VII. England and Wales

a) Brief Summary of the Facts

2A family history of haemophilia, and her desire to avoid having a child with that condition, led the claimant to consult her general medical practitioner (GP) with a view to establishing whether she was a carrier of the haemophilia gene. The GP carried out tests that were adequate to establish only whether the claimant in fact had haemophilia, not whether she was a carrier of the gene. For the latter, it would be necessary for her to undergo genetic testing. At no time was she told this and, after receiving and discussing her results with the defendant, another GP in the same practice, which revealed she had tested negative, she was led to believe that any child she had would not have haemophilia. Some time later she became pregnant and gave birth to a boy with haemophilia. She then underwent genetic testing which confirmed that she was a carrier of the haemophilia gene. Had she been referred for genetic testing previously, she would have known that she was a carrier before getting pregnant and would have undergone foetal testing during her pregnancy. This would have revealed that the foetus was affected and the claimant would have chosen to terminate the pregnancy. Her son would not have been born.

3The boy’s haemophilia is severe. He is unresponsive to conventional clotting factor injections and has had to endure unpleasant treatment. His joints have been affected by repeated bleeds and he has had to be constantly watched as minor injury will lead to further bleeding. At the age of four, he was diagnosed as also suffering from autism. The fact that he had haemophilia did not cause his autism or make it more likely that he would have it. The autism has made management of his haemophilia more complicated as he does not understand the benefits of his treatment, and so suffers heightened distress, and it is unlikely he will ever be able to administer his own treatment or manage his treatment plan. In itself, his autism is likely to prevent him living independently or being in paid employment in the future.

4The claimant sought damages from the defendant for the latter’s admitted negligence in respect of the additional costs of raising a child with disabilities. The defendant admitted liability for the costs attributable to the haemophilia (agreed at £1.4 million) but not those attributable to the autism (agreed at £7.6 million), which she argued were outside the scope of her liability because the service she provided was only in relation to the risk of haemophilia. At first instance, Yip J upheld the claim in its entirety, awarding a total of £9 million in respect of the claimant’s additional costs of rearing her son because of his two disabilities.^[2] The Court of Appeal allowed the defendant’s appeal on the basis that the costs attributable to the autism fell outside the scope of the defendant’s duty of care.^[3] The claimant appealed to the Supreme Court.

b) Judgment of the Court

5The Supreme Court unanimously dismissed the appeal.

6Delivering a joint majority judgment, Lord Hodge and Lord Sales (with whom Lord Reed, Lady Black and Lord Kitchin agreed) noted that textbook accounts of tort law often identify four components or ingredients in the tort of negligence, namely, (i) the duty of care, (ii) its breach, (iii) causation of damage and (iv) the damage.^[4] The main question for the Supreme Court was how the principle of scope of duty fits into the analysis. To accommodate that principle and clarify its role, Lord Hodge and Lord Sales proposed a new model involving six questions asked in sequence:^[5]

‘(1) Is the harm ... which is the subject matter of the claim actionable in negligence? (the actionability question)

(2) What are the risks of harm to the claimant against which the law imposes on the defendant a duty to take care? (the scope of duty question)

(3) Did the defendant breach his or her duty by his or her act or omission? (the breach question)

(4) Is the loss for which the claimant seeks damages the consequence of the defendant’s act or omission? (the factual causation question)

(5) Is there a sufficient nexus between a particular element of the harm for which the claimant seeks damages and the subject matter of the defendant’s duty of care as analysed at stage 2 above? (the duty nexus question)

(6) Is a particular element of the harm for which the claimant seeks damages irrecoverable because it is too remote, or because there is a different effective cause ... in relation to it or because the claimant has mitigated his or her loss or has failed to avoid loss which he or she could reasonably have been expected to avoid? (the legal responsibility question)’.

