Walsh v Jones Lang Lasalle: Economic analysis of duty of care between an auctioneer and a purchaser

Here, Walsh v Jones Lang Lasalle Ltd, the Supreme Court overturned the High Court’s decision, in this case, which blurred the distinction between the duty of care due for negligent acts and for negligent statements: a duty of care for a negligent statement can only arise where the writer or speaker has expressly or by implication assumed some responsibility.

The Court also emphasised the distinction between a disclaimer against a contractual duty and a disclaimer against a duty of care in tort for misstatement: whereas in contract a disclaimer must clearly preclude a pre-existing duty, in tort a disclaimer is evidence that no duty of care was assumed.

Background

Walsh is a property developer. Jones Lang Lasalle (JLL) is any estate agent. JLL acted for a vendor selling a property with development potential in Dublin’s Upper Gardiner Street. JLL’s brochure provided information as to location, title, tenure and scale. It stated that the first floor of the building measured 10,463 sq ft. It also contained the following disclaimer:

Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending puchusers (sic) /lessees should satisfy themselves as to the correctness of the information given.

Walsh purchased the property without having it measured. He secured a tenant for the first floor and then discovered that it only measured 8,573 sq ft. He issued High Court proceedings against JLL for loss of expected rental income. He claimed that JLL had a duty of care to ensure that information in its brochure was accurate, and it had breached that duty.

The High Court, Quirke J, upheld Walsh’s claim and awarded him €350,000 damages against JLL. JLL appealed that decision to the Supreme Court.

Supreme Court

O’Donnell J and Laffoy J wrote concurring opinions allowing JLL’s appeal; O’Malley J concurred with both. McKechnie J dissented. MacMenamin J wrote a dissenting judgment.

Citing Caparo Industries Plc v Dickman [1990] 2 AC 605, MacMenamin J was of the view that not “any” disclaimer will exonerate a defendant, only an “appropriate” disclaimer will. And he did not believe that JLL’s disclaimer was appropriate.

O’Donnell J followed Hedley Byrne v Heller [1964] AC 465 “where the disclaimer is viewed not as an exemption clause, but rather as part of the evidence as to whether a risk had been assumed, and a duty of care arisen” [44]. While a duty of care may arise between an auctioneer and a purchaser on the facts of an individual case, Doran v Delaney [1998] 2 IR 61, no such duty arises generally [34].

Interpreting the disclaimer, O’Donnell J stated:

In my view, the most reasonable interpretation of the disclaimer, and thus the manner in which it would be understood at the time, was that while Jones Lang Lasalle asserted that they took every care in the preparation of the particulars and believed them to be correct, if they did not do so, and/or if the particulars were incorrect, they did not accept responsibility. If the detail of the particulars was important to a prospective purchaser, he or she should verify them independently or, if they did not, they would bear the risk of any inaccuracy [47].

In his concluding paragraph, O’Donnell J provides a Posner style justification of why no duty of care should automatically arise between an auctioneer and a purchaser:

63 Finally, and while not in any sense dispositive, it seems to me this is an outcome which provides clarity and promotes efficiency. This case is, ultimately, about the allocation of risk. At first blush, it might appear reasonable that the agent uttering the statement, should bear the risk of damage flowing from error, but when put in context this is less clear. Everyone involved in this transaction is selling or buying something. The provision of information or advice which can be relied on (and sued on if incorrect) has a value, sometimes substantial. Why should one party, be able to acquire this information backed by the resources of a substantial firm, for nothing? If the agent is unable to limit liability (or be confident that it can do so, which if a disclaimer is to be assessed with the severity of an exemption clause, it cannot be), it must seek to price its services at a sufficient price to cover the risk. Given the potential exposure to damages in property transactions and the costs involved in litigation, this is a substantial cost that must be built into the price either directly, or indirectly through insurance. This means that the cost is spread across the agent, its client, and all other purchasers. But those purchasers may have no interest in accuracy of information as to area, and will not be relying on the brochure in other respects, such as title or tenure. To these participants this would be an additional and unnecessary cost. It is only a special purchaser, who has a particular interest in the square footage for whom the information has value, and there is no reason why that purchaser should be able to avoid the cost of being able to rely on that information, and spread it across other market participants. It is reasonable in my view, that if a purchaser has a particular interest in reliance on the information in the brochure, the starting point should be that he should contract for that, either with the vendor, the vendor’s agent, or his own expert, and otherwise bear the risk of reliance in error, unless the agent has, and for whatever reason, clearly assumed the risk. This is, as I understand, the essential approach to claims of negligent misstatement in cases such as this and is consistent with the outcome of those cases, whether the claims succeed or fail. In my view, it cannot be said from the circumstances of this case (which here resolve themselves on the terms of the brochure), that the agent assumed that responsibility to this plaintiff.

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