which the lenders suffered as a result of making the loans. Several appeals were held together. The facts are well illustrated by one of the cases, United Bank of Kuwait PLC v Prudential Property Services Ltd. In 1990 the lenders advanced £1.75m on the security of a property valued at £2.5m. The judge found the true value of the property when valued was only £1.8 or £1.85m. The property was sold in 1992 for just £950,000. On a traditional approach[10] the valuer’s liability would be the difference between the sums recovered on sale and the amount advanced, but that assumed no fall in the value of the property in the meanwhile. The problem in South Australia was who should bear the consequences of the fall in the market?

7       When the South Australia cases were heard in the Court of Appeal, that Court’s approach reflected the classic starting point for claims in tort, namely that the damages should be as nearly as possible in the sum required to put the plaintiff in the position in which he would have been if he had not been injured.[11] This starting point has also been adopted in Jersey cases, for example in Dixon v Jefferson Seal,[12] a case concerned with stockbroker’s negligence. From this perspective, the English Court of Appeal held that the valuers were liable (subject to any contributory negligence) for the entirety of the lenders’ losses, including those which arose from the fall in the property market.

8       In the House of Lords,[13] Lord Hoffmann delivered the only reasoned speech. He said[14] that the Court of Appeal had begun its enquiry at the wrong point, and that before one could consider “the principle on which one should calculate the damages to which the plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation.” He emphasised that a plaintiff who sues for breach of duty, whether contractual, tortious or under statute, must show that the duty was owed to him, “and that it was a duty in respect of the kind of loss which he has suffered.”

9       Lord Hoffmann said that normally the law limits liability “to those consequences which are attributable to that which made the act wrongful.” He contrasted that principle with the approach of the Court of Appeal, using the example of a mountaineer who consults a doctor about the state of his knee. The doctor negligently pronounces it fit, and the mountaineer undertakes an expedition which otherwise he would not have done. On the expedition he suffers a fall which has nothing to do with the state of his knee. Lord Hoffmann said that on the Court of Appeal’s principle there would be liability, but not on the normal principle.

10     These considerations led Lord Hoffmann to formulate a general principle[15] -

“It is that a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.

The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action. If he is negligent, he will therefore be responsible for all the foreseeable loss which is a consequence of that course of action having been taken. If his duty is only to supply information, he must take reasonable care to ensure that the information is correct and, if he is negligent, will be responsible for all the foreseeable consequences of the information being wrong.”

11     For the remainder of this article, this principle is referred to as “the South Australia principle”. As Lord Hoffmann explained,[16] the measure of damages to which its application would give rise, applies only to cases where the action is for the breach of a duty to take care, and not for damages for breach of a warranty as to the accuracy of the information.[17]

12     The application of the South Australia principle to the cases before the House,[18] limiting damages to the consequences of the valuations being wrong, involved ascertaining whether each of the lenders had obtained less security than they had expected. Therefore in the United Bank of Kuwait case, the measure was the difference between true value (£1.8 -£1.85m)[19] and the valuation figure of £2.5m.

13     Crucially, for the assessment, Lord Hoffmann rejected[20] as “quite irrelevant to the scope of the duty of care” whether the cases could be classified as “no-transaction” or “successful transaction” cases, referring to the distinction between those cases in which the transaction would have proceeded had the true position been known, and those which would not. Lenders had sought to justify recovery of losses from the market fall on the basis that they would not have entered the transactions if they had known the true position. Lord Hoffmann said that the distinction was “not based on any principle and should in my view be abandoned.”

14     From Lord Hoffmann’s analysis it is plain that the foundation of the South Australia principle lies in the scope of the duty of care, but the principle itself imposes a refinement which requires the categorisation of the relevant duty as one (1) where the defendant is a provider of information (“an information provider”) or (2) an adviser on a course of action (“an adviser”).

15     This refinement has introduced problems, not least of classification, in cases which have followed, and more recent cases suggest that the courts are concerned primarily with the scope of the duty of care, and not with the refinement involving categorisation.

The application of the South Australia principle

16     The courts in Jersey have considered the South Australia case, but in the only reported decision, Le Quesne and Thacker (practising as Viberts) v Golder[21]the Jersey Court of Appeal was dealing with the case at the stage when it had been decided by the English Court of Appeal and not the House of Lords. Golder concerned alleged negligence in preparing a contract for the sale of land. The actual decision, on the facts, in that case would almost certainly not be affected by the decision in the House of Lords, or any of the later developments discussed in this article.

