LORD JUSTICE RALPH GIBSON: This is an appeal by the plaintiff from an order striking out his statement of claim and dismissing his action on the ground that he had pleaded no reasonable cause of action. Leave to appeal was given by the judge.
The plaintiff on 26th January 1984 suffered severe injuries while driving the defendants' Landrover vehicle on a road in Ethiopia in the course of his employment by the defendants as a quarry foreman on the Armati Diversion project. His injuries were caused by a collision between the Landrover and a lorry which was being driven along the road in the opposite direction by some person whose identity is not known. The defendants were in no way responsible for the happening of the accident of which the sole cause was the negligence of the lorry driver. The plaintiff has alleged that the defendants were in breach of their duty of care as employers in failing either to insure the plaintiff so as to provide suitable benefits to him in the event of his being injured, as a result of the negligence of a third party, in such a traffic accident or to advise the plaintiff to obtain such insurance cover for himself. His case is that if he had been so advised he would have obtained personal accident cover.
The plaintiff issued his writ on 24th October 1986 and served a statement of claim on 31st March 1987. The Plaintiff amended his statement of claim after his action was dismissed by order of Master Creightmore on 16th November 1987. He amended it again by leave of this court. The changes and reinstatements do not matter. The allegations as they are now before this court are as follows:
(i) The defendants were experienced in employing persons upon work overseas in "developing" countries and knew or ought to have known of the working and living conditions of their employees in those countries; and in particular the defendants were, or should have been, aware that there was no system of compulsory third party motor insurance in Ethiopia or any scheme similar to that effected by the M.I.B. and accordingly that should their employee be injured in Ethiopia in a road traffic accident in the course of his employment caused by the fault of an unidentified and/or uninsured third party and/or by one otherwise against whom proper compensation would not in practice be obtainable he would not be able to obtain compensation. That inability constituted a special risk to those required to work in Ethiopia.
(ii) He was on 14th October 1983 offered employment as quarry foreman for a term of 12 months, to be extended by mutual agreement, at an annual salary of £15,000 upon the terms set out in a letter and in certain standard conditions of overseas employment. Those terms included provisions for kit allowance, accommodation, holidays and travel. In addition (paragraph 8 of the letter) the plaintiff became a member of the defendants' Group Retirement Benefit Scheme; he was offered a choice of joining the defendants' Group BUPA (Medical Expenses Scheme; and (paragraph 6 of the standard conditions) the defendants agreed to be responsible for any medical treatment reasonably necessary for the plaintiff in Ethiopia. He accepted that offer by letter of 17th October 1983.
(iii) The plaintiff started work in Ethiopia on about 22nd November 1983. The accident occurred on 26th January 1984 and on a bush road some 11 kilometres from his place of work in Fincha. The plaintiff was 31. The injuries were to both legs. The plaintiff still required two crutches in order to walk in 1987. He has been unable to return to work.
(iv) The plaintiff has not received any damages in compensation and will not be able to recover any such damages. If the plaintiff had been advised of the special risk, he would have obtained a personal accident insurance cover and because of the defendants' failure to advise him he had not obtained such cover.
The appeal came before Sir Douglas Frank, sitting as a Deputy High Court Judge, on 25th April 1988. He dismissed the appeal. In giving judgment, he acknowledged that in the field of tort "the door is not necessarily shut" but, in his view, it was plain and obvious that the plaintiff's case could not succeed. Firstly, he found it a fair analogy to compare this case with the position of people working in this country in the 1920s and 1930s before the enactment of compulsory third party insurance by the Road Traffic Acts of 1930 and 1934. There were in those years many road accidents but he regarded it as significant that no case was cited in which a servant had recovered damages against his master for failing to protect him against the consequences of being injured by an uninsured and impecunious driver. Secondly, there was no authority f or the proposition that an employer is liable for economic loss caused by the wrongful act of a third party.
The Plaintiff's Grounds of Claim
The statement of claim as amended in this court asserts the plaintiff's right to damages upon various grounds. The first implied term alleged was that the defendants would take out appropriate insurance cover for the benefit of the plaintiff "indemnifying him against the risk of death or injury occasioned by the fault of a third party resulting from a road traffic accident in Ethiopia whilst the plaintiff was driving the defendants' Landrover in the course of his employment". Appropriate insurance would be, it was said, either to provide such sum as the plaintiff would recover in respect of his injuries, taking into account any contributory negligence, in proceedings in this country on the assumption that the accident had occurred in England, or, in the alternative, to provide a substantial tariff of benefits appropriate to the degree of injury sustained by the plaintiff and the loss occasioned to him or his dependants. The second and alternative implied term was that, prior to the plaintiff's departure for Ethiopia, the defendants would give to the Plaintiff all necessary advice relating to working conditions there, including any special risks such as that mentioned above, and would advise the plaintiff accordingly that he should himself obtain the appropriate insurance cover described above.
Next the source and the scope of the duties said to be owed by the defendants in tort were stated: firstly, under the duty owed by the defendants as employers of the plaintiff, "to take all reasonable steps which were necessary, in the light of any special risks arising from his working in Ethiopia, properly to protect the economic welfare of the plaintiff whilst he was acting in the course of his employment", arid, therefore, in particular either to provide the appropriate insurance cover or to inform the plaintiff of the special risk and advise the plaintiff himself to obtain that cover. Secondly, the relationship of the plaintiff and the defendants was alleged to be such as to give rise to a duty of care within the principle of Hedley Byrne & Co. Ltd. v. Heller and Partners Ltd. [1964] A.C.465 in that the defendants, by employing the plaintiff to work for them in Ethiopia, "undertook, by necessary implication, to advise the plaintiff as to any special risks incidental to such employment and the plaintiff, by necessary implication, relied upon the defendants to furnish him with such advice" and, accordingly, the defendants should have informed the plaintiff of the special risk and advised him to obtain the appropriate insurance cover.
