Out-Law News | 29 Jul 2009 | 9:13 am | 8 min. read
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.
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.
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".
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.