17     In another Jersey case, decided by the Privy Council[22], Pickersgill & another v Riley, whilst the critical matter for decision was whether business advice fell within the scope of the duty of a Jersey lawyer (categorised in the decision of the Royal Court as fulfilling the rôle of an homme d’affaires), the Board did not even refer to the South Australia principle for guidance as to how it should define the scope of the duty.[23]

18     In England, the application of the principle was tested[24] soon after the House of Lords decision. In Bristol & West Building Society v Fancy & Jackson and other actions,[25] Chadwick J, as he then was, considered a number of cases brought against solicitors for damages arising from lending transactions where the solicitors had been retained to act for the lender. In one of the cases, Steggles Palmer,[26] the judge held that the defendants were in breach of duty in failing to notify the lender that the transaction was a sub-sale profiting the vendor, and in failing to notify that they could not confirm that the borrower was unable to pay the balance of the purchase monies from his own resources.[27] He held also that no advance would have been made had the lender known the true position.[28] In short, though the judge did not say this, on the terminology disapproved by Lord Hoffmann, it was a “no transaction” case. The judge reminded himself of the South Australia principle, and said it was the test which he should seek to apply.[29] Nonetheless, he went on to hold that the defendants should be liable for the whole of the loss which resulted from the advance (subject to questions of mitigation and contributory negligence), even though a substantial part of that loss resulted from the mortgaged property’s realising much less than the valuation figure obtained at the time of the advance.

19     Chadwick J reached his decision on the basis that -

“… if the society had known what it should have known, it would decided that [the borrower] was a borrower to whom it did not wish to lend. In those circumstances it seems to me fair, and in accordance with Lord Hoffmann’s test, that the defendants should be responsible for the consequences of the society not being in the position to take the decision which it would have taken if the defendants had done what they should have done. That is to say, the defendants should be responsible for the loss suffered by the society as a result of lending to [the borrower].”

20     The justice of the decision is beyond doubt, but it is difficult to reconcile with the South Australia principle. Every lender in the South Australia cases could equally have said (and did say) that if it had been given the information it should have had, it would not have entered into the transaction. This is precisely the reasoning that Lord Hoffmann rejected, and amounts, it is submitted, to a resurrection of the “no transaction” plea.

21     Chadwick J’s approach was approved and followed by the Court of Appeal[30] in Portman Building Society v Bevan Ashford.[31]  In that case a lender suffered a loss on repossession of mortgaged premises. It complained that it would not have entered into the transaction if it had known that the borrower was seeking a second mortgage, and that the honesty of the borrower had been misrepresented as a result of the solicitors’ negligence. Otton LJ held that the solicitors were liable for the entire loss. He said -

“I am satisfied that, in these circumstances, [the lender] was rightly held by Longmore J to be entitled to recover the whole of its loss. Longmore J was correct to follow the reasoning of Chadwick J in the application of the SAAMCO principle, which has the effect that where a negligent solicitor fails to provide information that shows that the transaction is not viable or tends to reveal an actual or potential fraud on the part of the borrowers, the lender is entitled to recover the whole of its loss. In other words, the whole of the loss suffered by the lender is within the scope of the solicitor’s duty and is properly recoverable.”

22     Again, the justice of the decision cannot be questioned, but “no viable transaction” seems to amount to another way of saying “no transaction”. The solicitors were not advisers, but information providers. Their failure to disclose the second mortgage was not a failure of advice as to a course of action, but as to the provision of information. The fact that armed with the information the lender would not have lent does not convert a duty to provide information into a duty to advise as to a course of action. The loss was suffered because the lender entered into the transaction, and the loss flowed from the transaction. The South Australia principle, however, does not permit recovery on that basis, unless the duty breached is to advise on a course of action, and a foreseeable consequence of the transaction is the loss.

23     The decision in Steggles Palmer was again considered by the Court of Appeal in another lender case, Crosse & Crosse v Lloyds Bank.[32] In that case the defendant solicitors negligently failed to inform the lender of restrictive covenants affecting the land.[33] Jonathan Parker LJ said that “in effect” Chadwick J had “equated the position of the solicitors in Steggles Palmer with the adviser whose duty it is to advise as to what course of action should be taken.” This approach, too, has inherent difficulties. The solicitors in Steggles Palmer, were not advising the lender about whether to make a loan. They failed to report facts about the borrower and his circumstances. They could not satisfactorily be classed as advisers; they were information providers. Sometimes, of course, solicitors will be advising as to the wisdom of a course of action (as in litigation), or as to the terms of a transaction (when assisting negotiating a company acquisition), but that was not the position in Steggles Palmer.