It seems clear that the statement of claim has throughout included the implied assertions, firstly, that the plaintiff was not aware of the special risk to him of suffering personal injury and consequential loss in the course of his employment in Ethiopia for which, because of the state of the law and of the absence of any scheme similar to those contained in the M.I.B. agreements, he would be unable to recover compensation; and, secondly, that the defendants knew or ought to have known that in probability the plaintiff knew or ought to have known that in probability the plaintiff was unaware of that special risk. No point was raised on these matters in argument. I think that the implied assertions should have been made expressly but this court must, I think, proceed upon the basis that they are contained in the statement of claim.
In his submissions for the plaintiff in this court, Mr. Smith did not seek to argue separately for the existence of an implied contractual term that the defendants would provide insurance cover or advise the plaintiff to obtain it but, of course, he still put the plaintiff's case in contract in so far as the ordinary duty of a master to his servant is based both in contract and in tort: see Matthews v. Kuwait Bechtel Corporation [1959] 2 Q.B. 57; and, as I understood his submissions, he was not conceding any defect in his reliance upon an implied assumption of responsibility under Hedley Byrne. He was merely acknowledging that, if the court was not persuaded of an arguable case of implied assumption of responsibility, he was unlikely to demonstrate an arguable case of implied contractual term, but, of course, if there is found to be a case of implied assumption of responsibility it may be sufficient to support also an implied term.
Mr. Smith further acknowledged the difficulties which the plaintiff may face in proving his claim upon all the evidence; but the parties at this stage do not know what the evidence would be as to the practice of other employers and the plaintiff does not know, until discovery of documents, what the experience of the defendants and of their other servants has been with reference to injuries from road accidents in foreign countries caused by uninsured or untraced drivers.
Mr. Smith contended that the law does not and should not exclude, as a matter of law, the possibility of a duty arising in special circumstances upon an employer to have regard to, and to take such precuations as are reasonably necessary with reference to, the economic welfare of his servant. The duty can be limited in this case to a special risk to the economic welfare of the servant arising out of a risk of personal injury in the course of his employment. Whether the scope of the duty extends to the provision of insurance cover or only to the giving of information and/or advice would depend upon all the evidence.
Firstly, it was submitted that the plaintiff has shown an arguable case based upon the position now reached in cases of negligence as explained by Lord Wilberforce in Anns v. Merton L.B. [1978] AC 728 at page 751, and by Lord Keith in Peabody Fund v. Sir Lindsay Parkinson Ltd. [1985] A.C.210 at 240-241. Next, if there should be any difficulty in recovering damage for economic loss under the ordinary duty of a master to his servant, no such difficulty could arise if the principle of liability established in Hedley Byrne is applicable and, said Mr. Smith, it is clearly arguable that it is so applicable' on the facts alleged in this case. A company which recruits a man in this country to work upon a large project in Ethiopia should, it was argued, be treated as assuming responsibility to use proper care in telling such a man what he needs to know about conditions in that country in order to make a properly informed decision whether to take the job and, if he decides to take it, whether there } are many steps which he needs to take for his own protection. A man who takes that employment, and who goes out to do the work in Ethiopia, should, in the absence of evidence to the contrary, be treated as impliedly relying upon the employer for having told him what he needed to know.
The Defendant's Submissions
Mr. Aylen, for the defendants, submitted that there are rules of law which render the plaintiff's claim unarguable. Firstly, he contended that the economic loss suffered by the plaintiff is not recoverable under Donoghue v. Stevenson because it was not caused by any injury or apprehended injury, whether to him or his property, for which the defendants were responsible: see D. & F. Estates Ltd. v. Church Commissioners [1988] 3 W.L.R. 368: where the reasoning in Lord Brandon's dissenting speech in Junior Books Ltd. v. Veitchi [1983] 1 AC 520, was said to contain "principles of fundamental importance". The economic losses claimed by the plaintiff, it was submitted, involve the assertion and creation of obligations suitable only to contract. Economic loss, divorced from actual or apprehended physical injury or damage for which the defendants are responsible, is recoverable, in the absence of contract, only when there is an assumption of responsibility, and corresponding reliance by the plaintiff, under the principles stated in Hedley Byrne.
Next, the plaintiff was in a contractual relationship with the defendants under the contract of employment. No term in the contract provides for the defendants to incur the obligations alleged, therefore the plaintiff is precluded from suing for economic loss in tort: Tai Hing Cotton Mill Ltd. v. Liu Chang Bank Ltd. [1986] A.C.80; and Greater Nottingham Co-Operative Society Ltd. v. Cementato Piling and Foundations Ltd. [1988] 3 W.L.R.396.
Finally, Mr. Aylen submitted that, while damages for economic loss may be recovered in tort under the principle of Hedley Byrne, such liability cannot arise from silence: he referred to passages in the report of that case at [1964] AC 465: at pp.486, 494-495, 526-527.
Mr. Aylen was stopped from developing submissions with reference to contractual terms because of Mr.Smith's concessions described above.
The Implied Term to Provide Insurance Cover
For my part, I have no doubt that the concession made by Mr. Smith with reference to contractual implied terms was rightly made. I can see no basis in the facts pleaded for holding that the defendants gave an implied undertaking to insure the plaintiff against the risk of uncompensated injury caused to him, while acting in the course of his employment, by third party drivers in Ethiopia. Such a term could not be implied by law under the test of "necessity", as applicable to all such contracts of employment; nor could it be implied as a term which the parties must have agreed: see Liverpool City Council v. Erwin [1977] A.C.239, and per Lloyd L.J. in The Maira [1988] 2 Lloyds L.R.126 at page 135. As to treating such a term as implied by law, the arguments in favour of a social policy, which would require employers to provide some level of personal accident insurance for the benefit of men and women working overseas, and for their dependants, are obvious but there appears to me to be no way in which the court could "embody this policy in the law without the assistance of the legislature": see Lord Bridge in D. & F. Estates v. Church Commissioners at page 389E. Further, as to treating such a term as one which the parties must have agreed, it seems to me unarguable that the parties would have agreed that any of the various obligations as to the provision of personal accident insurance, as put forward by the plaintiff, was a part of the contract. The written contract contained, as I have said, a number of detailed terms dealing with the economic welfare of the plaintiff, such as provision of retirement benefits and of medical services, and it is impossible to suppose that the defendants would have acknowledged as obviously included within the contract additional terms with reference to provision by them of personal accident insurance. As to an implied term to the effect that the defendants would inform the plaintiff as to the existence of the special risk and advise the plaintiff to obtain for himself suitable personal accident insurance, I will deal with that part of the case when I come to examine the plaintiff's case based upon an implied assumption of responsibility by the defendants on the principle contained in the Hedley Byrne case.
