A trade body for swimming pool installers escaped liability for
information on its site that wrongly suggested a company was a
member that had been vetted as being trustworthy. The site's
warning to visitors to make further inquiries was a key factor in
the court's decision.
The facts
When Gary and Karen Patchett wanted a swimming pool for their
garden, they found the website of the Swimming Pool & Allied
Trades Association (SPATA) via Google's search engine. The trade
body's website offered a 'member finder' to help visitors find the
SPATA members nearest to them. The Patchetts used it to contact
three companies for quotes.
They hired Crown Pools Limited, which had been identified among
the members on the site. They agreed a quote of £55,815 for the
installation of the pool and landscaping works. However, Crown
became insolvent before the work was completed and alternative
contractors had to be found to finish the job. The Patchetts said
they lost £44,000 as a consequence.
The couple looked to SPATA to recover their loss. They argued
that SPATA had made negligent misrepresentations on its website and
in so doing had breached a duty to take reasonable care in making
representations.
A page on the site headed "Who and what is SPATA?" made a claim
that "pool installer members are fully vetted before being admitted
to membership, with checks on their financial record, their
experience in the trade and inspections of their work."
It added: "Only SPATA registered pool and spa installers belong
to SPATASHIELD, 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!"
Mr Patchett said that he read this information before hiring
Crown but he did not have any direct communication with SPATA.
The SPATA website failed to disclose that there was more than
one type of member and that Crown was only an affiliate member.
Only full members underwent the checks and vetting that the site
referred to and only full members were covered by the SPATASHIELD
bond and warranty scheme.
Duties of care: the need for independent inquiry
A High Court judge rejected the Patchetts' case and they
appealed. The Court of Appeal dismissed the appeal by a majority
ruling. Master of the Rolls Lord Anthony Clarke gave the leading
judgment.
The legal test to be applied to cases of negligence causing pure
financial loss was not in dispute. One element of that test is
whether the loss was reasonably foreseeable as a result of what the
defendant did or failed to do. "There is no issue here about
foreseeability," wrote Lord Clarke. "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."
Lord Clarke noted that the purpose of the website was to
encourage people who wanted a swimming pool to use a member of
SPATA. He said it was foreseeable to SPATA that people wanting a
swimming pool would rely on the representations made on its
site.
This was not a case of a website containing statements "to all
and sundry for any purpose on which they may choose to rely," he
said. "On the contrary, the representations were directed to a
limited class of people, namely those considering having a swimming
pool installed."
The critical representations, he said, were those about the
vetting of members' creditworthiness, work quality and the
SPATASHIELD scheme and the representation that Crown was a member
of SPATA.
Lord Clarke said that this established "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 … 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."
"If the reader of the website read only the paragraphs quoted
above [about vetting] 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," wrote Lord Clarke.
But the High Court judge said that SPATA did not owe a duty of
care because, while SPATA 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," said Lord Clarke.
The High Court judge had referred to a landmark ruling from
1964, the case of Hedley Byrne v Heller, which described criteria
for establishing a duty of care between advisor and advisee. These
include knowing either actually or inferentially that the advice
communicated is likely to be acted upon by the advisee without
independent inquiry. The High Court said that that criterion had
not been satisfied. Lord Clarke endorsed that view.
"The principal reason it was not satisfied is that, when the
website is read as a whole, it urges independent enquiry," he
wrote.
The page that described the vetting of members also stated that
SPATA supplies an information pack on request. "The pack includes a
Contract Check List which sets out the questions that the customer
should ask a would-be tenderer together with those that must be
asked of the appointed installer before work starts and prior to
releasing the final payment," said the web page.
Lord Clarke wrote: "The purpose of the information pack was to
provide relevant information, including a contract check list which
set out questions which should be asked of a would-be tenderer and
an appointed installer. The judge held that it would be expected
that a potential customer would obtain the information pack. I
agree."
"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," he
wrote. "For my part, I do not think that the judge erred in any way
in reaching that conclusion."
"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," he wrote. "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, […] 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."
He added that there was "no real support for an assumption of
responsibility" because "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 […] 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," wrote Lord Clarke. "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 [the paragraph describing the information
pack]."
Neither the High Court judge nor Lord Clarke accepted that
"SPATA might reasonably anticipate that those reading the
statements made on its website would rely upon those statements
without making any checks of their own."
The High Court judge wrote: "Looking at the material objectively
and in context, the website is to be seen as a first step in a
process. That is how it reads, and viewed objectively that is how
SPATA present it. The information pack is not said to be an
essential next step, but that is the step which it obviously
encourages. It would be particularly surprising to find a customer
rely on the information as to the SPATASHIELD scheme without
obtaining a copy of the policy, or some more detailed document
confirming the terms of the cover." Lord Clarke said that he
agreed.
"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," wrote Lord Clarke. "It is common ground
that, if the claimants had asked for and obtained an information
pack, they would have learned the true facts."
"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," he wrote.
Lord Clarke said that to rule that SPATA owed a duty of care to
the claimants "would be an unwarranted extension" of existing case
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," he wrote. "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," he
concluded.
Lord Justice Scott Baker supported Lord Clarke's opinion, making
clear that the drop-down list of members was insufficient to
establish liability "because the reader's attention was drawn to
the information pack".
Dissenting judgment: no further inquiry necessary
Lady Justice Smith disagreed with Lord Clarke and Lord Justice
Baker. She believed that there was close proximity between the
parties. "There is nothing in [the paragraph about the information
pack] 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," she wrote.
"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," wrote
Lady Justice Smith.
"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," she
concluded. "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'," she said. "I would hold
that, objectively construed, the website invites reliance on the
qualities inherent in membership without further inquiry."
Note: Today’s editorial provides analysis of this ruling’s
implications.