7The Justices emphasised that this was not an exclusive or exhaustive analysis^[6] and that it would be quite possible to consider the matters identified in a different order or to address more than one question at the same time. In fact, as in many other cases, the present appeal called for the second and the fifth questions to be analysed together.^[7]

8Addressing the six questions on the facts, the Supreme Court majority found: (1) The harm which was the subject matter of the claim was actionable in negligence as it was for the bodily consequences of the claimant’s pregnancy and the economic costs related to the care of her disabled son.^[8] (2) The scope of the defendant GP’s duty was linked to the specific purpose for which her services were obtained, namely, so the claimant could find out if she was a carrier of the haemophilia gene.^[9] (3) As was admitted, the defendant was in breach of her duty of care.^[10] (4) As a matter of factual causation, the claimant lost the opportunity to terminate her pregnancy as a result of the defendant’s breach of duty, which was thus causally linked to her child’s birth with the disabilities in question.^[11] (5) However, in considering the duty nexus question in connection with the scope of the defendant’s duty, the law did not impose on her any duty in relation to unrelated risks such as autism, which might arise in any pregnancy.^[12] (6) Given the purpose for which the service was undertaken by the defendant, and there being no questions of remoteness of loss, other effective cause or mitigation of loss, the law imposes upon her responsibility for the foreseeable consequences of the birth of a boy with haemophilia, and in particular the increased cost of caring for a child with haemophilia.^[13]

9Lord Burrows and Lord Leggatt delivered separate concurring judgments, agreeing that the appeal should be dismissed for broadly the same reasons as the majority.

c) Commentary

10It is well established in English law that, in wrongful birth and wrongful conception situations, no damages are to be awarded to the parents for the normal costs of raising a child who would not have been born in the absence of the defendant’s negligence.^[14] But it is accepted that damages should be available in cases where the child is born with a disability that increases the costs of raising them.^[15] In such a case, the damages are for the additional costs attributable to the disability, and do not cover the ordinary costs of raising a child. In the case under discussion now, it was the extent of the liability to compensate those additional costs that was at issue. The complication was that, unlike previous cases where the defendant’s negligence was in failing to prevent the claimant mother giving birth to any child at all,^[16] the negligence in Meadows was in failing to give the mother the opportunity to prevent the birth of a child with a specific disability, haemophilia, but it was also the factual cause of another wholly unrelated disability, the autism.

11The focal point of the Supreme Court’s analysis was the decision of the House of Lords in South Australia Asset Management Corporation v York Montague Ltd (SAAMCO).^[17] This had addressed the scope of duty question in connection with pure economic loss suffered in consequence of the claimant’s acquisition of property that had been negligently overvalued by the defendant, in circumstances where the loss was increased by significant falls in the property market generally. In SAAMCO, the House of Lords had limited the extent of the negligent valuer’s liability to the loss that was attributable to the valuation being wrong, excluding the loss that was attributable to the crash in the property market. To arrive at the correct amount, the Law Lords posed the following hypothetical question: what would the claimant’s loss have been if the information which the defendant in fact gave had been correct?^[18]

12In Meadows, the claimant argued that the SAAMCO scope of duty principle did not apply as it should be limited to commercial transactions resulting in pure economic loss, and was not suited to cases of clinical negligence in which there was an imbalance of knowledge and power between the clinician and the patient, and the loss was economic loss consequential on pregnancy and birth.^[19] This did not persuade the Supreme Court, which reaffirmed that the scope of duty principle is a general principle of the law of damages.^[20] There was no principled basis for excluding clinical negligence from its ambit or for confining it to pure economic loss arising in commercial transactions.^[21] It requires the court, in determining the extent of the defendant’s liability in damages, to distinguish between the merely factual consequences of the breach of duty and those that are legally relevant. Factual consequences which are not within the scope of the defendant’s duty of care do not give rise to liability in negligence.^[22] Applying the SAAMCO counterfactual test as a cross-check, the birth of a child with autism was not within the scope of the defendant’s duty of care in the instant case because the claimant’s son would still have been born with autism if the medical advice had been correct and she had not been a carrier of the haemophilia gene.^[23]