The Ordinary Duty of Care of Master to Servant
It is first necessary to examine the plaintiff's claim, which Mr. Smith has acknowledged to be a claim for pure economic loss as against the defendants, with reference to the ordinary duty of care owed by a master to his servant. The duty has for very many years always been referred to in terms of the physical safety and well-being of the servant: see Smith v. Baker [1891] A.C.325 and Wilsons and Clyde Coal Co. v. English [1938] A.C.57. No case has been cited in which it has been held to extend to protect the servant from economic loss. In Deyong v. Sherburn [1946] 1 K.B. 236, where the plaintiff's clothing was stolen from the dressing room provided for his use at a theatre, the County Court Judge held that the defendant had been negligent in failing to provide a lock on the dressing room door, but he held also that the defendant was not under a duty to protect the plaintiff's clothing from theft. His decision was upheld by this court (Lord Greene, du Parcq and Tucker L.JJ.) on the ground that there was no relevant implied term of the contract and no duty at law to provide such a system of work as would protect his servant's clothing from theft. A safe system of work as required by the law was for the protection of the personal safety of the workmen: per due Parcq L.J. at page 232. Edwards v. West Herts Hospital Management Committee [1957] 1 W.L.R. 415 was a decision of this court to the same effect.
Further, the master is free to employ a servant upon work which will expose the servant to unavoidable risk of injury or death, such as service at sea. "There are some kinds of work in which danger is necessarily inherent, where precautions such as would ensure safety to the workmen are either impossible, or would only be attainable at an expense altogether incommensurate with the end to be accomplished.
In all such cases---in the absence of express stipulation to the contrary, the risk is held to be with [the workman] and not with the employer": Smith v. Baker [1891] A.C.325 at 356 per Lord Watson.
The law, however, requires the master to use all reasonable care to diminish any danger, if he cannot eliminate it: Glyn Jones J. [1955] 1 All E.R. 833 at 836; and, if he cannot effectively eliminate it so that significant risk remains, he may be required to give to the servant such information which he has to help the servant to evaluate properly the benefit of the job against the risk: see per Devlin L.J. in Withers v. Perry Chain Co. Ltd. [1961] 1 WLR 1314 at 1320. The point was expressed more firmly some twentyfour years later by this court (Lawton, Fox and Robert Goff L.JJ.) in White v. Holbrook Precision Castings Ltd. [1985] I.R.L.R.215 where, in upholding the dismissal of the plaintiff's claim on the facts, it was held that an employer had a duty to tell a prospective employee about the risks he would expose himself to if he took the job but the risks referred to were those to physical safety or well-being. Lawton L.J. said at page 218:
"Generally speaking, if a job has risks to health and safety which are not common knowledge but of which an employer knows or ought to know and against which he cannot guard by taking precautions, then he should tell anyone to whom he is offering a job what those risks are if, on the information then available to him, knowledge of those risks would be likely to affect the decision of a sensible, level-headed prospective employee about accepting the offer."
The position is, accordingly, that although the duty of a master to his servant may extend to warning him of unavoidable risks of physical injury, it has hitherto riot been extended to the taking of reasonable care to protect the servant from economic loss. Apart from the cases of Deyong v. Sherburn and Edwards v. West Herts Hospital Management Committee, which were mentioned in argument, we were not deferred to any case in which the court has considered and rejected any such claim and no doubt the reason for that is not only the limitation of the duty, as stated, to personal safety but also the fact that it must be rare for any matter of economic loss to have been arguably caused by a breach of duty of the master without it being a breach of contract. If a servant is to have a claim in tort against his employer in respect of economic loss it must be based upon some special factor in the circumstances or in the relationship between them which justifies the extension of the scope of the duty to cover such a claim or upon a separate principle of the law of tort which imposes such a duty.
The Ordinary Risk of Suffering Uncompensated Injury
The defendants, apart from submitting that the law leaves to employees the responsibility for deciding whether they need personal accident insurance, have not contended that the special risk is not sufficiently special or unusual to provide an arguable case for the plaintiff if he can surmount the legal barriers which, on the defendants' submissions, justify striking out his claim. The defendants recognise, rightly in my view, that assessment of the nature and extent of the risk, for the purposes of the plaintiff's case, must be made, if the case is to proceed, when the evidence is before the court. It was for that reason that detailed submissions were not made by either side as to the extent of the risk in this country of suffering injury which may go uncompensated. Nevertheless, before considering the points °f law raised in the submissions before the court, it is useful to describe, and to put into context, the special risk upon which the plaintiff's case depends.
It is, of course, not the case under the law of this country that in respect of all injuries, caused by the fault of another, a claimant will be able actually to recover the compensation which the law would award in respect of his injuries. The person responsible may have no money. For some 50 years the law has dealt with one of the most common causes of serious injury by requirement of compulsory third party insurance in respect of the use on the public roads of a motor vehicle. Effective cover, in the event of the driver in breach of the law having no insurance cover, was provided by means of the Motor Insurers Bureau agreement in 1946, and was extended to the case of the untraced driver in 1969. A description of the terms and of the wording of the M.I.B. agreements can be found at Chapter 17 of Charles-worth and Percy on Negligence, 7th Edition, 1983. Effective cover, however, is by no means complete even for traffic accidents: a pedestrian or a cyclist may be solely to blame for an accident in which a driver or other persons are seriously hurt and there is no compulsory insurance or scheme like that of the M.I.B. to cover such accidents. Further the M.I.B. is riot liable where the accident occurred in some place which was not a public road: see Buchanan v. M.I.B. [1955] 1 All E.R.607.
