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The end of the affair: duty of care and liability insurance

Published online by Cambridge University Press:  02 January 2018

Martin Davies
Martin Davies*
Affiliation:
University of Western Australia
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Extract

Duty of care is in dire straits. Until recently, Lord Atkin's ‘neighbour principle’ was ‘the very foundation of the law of negligence’. It was a simple, all-purpose test for the existence of a duty of care. However, times have changed. There has been a loss of confidence in the neighbour principle. Its suitability as a general test for duty of care has been questioned, in a way that would have been unthinkable only a decade ago. In 1970, it was still possible to say that the principle ‘ought to apply unless there is some justification or valid explanation for its exclusion’. By 1984, apostasy had set in, and it was said that the principle ‘has long been recognised as not intended to afford a comprehensive definition’ In 1978, Lord Wilberforce attempted to make the principle more workable by marrying it to policy considerations in a two-state test for duty. Even this modified version of the principle has now fallen out of favour. In 1987, it was said of Lord Wilberforce's two-stage test that it ‘is not to be regarded as in all circumstances a suitable guide to the existence of a duty of care.’

Type
Research Article
Information
Legal Studies , Volume 9 , Issue 1 , March 1989 , pp. 67 - 83
Copyright
Copyright © Society of Legal Scholars 1989

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References

Footnotes

1. ‘You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be– persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.’ See Donoghue v Stevenson (1932) AC 562 at 580.

2. See J. C. Smith and Peter Burns, ‘Donoghue v Stevenson- The Not So Golden Anniversary’ (1983) 46 MLR 147.

3. Home Office v Dorset Yacht Co Ltd (1970) AC 1004 at 1027, per Lord Reid.

4. Governors of the Peabody Donation Fund D Sir Lindsay Parkinson B Co Ltd (1985) AC 210 at 239, per Lord Keith of Kinkel.

5. Anns v Merton London Borough Council (1978) AC 728 at 751–752, per Lord Wilberforce.

6. Yuen kun yeu v attorney-general of hong kong (1987) 3 WLR 776 at 785, per Lord Keith of Kinkel (PC).

7. See, for example, Hedley Byrne & Co Ltd v Heller B Partners Ltd (1964) AC 465 (negligent misstatements causing economic loss); Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad’ (1976) 136 CLR 529 (negligent acts causing economic loss - Australia only).

8. See the judgments of Deane J in Jaensch v Coffey (1985) 155 CLR 549 at 579–585; Hackshaw v Shaw (1984) 155 CLR 614 at 654;Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 49–98; Stevens v Brodribb Sawmilling Pty Ltd (1986) 160 CLR 16 at 51–52. See also the judgment of the majority in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act (1986) 61 ALJR 41. The proposed test emphasises the concept of ‘proximity’ as a limiting factor for the existence of a duty of care.

9. See, for example, Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd (1985) 1 QB 350 at 395, per Robert GOB LJ affd on other grounds (1986) 2 WLR 902, CA); Candle wood Navigation Corp. Ltd v Mitsui OSK Lines Ltd (1986) AC 1, 24, PC.

10. San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act (1986) 61 ALJR 41 at 45, per Gibbs CJ, Mason, Wilson and Dawson JJ.

11. See P. S. Atiyah, Accidents, Compensation and the Law (3rd edn, 1980), p 263 for the suggestion that liability insurance is in fact the primary medium for the payment of compensation to accident victims, and the law of negligence is merely a subsidiary part of that process.

12. Although it is customary to refer, as Winfield does, to Lord Esher's judgment in Heaven v Pender, it is, in fact, historically inaccurate to do so. Brett LJ became Master of the Rolls in 1883, but was not created Baron Esher until 1885. Thus, in Heaven he was, strictly speaking, Sir William Baliol Brett MR. On his retirement in 1897, he was made Viscount Esher. See The Dictionary of National Siograply (19031), vol 1.

13. (1883) 11 QBD 503.

14. P Winfield, ‘Duty in Tortious Negligence’ (1934) 34 Col LR 41 at 56.

15. 43 & 44 Vict c 42.

16. Responsibility of Shipowners Act 1734. The protectionist purposes of this Act were frankly stated in the preamble, which read, ‘Whereas it is of the greatest consequence and importance to this Kingdom to promote the increase of the number of ships and vessels, and to prevent any discouragement to merchants and others from being interested and concerned therein …’ - see M. Thomas, ‘British Concepts of Limitation of Liability’ (1979) 53 Tulane L Rev 1205 at 1206.