13Lord Burrows accepted that his reasoning did not align with all aspects of the conceptual analysis of the tort of negligence advanced by Lord Hodge and Lord Sales,^[24] which he admitted to finding ‘not ... helpful’.^[25] He remarked with apparent surprise that the Hodge/Sales approach ‘does not appear to start with establishing a duty of care’.^[26] He proceeded to formulate his own conceptual approach based on seven main questions, relating to (1) the duty of care, (2) breach of duty, (3) factual causation, (4) remoteness, (5) legal causation, (6) scope of duty, and (7) defences.^[27] The question of minimum actionable damage (which comes first in the Hodge/Sales approach) could be subsumed as a sub-issue in asking whether there was a duty of care owed by the defendant to the claimant.^[28] As Lord Burrows claimed, this list is ‘relatively conventional’,^[29] though textbooks generally treat items (3) to (6) together in a single chapter.^[30]

14Lord Leggatt, delivering a separate concurring judgment, said that he found the extensive discussion of the conceptual structure of the whole tort of negligence by Lord Hodge and Lord Sales ‘undesirable as well as unnecessary’.^[31] This is also the view of academic commentators. Nolan and Plunkett, for example, have expressed concern about the development of what they see as

‘a somewhat esoteric new roadmap of negligence which has the potential to complicate negligence litigation if taken up and employed by other judges.’^[32]

It seems unlikely then that the Hodge/Sales analysis will take root, though no doubt it will fall again to be addressed in future scope of duty decisions.

a) Brief Summary of the Facts

15Between 2004 and 2008, the claimant building society purchased and issued lifetime mortgage loans under which interest was charged at a fixed rate. The mortgage loans were funded by borrowing at variable rates of interest. In order to protect itself against the risk that the variable cost of borrowing would exceed the fixed rate of interest receivable on the mortgage loans, the claimant entered into interest rate swap contracts whereby the society paid a fixed rate of interest on a notional sum in return for the counterparty’s payment of a variable rate of interest on the same sum. The intention was that the variable rate of interest payable by the swap counterparties should match the variable rate payable by the society to borrow money, while the fixed rate payable by the society under the swaps was less than the fixed rate of interest receivable under the lifetime mortgages.

16The claimant pursued this business model in reliance on incorrect and negligent advice by the defendant accountants that the claimant’s accounts could legitimately be prepared using a method known as ‘hedge accounting’. This would reduce the volatility in the claimant’s reported financial position that would result from the swaps, in accordance with normal accounting practice, being accounted for on the balance sheet at fair value. That volatility would raise the level of capital the claimant needed in order to satisfy regulatory requirements. Under hedge accounting, the value of the lifetime mortgages was adjusted to offset changes in the fair value of the swaps thus reducing accounting volatility and the amount of capital required. It was crucial to the legitimacy of this arrangement that the swaps could be matched with the mortgages. The defendants advised that they could.

17After several years in which the defendants continued to advise that the claimant was entitled to apply hedge accounting, and in the course of the annual audit certified that the financial statements prepared on that basis gave a true and fair view of the society’s financial position, they informed the claimant in 2013 that it was not after all permitted to apply hedge accounting. The swaps could not in fact be matched with the mortgages as the former were for a fixed number of years, while the latter were for life terms, and they were therefore very unlikely to mature on the same date.

18By this time, following the 2008 financial crisis, the claimant’s swaps had a negative value. Because of the new advice, the claimant was required to make corrections to its accounts, reducing further its net assets and its regulatory capital. To extricate itself from this situation, the claimant terminated all of the swap contracts early at a cost of some £32.7 million, reflecting their negative value.

19The claimant brought an action for damages against the defendants in which the main loss claimed (and the only loss still in issue in the Supreme Court) was the amount paid to close out the swaps. The defendants admitted negligence but contended that this did not cause the losses claimed by the society and/or that those losses were not recoverable in law because they were not losses from which the defendants owed the claimant a duty to protect it. The claim for the cost of terminating the swaps failed at both first instance and before the Court of Appeal, except for an amount of £316,845 (plus interest) which the judge ordered to be paid as damages, mainly in respect of the transaction costs payable to terminate the swaps early, subject to a 50 % reduction for the claimant’s contributory negligence.