As to accidents which a servant may suffer in the course of his employment as a result of the fault of the master, or of a fellow servant, actual recovery of the compensation to which the servant was in law entitled was for many years not certain because the master might have no money and no insurance to cover his liability. Compulsory insurance against liability to employees was required by the Employers Liability (Compulsory Insurance) Act 1969 - the Act came into force on 1st January 1972 - but the requirement applies only to "liability for bodily injury or disease sustained by his employees and arising out of and in the course of their employment in Great Britain". Insurance for liability for "injury or disease suffered or contracted outside Great Britain" is only compulsory when required by regulations. According to Halsbury's Statutes 4th Edition, Volume 16, the Act has been applied to employers of persons working on or from off-shore installations in designated areas of the continental shelf and territorial waters by regulations S.I. 1975/1289 under the Mineral Workings (Off-Shore Installations) Act 1971. Failure to ensure as required by the Act is a criminal offence: see section 5. There is, however, no scheme equivalent to that of the M.I.B. to ensure recovery of compensation by a servant in respect of injury suffered in this country if, in breach of law, the employer has failed to take out insurance cover.
Next, it is to be noted that the insurance required by the 1969 Act applies only to liability to employees. Liability to members of the public is, I think, usually covered by a public liability policy in the case of responsible employers whose activities expose members of the public to risk of injury but the law imposes no statutory duty to have such insurance cover and serious injury might be suffered without compensation by a servant in the course of his employment as a result of the wrongdoing of a third party not concerned with the use of a motor vehicle on a public road.
Another common form of injury for which the victim cannot normally recover substantial compensation from the wrongdoer is criminal injury. The Criminal Injuries Compensation scheme, which came into operation in 1964, enabled the Board to make ex gratia payments in respect of personal injury directly attributable to a crime of violence, to an arrest of an offender, to the prevention of an offence, or to the giving of help to a constable engaged on making an arrest or preventing an offence. Details of the current scheme are now contained in the 21st Report of the Board (Cmnd 9684). Two matters must be noted: firstly, the scheme applies only to injuries suffered in this country or upon a British ship or aircraft and not to criminal injuries suffered abroad, and, secondly, the scheme provides no compensation for property or economic loss caused by crime save for such loss resulting from a criminal injury within the scheme.
From this limited survey it can be seen that in a number of cases it is possible for someone to suffer personal injury in this country, caused by the wrongdoing of another, for which the victim may well not recover the compensation which the law would award. Further, in respect of injury suffered or disease contracted outside this country by a person normally resident here, or employed abroad by an employer based in this country, there is in general no protection of compulsory employers' insurance and, in respect of the special claims of injury arising from road accidents or criminal activity, there is no protection from any statutory scheme such as the M.I.B. or the C.I.C.B.
The Plaintiff's Claim in Tort: Damages for Financial Loss Without Assumption of Responsibility
I turn now to the question whether the plaintiff's claim reveals any reasonable cause of action in tort. As to the claim based upon Lord Wilberforce's two stage test stated in Anns v. Merton L.B. [1978] A.C.728, and the comments thereon of Lord Keith in Peabody Fund v. Sir Lindsay Parkinson [1985] A.C.210 at page 240-241, it was not disputed that on the facts alleged it was reasonably foreseeable by the defendants that the plaintiff might suffer economic loss as a result of the special risk to which he was exposed in his work in Ethiopia. The questions remain whether the relationship of master and servant was, in the circumstances, arguably of such proximity as to cause any of the alleged duties to arise, and whether it could be held to be just and reasonable for the court to hold that any such duty was owed by the defendants to the plaintiff. Before considering those questions in the light of all the circumstances and of the relevant considerations, which are questions of "an intensely pragmatic character well suited for gradual development but requiring most careful analysis" (per Lord Keith in Rowling v. Takaro Properties [1988] 2 W.L.R. 418 at 429H) it is necessary to consider Mr. Aylen's submission that, without proof of voluntary assumption of risk and reliance within the principle of Hedley Byrne, those questions do not arise in this case by reason of the fact that the plaintiff's claim is for economic loss not caused by any physical injury or damage for which the defendants were responsible. Reliance was placed by Mr. Aylen for this conteniton on D & F. Estates Ltd. v. Church Commissioners [1988] 3 W.L.R. 368. In my judgment, that decision of the House of Lords has not established a rule as wide or as general as that for which Mr. Aylen contends
The issues in that case concerned the law in relation to a builder's liability in tort for defective plasterwork installed in a flat by his sub-contractor. In a speech with which all their Lordships agreed, Lord Bridge firstly held that the dissenting speech of Lord Brandon in Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 AC 520 enunciated "principles of fundamental importance which are clearly applicable to determine the scope of the duty of care owed by one party to another in the absence ... of either any contractual relationship or any such uniquely proximate relationship as that on which the decision of the majority in Junior Books was founded."