Later decisions: the primacy of the duty of care

24     As noted above, in Pickersgill,[34] the Privy Council resolved the case exclusively by reference to the scope of the duty of care. In other cases, however, the courts have grappled with the problems posed by the South Australia principle.

25     In Aneco Reinsurance Underwriting Ltd v Johnson & Higgins,[35] reinsurers of what was known as “the Bullen treaty” were prepared to provide cover only if brokers could obtain satisfactory excess of loss protection. The brokers negligently failed properly to present the risks to the excess of loss insurers, who subsequently avoided cover. In fact, the kind of protection desired was not available in the market, if the true risk had been made known by the brokers. If such non-availability had been made known to the reinsurers, they would not have entered into the Bullen treaty. As a result of entering into the Bullen treaty, the reinsurers lost $35m; however, had the excess of loss cover which they believed protected them been fully valid, it would have afforded them protection as to only $11m.

26     The history of the case demonstrates the difficulty encountered in categorising transactions of this kind. The trial judge, Cresswell J, was overturned on the facts as to whether excess of loss insurance was available. The Court of Appeal unanimously held it was not, but differed as to the consequences. Evans LJ held that the brokers were liable for the full $35m because they had failed to report correctly the market assessment of the reinsurance risks. Those risks were central to the reinsurers’ decision. Ward LJ, agreeing in the result, held that full liability was established because this would be fair, just and reasonable. This was an unsatisfactory basis for establishing liability, as explained by Lord Steyn at paragraph 40 –“It is a deus ex machina.” Aldous LJ found for liability of only $11m, on the basis that this was only a duty to provide information case.

27     The House of Lords (Lords Slynn,[36] Browne-Wilkinson,[37] Lloyd,[38] Steyn,[39] and Millett) held (Lord Millett[40] dissenting) that Evans LJ’s approach was correct. Lords Slynn and Browne -Wilkinson delivered short speeches agreeing with the speeches of Lords Lloyd and Steyn, both of whom expressly adopted and approved Evans LJ’s reasoning.

28     Given the weight attached to Evans LJ’s judgment, it is worth noting precisely what he said with regard to the application of the South Australia principle[41]-

“. . .the fact that no reinsurance cover was available in the market is important, because it introduces an additional head of breach of duty by [the broker]. They are liable not merely for failing to obtain effective cover on the terms which they reported to Aneco, but also for failing to report that no cover could be obtained.

The last factor in particular means in my judgment that the Banque Bruxelles principle - compensating the claimant only for the consequences of the advice or information being wrong - fails to provide proper compensation in the present case. Aneco is also reasonably entitled to compensation for [the broker’s] failure to report correctly the current market assessment of the reinsurance risks which Aneco was proposing to undertake. Those risks were central to Aneco's decision and [the broker] took it upon himself to advise Mr. Crawley with regard to them. This is far removed from the lender/valuer relationship and even from the client/professional adviser relationship to which the Banque Bruxelles case applies, and even more so from the doctor and mountaineer.

I therefore would hold that Aneco is entitled to recover damages for the whole of the losses which it suffered in consequence of entering into the Bullen treaty, acting on [the broker’s] advice with regard to the availability of reinsurance (retrocession) and therefore on the current market assessment of the risk.”  (My emphasis)

Lord Lloyd said  -

“This is, as Evans LJ pointed out, far removed from the lender/valuer relationship in SAAMCO. The difference does not depend on calling one “information” and the other “advice”. It depends on a difference of substance, and in particular, of course, on the scope of the advice which the brokers undertook to give. In some cases, it may be difficult to draw the line. But I have little doubt on which side of the line the present case falls.” [42]

29     Lord Steyn,[43] referring to the very passage from Evans LJ’s judgment quoted above, said that for his part “this reasoning is convincing”, and that “the reasoning of Evans LJ is entirely consistent with principle.” Critically, he said -

“The width of the duty assumed by the brokers is determinative of this being the correct measure of damages.” [44]