20The claimant appealed to the Supreme Court.

b) Judgment of the Court

21The Supreme Court dismissed the appeal. Applying South Australia Asset Management Corporation v York Montague Ltd (SAAMCO),^[34] the claimant building society had suffered a loss which fell within the scope of the duty of care assumed by the defendant accountants. The scope of the defendants’ duty fell to be governed by its purpose judged on an objective basis by reference to the purpose for which the advice was given.^[35] In the case of negligent advice given by a professional adviser, one looks to see what risk the duty was supposed to guard against and then whether the loss suffered represented the fruition of that risk.^[36] On the facts, the purpose of the defendants’ advice was clear. The claimant had looked to the defendants for technical accounting advice as to whether it could legitimately use hedge accounting in order to pursue its proposed matched swaps and mortgages business model, and the defendants advised that it could. That advice was negligent. In reliance on it, the claimant adopted the business model, entered into further swap transactions and was exposed to the risk of loss from having to break the swaps when it transpired that the swaps and the mortgages could not be matched and that hedge accounting could not in fact be used. In consequence, the society was exposed to the regulatory capital demands which the use of hedge accounting was supposed to avoid.^[37] That loss fell within the scope of the duty of care the defendants owed to the claimant.^[38] The claimant was entitled to damages, subject to a 50 % reduction for its own contributory negligence. Giving credit for £6 million the claimant had gained on the mortgages since implanting its business plan, there was a net loss of £26.7 million; with the discount for contributory negligence, the damages thus came to some £13.4 million. The exact figure was to be agreed by the parties.^[39]

c) Commentary

22The Supreme Court gave judgment in this case on the same day as Meadows v Khan (above) and, though it heard the cases separately, the constitution of the Court was the same expanded panel of seven on each occasion so as to allow the provision of general guidance regarding the proper approach to determining the scope of duty and the extent of liability of professional advisers in the tort of negligence. The Court considered it desirable that the two judgments should be read together as reflecting and supporting a coherent underlying approach.^[40]

23Though the seven Supreme Court Justices all agreed on the outcome of the appeal, there were some subtle differences in their reasoning. The majority (in an opinion delivered by Lord Hodge and Lord Sales, with which Lord Reed, Lady Black and Lord Kitchin agreed) preferred an approach focused squarely on the purpose of the defendants’ duty of care, and found Lord Leggatt’s approach to give undue emphasis to causation, and Lord Burrows’s too great a role to policy.^[41] The differences of approach are quite subtle, and it is hard to appreciate their significance without engaging in very detailed scrutiny of the facts of the case.

24The Justices were agreed that no rigid distinction should be made between cases where a professional offers advice and those where the professional merely provides information^[42] – a tendency apparent in some of the post-SAAMCO decisions, including that of the Court of Appeal in the present case.^[43] In truth, the advice and information categories are on a spectrum.^[44] Making a too rigid distinction between them is liable to mislead.^[45] The starting point for analysis should be the purpose of the duty, not whether the defendant was giving advice or (merely) information.^[46]

25The Justices underlined that the so-called ‘SAAMCO counterfactual’, though it might serve as a useful cross-check in some situations, was not helpful in all cases,^[47] especially bearing in mind the danger of manipulation of the parameters of the counterfactual world.^[48] It is to be regarded as subordinate to the analysis of the purpose of the duty and should not supplant or subsume that analysis in seeking to identify the scope of the defendant’s duty.^[49] The majority of the Court saw no need to apply the counterfactual on the facts of the present case.^[50] The other two Justices applied the counterfactual test and found it to be satisfied anyway: if the defendants’ advice had been correct that there was an effective hedging relationship between the swaps and the mortgages, the claimant’s loss would not have occurred.^[51] That reinforced the Justices’ conclusion that the loss therefore fell within the scope of the defendants’ duty of care.

a) Brief Summary of the Facts

26Two Nigerian communities, consisting respectively of approximately 40,000 and 2,335 individuals, claimed they had suffered environmental damage caused by oil spills in the Niger Delta and could no longer safely use their water sources. They alleged that the oil had been discharged by pipelines that were operated by a Nigerian company that was a subsidiary of the defendant Royal Dutch Shell plc, which was domiciled in the UK. They argued further that the parent owed the members of the two communities a duty of care on the basis that it exercised significant control over material aspects of the subsidiary’s operations and/or assumed responsibility for those operations, including by the promulgation and imposition of mandatory health, safety and environmental policies, standards and manuals which failed to protect the claimants against the risk of foreseeable harm from the operations.