The principles of fundamental importance to which Lord Bridge was referring were, in summary, if I have understood them correctly, firstly that in the Junior Books case, where the building owner was asserting a duty of care owed in tort by a sub-contractor to take care not to cause or permit defects in the work done by the sub-contractor, the only foundation for the existence of duty of care was that laid down in Donoghue.v. Stevenson [1932] A.C.562; and that duty was based upon the existence of a danger of physical injury to persons or their property, not including the very property which gave rise to the danger of physical damage. The second fundamental principle was that, for the purposes of the two stage test of the existence of duty of care propounded by Lord Wilberforce in Anns case at page 751-752 it was necessary to ask whether, in the particular case "there are any considerations which ought, inter alia, to limit the scope of the duty which exists"; and, in the Junior Books case, which was concerned with the scope of the duty of sub-contractors in providing the floor in a building, there were two such considerations of which it is sufficient to mention the first only, namely that in Donoghue v.Stevenson itself, and in the cases in which the principle of that decision have been applied, "an essential ingredient in the cause of action relied on was the existence of danger, or the threat of danger, of physical damage to persons or their property, excluding the very piece of property from the defective condition of which such danger or threat of danger arises"; and that to dispense with that essential ingredient in a cause of action of the kind concerned in that case "would involve a radical departure from any established authority": [1988] 3 W.L.R. at page 382. Lord Oliver, with whose speech Lord Templeman, Lord Ackner and Lord Jauncey agreed, said that "the case [Anns v. Merton L.B.C.] cannot properly be adapted to support the recovery of damages for pure economic loss.... and such loss is not in principle recoverable in tort unless the case can be brought within the principle of reliance established by the Hedley Byrne case". It was, in particular, upon this last passage that Mr. Aylen relied.
I think it is clear that their Lordships were not, as I understand their speeches, dealing with the tort of negligence in all its forms and it does not seem to me that they were intending to lay down a rule that in no case can damages for economic loss be recovered except under the principles established by the Hedley Byrne case. I take Lord Oliver's statement, namely that damages for pure economic loss cannot be recovered unless the case can be brought within the principle of reliance established by the Hedley Byrne case, to apply only to the sort of case under consideration in D & F Estates.
In La Banque Financiere de la Cite v. Westgate Insurance Co. Ltd. [1988] 2 LL.L.R. 513 a submission was made that a duty of care not to cause economic loss may be owed without assumption of responsibility or reliance. This submission was based upon Lord Keith's opinion in Yuen Kun Yeu [1988] A.C.175 (to which I shall refer again below) and upon three cases in which damages for economic loss were awarded without proof of any voluntary assumption of responsibility by the defendants or reliance thereon by the plaintiff. Those cases are Ministry of Housing v. Sharp: C.A. [1970] 2 Q.B.233; Ross v. Caunters [1980] Ch.297, Sir Robert Megarry V.C.; and American Express v. Hurley [1985] 3 All E.R.564, Mann J. This court then said (page 560):
"We are prepared to accept, for the purposes of this judgment, that in some cases (if rare) of pure economic loss the court may be willing to find the existence of a duty of care owed by a defendant to a plaintiff even in the absence of evidence of any actual voluntary assumption by the defendant of such duty and/or of any reliance on such assumption. We shall accordingly proceed on the basis that, on appropriate facts, the court may be willing to hold that, having regard to the special circumstances, and the relationship between the parties, a defendant should be treated in law (even though not in fact) as having assumed a responsibility to the plaintiff which is capable of giving rise to a claim for damages for pure economic loss."
but held on the facts that the insurance company could not, for the purposes of the law of negligence, be treated as having in law voluntarily assumed responsibility to make disclosure. Also in the case of Caparo Products plc v. Dickman (27th July 1988: O'Connor, Bingham and Taylor L.JJ.) in a claim against auditors the submission was that voluntary assumption of direct responsibility, as a particular responsibility in addition to the existing responsibility to the company, was necessary for any liability of the auditors to Caparo Products. Bingham L.J. held that "voluntary assumption of responsibility", although a very useful expression, did not provide a single simple litmus test of proximity, citing the judgment of Lord Denning, M.R. in Ministry of Health v. Sharp [1970] 2 Q.B. 223 at 260F. Taylor L.J., who agreed with Bingham L.J. in allowing the plaintiffs' appeal in part, also said that "because in a Hedley Byrne type of case, a voluntary assumption of responsibility is necessary to establish proximity, it does not follow that such an assumption is necessary in every case. There may be some other nexus sufficient to create proximity". He also referred to Sharp's case. This view of Bingham L.J. and of Taylor L.J., however was not necessary for the decision by them of that case because both held that in fact there had been a sufficient assumption of responsibility by the auditors. In my judgment, they were right and the decision in D. & F. Estates does not compel this court to hold otherwise.
In Yuen Kun Yeu [1988] 1 A.C. 175, where the plaintiff's claim was for economic loss, it was argued for the defendants that (i) the cases of Donoghue v. Stevenson, Dorset Yacht Co. Ltd. v. Home Office [1970] AC 1004 and Anns v. Merton L.B.C. were all concerned with material damage and had no application in that case; and (ii) in the absence of material damage a duty has only been imposed where there was a special relationship between the parties as in Hedley Byrne Ltd. or Junior Books Ltd. There was in that case, as their Lordships held, "clearly no voluntary assumption by the Commissioner of any responsibility towards the plaintiffs": see page 196 G-H. Their Lordships, however, did not say that that fact was a sufficient answer to the case. At page 194 F Lord Keith said:
"..... the primary and all important matter for consideration, then, is whether in all circumstances of this case there existed between the Commissioner and would be depositors with the company such close and direct relations as to place the Commissioner, in the exercise of his functions under the Ordinance, under a duty of care towards would be depositors."
For the reasons given in the judgment of their Lordships, the Commissioner did not owe to the plaintiffs "any duty of care on the principle which formed the ratio of the Dorset Yacht case" (196 C); and, in summary, the reason for that conclusion was not that the plaintiffs' claim was for economic loss but that there were no such "close and direct relations between the Commissioner and the plaintiffs as to give rise to the duty of care desiderated" (196 C). I would therefore hold in this case, as this court was prepared to accept for the purposes of the judgment in La Banque Financiere, as cited above, that "in some cases (if rare) of pure economic loss the court may be willing to find the existence of a duty of care owed by a defendant to a plaintiff even in the absence of evidence of any actual voluntary assumption by the defendant of such duty and/or of any reliance on such assumption".