17. (1836) 4 Ad & E 420; 111 Eng Rep 845.

18. W. A. Dinsdale, History of Accident Insurance in Gnat Britain (1954) p 195, n 10(hereafter referred to as Dinsdale).

19. See C. Hamilton Ellis, British Railway History 1830–1876 (1954), pp 153–286.

20. 7 & 8 Vict c 110. See L. C. B. Gower, Principles of Modern Company Law (4th edn, 1979), ch3.

21. B. Supple, The Royal Exchange Assurance: A History of British Insurance 1720-1970 1970), pp 2267 (hereafter referred to as Supple).

22. 9 & 10 Vict c 93. This Act is often referred to as Lord Campbell's Act.

23. Dinsdale, p 177.

24. See below, n 42, for an account of one of the expedients developed to counteract the absence of liability insurance cover for industrialists.

25. A. H. Manchester, Modern Legal History 1750-1950 (1980), pp 286–7.

26. H. Luntz, D. Hambly, R. Hayes, Torts: Cases and Commentary (2nd edn, 1985), pp 345–347.

27. See H. W. Arthurs, Without the Law: Administrative Justice and Legal Pluralism in Nineteenth Century England (1986).

28. IUP Series of Parliamentary Papers, Industrial Relations, vol 19, Select Committee Proceedings (1877), p 118, Q 1931.

29. Ibid, p58, Q 1100.

30. Ibid, p 123, para 10.

31. Sir H. P. Robinson, The Employers' Liability Assurance Corporation Ltd 1880-1930 (1930), p 5 (hereafter referred to as Robinson).

32. Although the Bill seems to have been drafted hastily, its progress through the Houses of Parliament was not marked by similar speed. The pace of its passage can be gleaned from the followed extract from the debate at the Committee stage: ‘Lord Randolph Churchill said, he extremely regretted that more rapid progress was not being made with the measure- [Ironical cheers] - …’ See 255 Official Report (3rd series), col 158 (1880).

33. 253 Official Report (3rd series), col 1408 (1880).

34. 253 Official Report (3rd series), col 1775 (1880).

35. 252 Official Report (3rd series), col 1101 (1880).

36. 255 Official Report (3rd series), col 172 (1880).

37. See the comment of Mr Schreiber, the member for Poole, at 253 Official Report (3rd series), col 1774 ‘the measure has too much the appearance of a “bill” drawn upon the capitalists of the country to pay an electioneering debt’.

38. 43 & 44 Vict c 42.

39. Robinson, p 10.

40. IUP Series of Parliamentary Papers, Industrial Relations, vol 19, Select Committee Proceedings (1877), pp llb119, QQ 1944–1.

41. The liability insurance available to shipowners from early in the nineteenth century was an exception. See p 70, above.

44. There was never any policy objection to potential defendants turning to expert sub-contractors to implement and maintain safety procedures. Safety experts reduced the risk of accident, but not the risk of liability in the event of an accident. For example, during the 1850s and 1860s, a number of boiler inspection companies were formed to deal with the safety hazards of steam boilers in industry. The Manchester Steam Users' Association boldly proclaimed, ‘… we do not insure for explosions; but we do propose to guarantee that explosions shall not take place.’ See Manchester Steam Users' Association Jubilee Book, quoted in Dinsdale, p 135.

43. In response to a question from Mr Thompson, the member for Durham, Sir Henry Jackson, the Attorney General, said that ‘it would be perfectly legal’ for employers to insure against the risk of being liable for their employees' negligence – see 255 Official Report (3rd series), col 1844 (1880).

44. Robinson, p 20.

45. All figures in this paragraph are from Robinson, p 23.

46. Supple, p 228. Interestingly, the main competitor to the Employers' Liability Assurance Corporation was the Railway Passengers Assurance Company, which had lost the chance to sell liability cover in the mid 1840s.

47. Ibid. Although these figures include premiums for ordinary accident insurance, the bulk of the sums in question derived from employers' liability insurance.

48. For example, the London and North Western Railway made all 52,000 of its employees contract out of the Act's protection – see Robinson, p 31.

49. The first land-based liability policy was sold by the London and Provincial Carriage Insurance Company in 1875 see Dinsdale, pp 179–180, 196, n 11, and A. G. M. Batten and W. A. Dinsdale, Third Party Insurance (3rd edn, 1959, p 3.

50. 59 & 60 Vict c 36.