30     It is particularly important to note how Lord Lloyd described the South Australia principle -

“What indeed is the SAAMCO principle? It is surely the principle which has been common ground throughout the argument before us that a defendant is not liable in damages in respect of losses of a kind which fall outside the scope of his duty of care. There was nothing new in that principle. It has been the rule in contract since the decision in Czarnikow Ltd. v Koufos, [1967] 2 Lloyd's Rep. 457; [1969] 1 A.C. 350, if not before. It has been the rule in tort since In Re Polemis and Furness Withy & Co. Ltd., (1921) 8 Ll.L.Rep. 351; [1921] 3 K.B. 560 was disapproved in Overseas Tankships (U.K.) Ltd. v. Morts Dock and Engineering Co. Ltd. (The Wagon Mound (No. 1)), [1961] 1 Lloyd's Rep. 1; [1961] A.C. 388.”[45]  (My emphasis)

31     This suggests a re-definition of the principle, notably omitting the information provider and adviser categorisation.  It is more than possible to detect in these speeches a recognition of the limitations of the South Australia principle. The House of Lords in Aneco specifically did not suggest that the earlier case was wrongly decided. What is clear, however, is that an approach to the analysis of duty and loss appropriate to lenders and mountaineers does not readily lend itself to more complex transactions such as reinsurance.

32     Since Aneco, the problem under consideration has been considered in many cases. The scope of this article permits mention of only two. The first is the decision of the Court of Appeal[46] in Equitable Life Assurance Co v Ernst & Young.[47] This was an appeal from a decision summarily to dismiss parts of the claim against the defendants. It arose from the inability of Equitable to honour guaranteed annuity rates to policyholders in the light of the earlier House of Lords decision in Equitable Life v Hyman.[48] Equitable alleged that its auditors had been negligent in 1997-99 in failing to advise of the need to make adequate provision. One allegation was that if Equitable had appreciated the true position, its directors would have put it up for sale in 1998 or thereafter (“the lost sale claim”), and that the failure to advise had led it to continue to declare unjustified bonuses (“the bonus claim”). The defendants applied to strike out the claims on the basis that neither claim fell within the scope of the duty of care, and that the losses were not caused by the defendants’ breaches of duty. The judge, Langley J, struck out both heads of claim, but permitted a revised, more limited, claim to proceed. That decision was reversed by the Court of Appeal whose judgment was given by Brooke LJ. He considered the submission that the loss on the bonus claim was not within the scope of the duty -

“Mr Hapgood’s solution was to strike out everything. We think that is to compound the mischief. Ultimately, we consider that it cannot be said that Equitable has no real prospect of persuading a court that E & Y owed it a duty to protect it from the harm identified by Mr Milligan. When auditors undertake for reward to perform services such as those listed … above and are found to be negligent in the way they perform those services we do not understand the law to require the client to ask for specific advice before it can recover damages for the foreseeable losses it later suffers. The answer to the matters set out in … the judgment … which so strongly influenced the judge, is that because E & Y must be taken to have failed in their duty of care to report to Equitable on material errors in its accounts, the directors of Equitable did not think that it needed to seek advice from E & Y about the advisability of a sale. If, however, they had known what it is said they would have known had E & Y performed their duty, it is well arguable that the consequences, not only for bonus distribution, but also for the factors affecting the society’s capital base generally, would have had to have been discussed with the auditors and considered at large and as a whole.” [49]

33     The case highlights the impossibility, in many factual situations, of identifying an information provider apart from an adviser. Equitable Life demonstrates the potential liability of a professional whose task may be to provide information, but breach of whose duty may mean that proper advice is not received, and a risky course of conduct embarked upon.

34     Secondly, in Thomson v Christie Manson & Woods,[50] the Court of Appeal[51] considered the measure of damages against an auctioneer who was allegedly negligent in the description applied to various vases. May LJ, with whom both other members of the Court agreed, referred to the South Australia case, and continued -

“[128] Ms Thomson does not contend that Christie’s warranted their information. Lord Grabiner does however say that they were advisers and not mere providers of information. In so far as this matters, I do not think that Lord Grabiner is right here. Christie’s duty was to provide advice in the nature of information to enable Ms Thomson herself to decide whether to bid or not. There were numerous elements of that decision which did not come within the scope of Christie’s duty at all, such as her ability to afford the likely purchase price and the relative merits of spending the money on these vases rather than on something quite different.

[129] I do not, however, think that a distinction between an adviser and a provider of advice in the nature of information is critical to determining the proper measure of damage. As I have said, the measure of damage has to relate to the scope of the responsibility assumed and to the breach of the resulting duty of care. Christie’s duty did not extend to carrying out metallurgical analyses and the measure of damage should not embrace the result of such analyses.”             (My emphasis)

35     The emphasised passage is the clearest possible affirmation of overriding importance of the scope of the duty of care, without regard to categorisation of a duty as that of an information provider or adviser.