That conclusion means that one of the grounds upon which the defendants have asserted that the plaintiff can have no reasonable cause of action has not been made out. It does not establish that this is arguably one of those rare cases in which a duty of care can be found.
The Plaintiff's Case on Implied Term
The next submission, based upon the two cases of Tai Hing Cotton Mill Ltd. and Greater Nottingham Corporation Society Ltd. was that, since there was between the parties the contract of employment, the plaintiff can only recover damages for economic loss if a term in that contract so provides and not in tort. It is necessary first to determine whether there was any implied term in the contract of employment to the effect that the defendants would give to the plaintiff all necessary advice relating to the special risk and would advise the plaintiff that he should himself obtain appropriate insurance cover. The alleged implied assumption of responsibility gave rise, it is alleged, to a similar duty.
In my judgment it is impossible to hold on the facts pleaded that an implied term arose on the particular relationship of this plaintiff to these defendants as his employers. The only facts are the offer and acceptance of the employment and the defendants' knowledge both of the circumstances in which the plaintiff would in Ethiopia be exposed to the special risk and of the plaintiff's ignorance of that risk. If the parties had been asked what the position was with reference to the risk of the plaintiff suffering injury in the course of his employment by the negligence of another driver, for whom the defendants were not responsible, and from whom the plaintiff could recover no damages, it is impossible to be confident, on the facts pleaded, that either side would have answered that the defendants had undertaken a duty to deal specifically with the matter, whether by advice or otherwise. Both parties must have expected and intended that the plaintiff and the defendants would respectively perform the express terms set out in the contract and would comply with any other obligations arising out of their mutual relationship as master and servant. As in Lister v. Romford Ice and Cold Storage Co. Ltd. [1957] A.C.555, according to the view of the majority, Lord Simonds, Lord Morton and Lord Tucker, the term on which the plaintiff in this case claims to rely cannot, in my judgment, be implied as a term agreed between the two individuals, and, if it is to be implied at all, must be implied by law. That means that it is to be implied in any contract of employment where the master engages the servant to work abroad in a country where, in doing his work, the servant will face a special risk of the nature relied on in this case and the servant is to the knowledge of the master ignorant of that risk. It is clear, I think, that a new term can be implied by law into contracts of employment: the case of Lister v. Romford Ice is an example of differing opinions held by judges as to whether a new term should cm the facts be held to arise by law; and the majority in the House of Lords gave reasons to explain why on the evidence in that case the term then contended for could not be accepted. It is, however, impossible, in my judgment, to imply in this case a term as a matter of law in the form contended for, namely a specific duty to advise the plaintiff to obtain specific insurance cover. Such a duty seems to me inappropriate for incorporation by law into all contracts of employment in the circumstances alleged. The length of time during which the servant will work abroad and the nature of his work may vary greatly between one job and another and hence the extent to which the servant would be exposed to the special risk. Further, having regard to the many different ways in which a servant working abroad may run the risk of uncompensated injury caused by the wrongdoing of a third party, apart from a traffic accident, it seems to me impossible to formulate the detailed terms in which the law could incorporate into the general relationship of master and servant a contractual obligation to the effect necessary to cover the plaintiff's claim. I have considered whether the implied term could be limited to the risk from injuries in a traffic accident, but then the question is raised whether the obligation should arise upon any difference between the total protection provided in this country by compulsory third party insurance and the M.I.B. scheme, on the one hand, and such protection as exists in the foreign country, on the other hand, or only upon the total absence of the protection provided in this country. I have also considered whether the term could be expressed as follows: "an employer who takes a person into his employment in this country for work to be done in a foreign country shall take reasonable care to provide sufficient information and warning to that servant with reference to any risk of suffering uncompensated injury in the course of his employment in the foreign country, caused through the fault of a third party, which risk would not be suffered in this country and of which a reasonable person would require to be informed before accepting such employment". For my part I am unable to accept that the court could properly incorporate such a term by law into contracts of employment. It seems to me that it would require of employers, many of whom may have no such resources of advice or experience as may be available to these defendants, and who may employ only one or two servants, to discover much information about foreign legal and social systems in order to decide whether such a term requires action on their part. The usefulness °f the principle contended for seems to me, in social terms, to be plain enough; but to incorporate the duty by law into contracts of employment would, in my view, require, if it were to work fairly, exemptions and limitation which can only properly be achieved by legislation.
Voluntary Assumption of Responsibility
The next question is whether, in the absence of a special term implied on the facts between these parties, or of a term implied by law, the alleged specific duty to inform and advise can be held arguably to have arisen by reason of an "assumption of responsibility" by the defendants. In my judgment on the bare facts alleged it cannot. To explain that conclusion it is necessary to begin with the decision in Hedley Byrne. In that case the only relationship between the parties lay in the request for the service of the gratuitous provision of a financial reference by the bank and the giving of that reference. If there was to be a duty of care in the giving of the reference it was necessary to state what it was in the relationship which gave rise to a sufficient proximity to justify imposition of a duty. At page 525 Lord Devlin said:
"It would be surprising if the sort of problem that is created by the facts of this case had never until recently arisen in English law. As a problem it is a by-product of the doctrine of consideration. If the respondents had made a nominal charge for the reference, the problem would not exist. If it were possible in English law to construct a contract without consideration, the problem would move at once out of the first and general phase into the particular; and the question would be, not whether on the facts of the case there was a special relationship, but whether on the facts of the case there was a contract."
That indicates to me that where the only relationship between the parties is the contract between them, and some acts in performance of that contract which are not said themselves to give rise to any separate assumption of responsibility (as in this case), any duty must be found in the terms of the contract or as arising out of the relationship created by the contract. Later, in words which have been frequently quoted, Lord Devlin said:
"I have had the advantage of reading all the opinions prepared by your Lordships and of studying the terms which your Lordships framed by way of definition of the sort of relationship which gives rise to a responsibility towards those who act upon information or advice and so creates a duty of care towards them. I do not understand any of your Lordships to hold that it is a responsibility imposed by law upon certain types of persons or in certain sorts of situations. It is a responsibility that is generally accepted or undertaken, either generally where a general relationship, such as that of solicitor and client or banker and customer, is created, or specifically in relation to a particular transaction."