27The defendant company challenged both the jurisdiction of the English court, and that it owed the claimants a duty of care. At first instance, the judge ruled that, though the court had jurisdiction to try the claim against the defendant, as a company incorporated in the UK, it was not arguable that the defendant owed the claimants a duty of care, and struck out the claim on that basis. By a majority, the Court of Appeal upheld that ruling. The claimants appealed.

b) Judgment of the Court

28The Supreme Court allowed the appeal, ruling that the pleaded case raised a real issue to be tried. It expressly followed the approach set out in its 2019 decision in Lungowe v Vedanta Resources plc.^[53] Delivering the judgment of the Court, Lord Hamblen reiterated that the liability of parent companies in relation to the activities of their subsidiaries is not of itself a distinct category of negligence liability, but is to be determined on ordinary general principles of the law of tort regarding the imposition of a duty of care. Whether there is such a duty depends on the extent to which, and the way in which, the parent took over, intervened in, controlled, supervised or advised the management of the relevant operations of the subsidiary.^[54] Lord Hamblen explained further that, in addressing that issue, control is just a starting point, because there is a sense in which all parents control their subsidiaries. Although that control gives the parent the opportunity to get involved in the management of the subsidiary, that is not the same as actually doing so. Control of a company and de facto management of its activities are two different things.^[55]

29Following the approach in Vedanta, Lord Hamblen stated that a duty of care may even arise regardless of the actual exercise of control in circumstances where the parent, in published materials, holds itself out as exercising the requisite degree of supervision and control of its subsidiary, even if it does not in fact do so. That very failure might then constitute the abdication of a responsibility which the parent has publicly undertaken.^[56] In the Supreme Court’s view, the Court of Appeal had erred in taking the view that the promulgation by a parent company of group wide policies or standards could never in itself give rise to a duty of care. That was clearly inconsistent with Vedanta.^[57]

30On the assumption that the defendant maintained its other objections to jurisdiction that were not resolved by the first instance judge, the case would be remitted for decision of those issues.

c) Commentary

31The question of the liability of a parent company for the harmful activities of its subsidiary in another country has been one of the rapidly developing areas of negligence litigation in recent years. A variety of factual and legal issues have arisen. As well as obvious issues relating to jurisdiction and applicable law, of particular significance has been the attempt to establish that the parent company in the UK owed a duty of care to those suffering damage elsewhere on account of its control of the subsidiary’s activities. In 2019, in Lungowe v Vedanta, the Supreme Court acknowledged that such a duty might in principle arise.^[58] In Okpabi, the Court affirmed that proposition again, Lord Hamblen expressing surprise that the guidance the Court had provided in Vedanta had not resolved the Okpabi litigation without the need for a hearing.^[59]

32In both the Supreme Court decisions, it fell to the Court to decide only whether – based on the pleaded facts – the existence of the duty of care was sufficiently arguable to be a triable issue, so it is important not to read too much into the two judgments. We shall only get a reliable sense of how the stated principles will be applied when they come up in cases that go to full trial on the facts. The immediate effect of the two decisions may actually be to defer that occurrence, as they give claimants a stronger hand to negotiate an out-of-court settlement without judicial resolution of the disputed issues of law.^[60]

33Notwithstanding the Court’s insistence in both its leading decisions that parent company liability is not a category of liability with its own special rules, but turns on the application of ordinary general principles of negligence, it seems likely that parent-subsidiary cases will come to form a distinct pocket of case law whose development will proceed with a significant measure of autonomy in the contemporary law of negligence. The Court’s apparent concern that this onwards development might be unduly constrained by too rigid an interpretation of the existing case authorities should be adequately met by ensuring that future decisions are based on a fact-sensitive inquiry into how and to what extent the parent actually exercised control over the subsidiary, rather than the formulaic listing of specific situations in which the parent owes a duty of care in respect of its subsidiary’s operations.