Broader considerations

36     The law of negligence in relation to liability for advice should conform to the philosophy generally applicable to the law, not merely of negligence, but tort as a whole. That philosophy was discussed at length in the speech of Lord Nicholls in Kuwait Airways Corporation v Iraqi Airways C (Nos 4 and 5),[52] a claim concerned with conversion. Of particular relevance to present considerations Lord Nicholls said -

“…it is of crucial importance to identify the purpose of the relevant cause of action and the nature and scope of the defendant’s obligation in the particular circumstances. What was the ambit of the defendant’s duty? In respect of what risks or damage does the law seek to afford protection by means of the particular tort? …”[53]

37     It is the identification of the risks or damage against which the cause of action aims to protect that enables the scope of the duty of care to be identified. This is why the valuer is not liable for loss arising from a fall in the property. The risk or loss that he is to guard against is, in the case of a purchaser client, paying too high a price for property, or in the case of a lender client, lending too much on its security. A solicitor or advocate advising in respect of a property purchase is to guard against the purchaser’s acquiring a defective or encumbered title, and so a defect in title will fall within the loss. Similarly a legal representative if, when investigating title, he learns of matters which he should realise might affect the lender’s decision to lend, his duty is to draw such matters to the lender’s attention; Mortgage Express Ltd. v Bowerman & Partners.[54] The risk he is to guard against is the lender’s entering into a transaction that he would choose not to enter into if properly informed. The loss from the transaction therefore falls within the scope of the duty. The decisions in Steggles Palmer and Bevan Ashford are compatible with this approach.

38     A doctor will not be liable for a mountaineering accident (having nothing to do with the condition of the mountaineer’s knee) if he has negligently advised the mountaineer that he has a sound knee. This is because the risk the duty exists to prevent has nothing to do with such an accident, not it is submitted, because the doctor is an information provider rather than an adviser.

39     Sometimes a duty exists to protect against risk or damage from a source independent of the defendant. For example, in Stansbie v Troman,[55] the Court of Appeal held a decorator liable for loss suffered from a burglary committed because the decorator had failed properly to secure the house on which he was working. The risk against which the decorator was to guard was the very risk of burglary, although committed wilfully by a third party, and so the burglar’s actions fell within the scope of the decorator’s duty of care.

40     On other, rarer occasions, the risk to be guarded against is one of self-harm by the plaintiff. Thus in Reeves v Commissioner of Police for the Metropolis,[56] the police were held liable for the suicide of a prisoner in custody, where he was a known suicide risk. The police accepted that they owed a duty to take reasonable care to protect a prisoner from suicide, and therefore the loss fell within the scope of the duty, even though the loss was self-inflicted.

The South Australia principle in the Jersey context

41     In the case of Picot (CI) Ltd and Vekaplast Windows (CI) Ltd v Michel Crill and Hamon,[57] it was held that the law of negligence in Jersey is the same as that in England. Le Quesne JA, giving judgment in the Jersey Court of Appeal said -

“It is common ground that excepting any point upon which a local rule has been established, on questions of liability for negligence the law of Jersey follows the law of England.  This means that on these questions the Jersey courts apply the whole law of England.  It does not mean that they are free, following not any local rules (of which ex hypothesi there are none) but their own preference, to accept some features of English law and reject others.”[58]

42     Frossard JA agreed with that judgment. Blom-Cooper JA, who dissented on this point, observed that the courts of Jersey as a general rule decide questions of tortious liability by direct reference to the development of the common law of England.  However, he suggested[59] that the common law of England could be adapted to Jersey. He stressed that Jersey’s courts are bound only by the decisions of the Privy Council, and that since there was no decision of the Privy Council on the point then under consideration (advocate’s immunity from suit), the Jersey Court of Appeal was free to decide that as a matter of principle an advocate should no longer enjoy such immunity for work undertaken in Court.[60]

43     In the light of the Privy Council’s decision in Invercargill City Council v Hamlin,[61] it must be questioned whether the majority decision of the Jersey Court of Appeal in Picot on the need to follow the law of England is correct. In Invercargill the New Zealand Court of Appeal[62] had held that in New Zealand that a local authority owed a duty of care to a plaintiff home owner who suffered loss as a result of a building inspector’s negligent passing of defective foundations. That decision was completely at variance with the earlier decision of the House of Lords in Murphy v Brentwood District Council.[63]The Privy Council[64] held, however, that the New Zealand courts were free to develop their own variant of the common law. The position could not have been more clearly stated than it was in the opinion of the Board which was  delivered by Lord Lloyd -