Those defendants, on the facts alleged, entered into the general relationship of master and servant. In my judgment, the special circumstances in which, and the special purpose for which, that agreement was made, either do or do not justify the extension of the scope of a general duty owed by a master to his servant, whether by implied term or under the general duty, so as to include the duty asserted. If they do, the law will impose the duty and proceed to inquire whether it was broken. The concept of "voluntary assumption of responsibility" as used in Hedley Byrne seems to me to refer to an act by a defendant whereby he voluntarily does something, which affects the plaintiff, and it is such an act that a reasonable man would recognise that in the circumstances he is required to perform it with due care. The defendant's knowledge, actual or implied, that the plaintiff is relying upon him to act with such care is a vital, and in many circumstances indispensable, factor. Where there is a contract between the parties, and any "voluntary assumption of responsibility" occurred, if at all, at the time of making and by reason of the contract, it seems unreal to me to try to separate a duty of care arising from the relationship created by the contract from one "voluntarily assumed" but not specifically assumed by a term of the contract itself. There was at no time any reference by either side to the special risk or to what might be done with reference to it. For these reasons, I conclude that this plaintiff has no reasonable cause of action based upon voluntary assumption of responsibility.
The General Duty of the Defendants as Employers
It remains then to consider whether any of the duties asserted by the plaintiff could be held in the circumstances to fall within the scope of the duty owed by a master to his servant.
As to the duty to provide personal accident insurance at the expense of the defendants for the plaintiff, it is in my judgment impossible to hold that the scope of the duty in tort could extend so far. The legislation has not in general extended even the duty of compulsory employer's liability insurance in respect of employment out of this country. It has not been suggested that the master is required to provide personal accident insurance in those cases where in this country his servant is exposed to the risk of suffering injury in the course of his employment through the fault of a third party who cannot pay. The common law cannot in my judgment devise such a duty which the legislature has not thought fit to impose and it could not be just or reasonable for the court to impose it.
As to the alleged duty to inform and advise, however, the answer seems to me to be less clear. It would be an extension of the scope of the duty of a master to his servant and the question is whether the law could regard such an extension as a necessary piece of gradual development, that is to say an extension made "incrementally and by analogy with established categories (of negligence)": see per Brennan J. in Shire of Sutherland v. Heyman [1985] 59 A.L.J.R. 564, High Court of Australia: cited by Lord Keith in Yeun Kun Yeu at page 191D. There are a number of factors which support the view that such an extension of the scope of an employer's duty might properly be made if the court were free to take that course. Firstly, the plaintiff's claim is for financial loss but it is loss related to and arising out of personal injury suffered in the course of the plaintiff's employment. Secondly, the duty might be regarded as analagous to that stated by Lawton L.J. in White v. Holbrook Castings cited above: namely to tell a prospective employee about unavoidable risks of the employment of which the servant is not aware, even though the duty goes outside the risk of physical injury arising from the employer's own operations, which the law requires the employer to know about, and extends to matters of law governing compensation for a wrong done by others. Thirdly, an employer who recruits in this country a number of people to do work abroad might reasonably be required by the law to discover the existence of any special risk, even of this nature, to which his servants will be exposed in their work for him and to give information about it to them. Fourthly, many men and women, particularly those with dependants, who would be willing to spend some time in employment overseas, would regard it as of great importance to be told of the existence of the special risk so as to be able to consider how much it would be sensible to spend in some form of personal accident insurance cover. Finally, the existence of some capacity of the common law to develop, so as to recognise changes which have taken place in the expectations of the people who make up our society, is not in doubt: see the dissenting speech of Lord Radcliffe in Lister v. Romford Ice at page 591. The question is whether the development which the court is asked to make is justified by the material before the court and is one within the powers of the court.
In my judgment, if the question was whether the giving of a warning about the special risk was something which a reasonable employer, with knowledge of the existence of the risk and of his servant's ignorance of it, would think it necessary to give to the servant, then I would hold that the plaintiff had alleged a reasonable case for persuading the court on a trial that such an employer would think it necessary. But that answer is not sufficient. There is clear authority that it is not open to the court to hold that a duty of care exists in negligence at common law, notwithstanding the fact that loss to the plaintiff is foreseeable if the duty is not performed, in ''a factual situation in which the existence of such a duty had repeatedly been held not to exist": see per Lord Brandon in Lee and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1986] A.C.785. As pointed out earlier in this judgment, the absence of a duty upon an employer, under the general duty of a master to his servant, to protect his servant from economic loss, caused through the wrongdoing of a person for whom the employer is not responsible, has not been repeatedly the subject of the decisions of the court; but it has been stated on at least two occasions (see the theft of property cases cited above) and, I am sure, assumed on countless other occasions that the duty of the master is, in the absence of a contractual term, express or implied, limited to the protection of the servant against physical harm or disease. In La Banque Financiere this court refused to impose a duty of care in circumstances in which so to do would "cut across all the principles of our law of contract relating to the effect of silence in the course of pre-contractual negotiations". To impose the duty alleged in this case would be contrary, in my judgment, to the accepted principles of our law relating to the general duty of a master to his servant.