51. By s 4.

52. Section 1 and the Schedule to the 1896 Act. The requirement, imposed by s 3 of the Locomotives Act 1865 (28 & 29 Vict c 83) that the walking man carrying a red flag, was abolished by s 29 of the Highways and Locomotives (Amendment) Act 1878 (41 and 42 Vict c 77).

53. Supple, p 233.

54. It is not my intention to re-open old debates about when negligence became an independent tort. Although it may not be completely accurate to consider ‘negligence’ as a separate entity until relatively late in the nineteenth century, it has been established that negligence was developing as an independent tort at least as early as 1825 - see P. Winfield, ‘The History of Negligence in the Law of Torts’ (1926) 42 LQR 184. In this section, when I refer to ‘the model of negligence’, I am referring to the way in which negligence was conceived in those actions where liability depended upon it, whether those actions were actions on the case or can be considered to be actions in an independent tort of negligence.

55. (1883) 11 QBD 503.

56. P. Winfield, ‘Duty in Tortious Negligence’ (1934) 34 Col LR 41 at 56. See the text to n 14 above.

57. See above, pp 73–74.

58. (1837) 3 Bing (NC) 468, 132 Eng Rep 490.

59. Ibid, at p 471; 492.

60. (1856) 11 Ex 781; 156 Eng Rep 1047.

61. The fictions that trespasses had broken the king's peace (contra pacem Regis) or had been done with force and arms (vi ct annis) even when this was not actually so, were devices to enable litigants to have their cases heard by the king's courts. See S. F. C. Milsom, Historical Foundations of the Common Low (2nd edn, 1981), pp 289–295.

62. P. Winfield, ‘Duty in Tortious Negligence’ (1934) 34 Col LR 41 at 58.

63. Sir William Brett was a Lord Justice of Appeal when he gave evidence to the Select Committee in 1877, but was Master of the Rolls in 1883 when he delivered judgment in Heaven - see n 12 above.

64. (1883) 11 QBD 503 at 508.

65. Ibid at 507.

66. La Lievre v Could (1893) 1 QB 491, per Lord Esher (as he had then become - see n 12, above).

67. (1883) 11 QBD 503 at 516.

68. (1934) 34 Col LR 41 at 58.

69. [1932) AC 562.

70. See above, n 1.

71. [1932) AC 562 at 580–581.

72. For a chronology of the development of new types of indemnity in response to legal determinations of liability, see A. G. M. Batten and W. A. Dinsdale, Third Party Insurance (3rd edn, 1959), pp 2–3.

73. R. L. Carter, Reinsurance (1979), p 39.

74. Ibid.

75. I am indebted to Mr Ian Williams of the State Government Insurance Office of Western Australia for the information in this paragraph about insurers' responses to the pressures on the liability insurance market.

76. Askew v Grimmer (1927) 43 Times LR 354; Grinham v Davies (1929) 2 KB 249. The rule disappeared after the introduction of compulsory insurance, because the presence of third-party cover could no longer be kept secret from juries.

77. [1928) 1 KB 191 at 197.

78. Compulsory liability insurance for car drivers was first introduced in 1928, in New Zealand. The United Kingdom followed suit in 1930, and Australian states legislated between 1935 and 1944 - see J. G. Fleming, The Law of Torts (6th edn 1984), p 367.

79. See R. E. Nisbett and T. de C. Wilson, ‘Telling More Than We Can Know: Verbal Reports on Mental Processes’ (1977) 84(3) Psych Rev 231; R. E. Nisbett and T. de C. Wilson, ‘The Halo Effect: Evidence for Unconscious Alteration of Judgments’ (1977) 35 (4) J of Personality and SOC Psych 250. For a consideration of this phenomenon in a legal context, see M. Davies, ‘Reading Cases’ (1987) 50 MLR 409 at 422423.

80. See Smith v Littlewoods Organisation Ltd (1987) 2 WLR 480 at 511, per Lord Goff of Chieveley.

81. Workmen's Compensation Act 1897 (60 & 61 Vict c 38).

82. No-fault compensation schemes for motor vehicle accidents now exist in three of the eight Australian jurisdictions. See Transport Accident Act 1986 (Vic); Motor Accidents (Liabilities and Compensation) Act 1973 (Tas); Motor Accidents (Compensation) Act 1979 (NT).

83. W. W. Buckland, ‘The Duty To Take Care’ (1935) 51 LQR 637 at 639.

84. J.C. Smith & P. Burns, ‘Donoghue v Stevenson - The Not So Golden Anniversary’ (1983) 46 MLR 147, 163.