Spring v Guardian Assurance plc [1994] UKHL 7

Facts

  • The claimant, a former employee, was dismissed from his role as a sales representative by Guardian Assurance plc.
  • Seeking new employment, the claimant’s former employer provided a negative reference to a prospective new employer.
  • As a result of the negative reference, the claimant was refused the new position.
  • The claimant alleged that the reference was inaccurate and prepared without reasonable care, resulting in pure economic loss.
  • The case was brought before the House of Lords to determine whether a former employer owes a duty of care to an employee when providing a reference.

Issues

  1. Whether a former employer owes a duty of care to an ex-employee in the preparation of employment references.
  2. Whether the provision of a negligent or inaccurate reference by the employer can give rise to liability for pure economic loss.
  3. Whether the duty of care for negligent misstatements extends beyond the traditional limitations established in prior case law.

Decision

  • The House of Lords held that an employer does owe a duty of care to a former employee when providing an employment reference.
  • The employer was found liable for any economic harm suffered by the former employee as a result of a negligent misstatement in the reference.
  • The decision extended the duty beyond avoiding defamation, establishing a positive obligation to exercise reasonable care in preparing references.
  • The Lords overruled the previous restrictive approach of limiting liability for negligent misstatement to core advisory businesses.

Legal Principles

  • A duty of care arises when an employer provides a reference due to the “assumption of responsibility” they bear, based on their special knowledge of the employee.
  • The ruling broadened the principle from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, applying it to employment references as a context of reliance and responsibility.
  • The case explicitly rejected the narrow limitation of duty found in Mutual Life & Citizens Assurance Co Ltd v Evatt [1971] AC 793.
  • The reliance of a prospective employer and the ex-employee on the accuracy and care taken in preparing a reference establishes proximity for the duty of care.
  • The duty is not diminished where providing a reference is a legal or customary obligation of an employer, rather than a voluntary act.

Conclusion

Spring v Guardian Assurance plc [1994] UKHL 7 established that employers owe a duty of care in providing employment references, significantly broadening the scope of liability for negligent misstatements and affirming that former employees may recover damages for economic loss resulting from careless or inaccurate statements in such references.

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