“Where the New Zealand Court of Appeal is purporting to apply settled principles of English common law, then it is the function of the Board to ensure that those principles are applied correctly. Hart v O'Connor [1985] AC 1000 was such a case, and Lord Scarman's observations in Tai Hing Cotton Mill Ltd. v Liu Chong Hing Bank Ltd. [1986] AC 80, 108 are to be understood in that light.      
But in the present case the judges in the New Zealand Court of Appeal were consciously departing from English case law on the ground that conditions in New Zealand are different. Were they entitled to do so? The answer must surely be “Yes.” The ability of the common law to adapt itself to the differing circumstances of the countries in which it has taken root, is not a weakness, but one of its great strengths. Were it not so, the common law would not have flourished as it has, with all the common law countries learning from each other.

44     The point was put by Lord Diplock in a very different context in Broome v Cassell & Co. Ltd -

“Other supreme appellate tribunals exercise a similar function in other countries which have inherited the English common law at various times in the past. Despite the unifying effect of that inheritance upon the concept of man’s legal duty to his neighbour, it does not follow that the development of the social norms in each of the inheritor countries has been identical or will become so. I do not think that your Lordships should be deflected from your function of developing the common law of England and discarding judge-made rules which have outlived their purpose and are contrary to contemporary concepts of penal justice in England, by the consideration that other courts in other countries do not yet regard an identical development as appropriate to the particular society in which they perform a corresponding function.” [65]

45     If these considerations apply to countries such as New Zealand, once a British colony, how much more are they applicable to Jersey (and indeed the whole of the Channel Islands) the foundations of whose jurisprudence are so markedly different. As was demonstrated by the decision of the Royal Court[66] in Jersey Financial Services Commission v Black (Jersey) Limited,[67]the Jersey common law of tort differs in origins and in many material respects from the English law of tort. Although the Jersey Court of Appeal[68] differed in its conclusions as to the implications for a plea of prescription, it cast no doubt on the significant differences which exist between the two systems, and indeed drew attention to them.[69]

46     It would be very strange if a decision of the House of Lords on a point of negligence law, were automatically to change the law of Jersey, yet not the law of New Zealand. It would be even more curious given the lesser rôle played by precedent in Jersey jurisprudence. The reduced significance of precedent in Jersey was explained by the Royal Court[70] in State of Qatar v Al Thani.[71] The Bailiff developed the point by reference to the 1861 Report of the Royal Commissioners appointed to enquire into the Civil, Municipal and Ecclesiastical Laws of Jersey. The Commissioners[72] emphasised Jersey’s retention of its ancient Norman Law, subject only to modification by later enactment and usage, and specifically found no proof of the introduction of England’s common law. Furthermore, as noted in Al Thani, the Jersey Court of Appeal has held in Hall v Attorney-General,[73] that the Jersey Courts are bound only by decisions of the Privy Council on appeals from Jersey. They are not bound by decisions even of the Privy Council on similar points of law arising from other jurisdictions.

47     In the light of these considerations, and developments, perhaps Picot will come to be seen as the high water mark for the automatic incorporation into Jersey law of English appellate decisions on the law of tort in general and negligence in particular.[74]

Conclusions

48     The decision in South Australia was welcome in that it emphasised the need for the loss asserted to fall within the scope of the duty of care breached. However, it is submitted that the introduction of a principle which requires categorisation of defendants, in advice cases, as information providers or advisers is unhelpful, and unnecessary.

49     More recent decisions, and in particular Aneco in the House of Lords, have recognised the problems which the need for such categorisation imposes, and have emphasised instead the need to ascertain whether the loss falls within the scope of the duty of care. This in turn can be defined by reference to the risk or loss against which the tortfeasor was to guard the plaintiff. That is a sufficient test.

50     Jersey, it is respectfully submitted, is not automatically (or at all) bound to follow an English decision on the law of tort, even when the tort concerned is negligence. Where, as with the South Australia principle, distinguishing between information providers and advisers, there is a mounting body of authority to suggest that even the English courts are sceptical of it, there is good reason for the courts of Jersey to pause before applying it.

Jeremy Cousins QC, practises from Selborne Chambers, London, WC2R 3AA

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