a) Trends in Personal Injury Claims

342021 saw a steep fall in the number of personal injuries claims – the predictable consequence of the COVID-19 pandemic, especially having regard to the greatly reduced road traffic during the extended periods of lockdown restrictions. There were 564,359 recorded personal injury claims in 2020/2021, as compared to 829,252 in 2019/2020, 862,356 in 2018/2019, and 853,615 in 2017/2018. This continues the steady decline in overall claims numbers from their peak in 2012/2013, when 1,048,309 claims were registered.^[61] Notwithstanding the impact of lockdown on the volume of motor vehicle traffic, road accident claims continue to form by far the largest category, constituting 79 % (446,976) of the total.

b) Significant Decisions

35 BXB v Barry Congregation of Jehovah’s Witnesses:^[62] A religious congregation was vicariously liability for the rape of one of its members committed by an elder in the congregation. Applying the test established in the Christian Brothers case,^[63] the relationship between the elder and the congregation was one that was capable of giving rise to vicarious liability because the elders were not carrying on business on their own account but, as the chief conduit of the guidance and teachings of Jehovah’s Witnesses, were integral to the organisation, and the nature of their role was directly controlled by the organisation and by its structure.^[64] Though the rape was committed in the victim’s marital home, it was closely connected with the elder’s work in the organisation because his role conferred on him the authority within the organisation that engendered the power that he had abused.^[65]

36 SKX v Manchester City Council:^[66] The defendant local authority was not vicariously liable for abuse carried out on the claimant by the chief executive of the privately-run children’s home to which the claimant had been sent at the age of 15, whilst in the defendant’s care. The home was an independent business and so, applying Various Claimants v Barclay’s Bank,^[67] its employees were not in a relationship akin to employment with the defendant. It did not matter that the abuse was perpetrated by a senior employee. Neither did the defendant owe a non-delegable duty to protect the claimant when he was placed in a privately-run residential home. The situation was analogous to children in foster care, in which the Supreme Court had already made clear that there is no non-delegable duty; by placing the children in care, a local authority discharges its duty rather than delegating it.^[68]

37 DSN v Blackpool Football Club Ltd:^[69] The defendant football club was not vicariously liable for the then 13-year-old claimant’s sexual abuse by a volunteer football scout whilst on an overseas tour which the latter was leading and on which he was the sole adult. His relationship with the football club was not one that could properly be treated as akin to employment and so as to be capable of giving rise to vicarious liability, irrespective of whether leading the tour could be regarded as part of his scouting activities. Even though those activities were beneficial to the club, none of the other attributes of an employment relationship were present. He was a free agent who acted independently and not under the club’s control, even in respect of the organisation of the tour, on which he was responsible for almost every aspect of the planning, running, administration and financing; the club merely made a modest financial contribution (about 2 % of the total cost) and provided their endorsement for the trip. Even if there had been a relationship akin to employment, the sexual abuse was not so closely connected with the scout’s work for the club as to satisfy that further requirement of vicarious liability. Notwithstanding the club’s endorsement of the tour, it could not reasonably be said that it either had or assumed responsibility for the boys going on the trip or entrusted them to the scout’s care.

38 Rushbond Plc v JS Design Partnership LLP:^[70] The Court of Appeal allowed an appeal against the striking out of the claimant’s action for damages in circumstances where its marketing agents had allowed access to property it was seeking to let (a large empty cinema) to an architect advising a potential tenant. It was alleged that the architect, in breach of his duty of care, had failed to lock the door providing access to the premises during the hour-long period of his visit, enabling an intruder to enter and start a fire that destroyed the interior and roof of the property. The Court found it arguable that this was not a ‘pure omission’ case but fell into an accepted category of potentially sustainable negligence claims.^[71] It was fanciful to suggest that a person entrusted with the keys to an empty property and allowed unaccompanied access owed no duty of care to the owner to take reasonable precautions as to security.