I have had much difficulty in concluding that the general duty at common law upon a master to take care for the protection of his servant's physical well being cannot be extended by decision of the courts to include protection for the financial well being of his servant in special circumstances where the foreseeable financial loss arises from foreseeable physical injury suffered in the course of the employment and the duty claimed would extend only to a warning of a special risk. If this view be right the only way in which an employer's general duty of care - and I emphasise that I am referring only to the general duty of care which arises out of the relationship - will be capable of extension to cover financial loss will be by legislation, or by a contractual term, express or implied on the particular facts, or by a term which the court is able to say must be implied by law. At this point consideration must be given to Mr. Aylen's submission based on Tai Hinq to the effect that a duty in tort cannot be imposed to enlarge the duties assumed, whether expressly or impliedly or by rule of law, under the contract of employment. That case was concerned with the mutual responsibilities of banker and customer and might be thought to be remote from the responsibilities between master and servant. The judgment of their Lordships in the Privy Council was delivered by Lord Scarman who, at page 107B, said this:
"Their Lordships do not believe that there is anything to the advantage of the laws development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to where the liability arises from contract or tort, e.g. in the limitation of action."
Lord Scarman was referring to the "right" to determine obligations and was not dealing with the probable capacity of a party to procure changes in the contract. Their Lordships, however, clearly thought that the principle could be applicable to master and servant. Lord Scarman continued at page 107 to cite a passage from the speech of Lord Radcliffe in Lister v. Romford Ice, to which I have referred above in support of the proposition that new implied terms are capable of being implied by law into the contract between master and servant. Lord Scarman said:
"Their Lordships respectfully agree with some wise words of Lord Radcliffe ..... after indicating that there are cases in which a duty arising out of the relationship between employer and employee could be analysed as contractual or tortious Lord Radcliffe said, at [1957] A.C. page 587:
'Since in any event the duty in question is one which exists by imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much contractual as tortious. Since in modern times the relationship between master and servant, between employer and employed, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that relationship to implied contract'."
It therefore seems to me that, on the facts alleged, it is not open to this court to extend the duty of care owed by these defendants to the plaintiff by imposing a duty in tort which, if I am right, is not contained in any express or implied term of the contract.
That conclusion, if correct, must dispose of this appeal and it is not necessary to decide whether, if that last obstacle could have been surmounted, the plaintiff would have demonstrated an arguable case for showing that it would be just and reasonable to impose the new duty necessary for the plaintiff's case. There are, I think, substantial difficulties when consideration is given to the current legislation to which I have already referred. In a number of contexts Parliament has legislated to protect people in this country from the risks of uncompensated injury. Compulsory employer's liability insurance has been imposed. Save for certain limited exceptions that duty does not apply to employment out of this country. Even in the limited and modest terms of a duty to warn it might be difficult to impose by judicial decision a duty on employers in respect of their servants working abroad, which relates to loss through injuries suffered where the employer is not responsible, having regard to the fact that Parliament has not imposed an obligation to ensure even in respect of injuries for which the employer would be liable. But on that issue I think that a decision would have been better made on the evidence after trial. In the result, for the reasons which I have given, I would dismiss this appeal;
LORD JUSTICE NEILL: I have had the advantage of reading in draft the judgments prepared by Lord Justice May and Lord Justice Ralph Gibson.
I agree with the conclusions reached by Lord Justice Ralph Gibson:
(a) That on the facts alleged in the Statement of Claim it is impossible to imply any term into the plaintiff's contract of service of which a breach would entitle the plaintiff to recover damages for the loss he has sustained; and
(b) that it is not open to this court to extend the duty of care owed by the defendants to the plaintiff by imposing a duty in tort which is not contained in any express or implied term of the contract.
I therefore agree that this appeal must be dismissed.
In those circumstances I do not find it necessary to express any view as to the circumstances in which a plaintiff may be able to recover damages in tort for pure economic loss. As Lord Justice May has indicated, this branch of the law is far from clear.
LORD JUSTICE MAY: I have had the advantage of reading the judgment of Lord Justice Ralph Gibson in draft and I respectfully agree with him that this appeal should be dismissed. As my Lord has said, the ordinary duty of care owed by a master to his servant arises both in contract and in tort. I agree that it is impossible to imply any term into the plaintiff's contract of service with the defendants in the instant case of which, on the facts alleged in the statement of claim, a breach would entitle the plaintiff to recover by way of damages compensation for the loss he has sustained. This being so, then I also agree that it is not open to us to extend the duty of care owed by the defendants to the plaintiff by imposing a duty in tort which is not contained in any express or implied term of the contract.
Although the point does not arise directly for decision in the instant appeal, however, I would wish to reserve my position on the question whether a duty of care not to cause economic loss may be owed in tort without any assumption of responsibility or reliance, or in the absence of some relationship between the parties which, as Devlin, L.J. said in Hedley Byrne & Co. Ltd. v. Heller & Partners [1964] AC 465, at 530, is equivalent to contract. I do not think that so to hold has been necessary for the decision of any of the cases on this topic to which my Lord has referred. In particular, I do not think that one can establish any positive principle in this regard by way of an argument founded upon that which their Lordships did not say in Yuen Kun Yen [1988] A.C. 175. The state of the law in this particular field is in my respectful opinion by no means satisfactory. This has been because the courts have in recent years sought to widen the scope of the tort of negligence to achieve what has been thought to be a just result in particular cases, without a sufficiently strict adherence to principles. For my part I respectfully adopt the cautionary approach of Lord Bridge of Harwich in his leading speech in D. & F. Estates Ltd. v. The Church Commissioners [1988] 3 W.L.R. 368, where at page 381 he said:
"My Lords I do not intend to embark on the daunting task of reviewing the wealth of other, mostly later, authority which bears, directly or indirectly, on the question whether the cost of making good defective plaster in the instant case is irrecoverable as economic loss, which seems to me to be the more important question for determination in the present appeal. My abstention may seem pusillanimous, but it stems from a recognition that the authorities, as it seems to me, speak with such an uncertain voice that, no matter how searching the analysis to which they are subject, they yield no clear and conclusive answer. It is more profitable, I believe, to examine the issue in the light of first principles."
Then Lord Bridge referred to the earlier decision in Junior Books Ltd. v. Veitchi Co. Ltd. [1983] 1 A.C.520. In respect of it he said - "The consensus of judicial opinion, with which I concur, seems to be that the decision of the majority is so far dependent upon the unique, albeit non-contractual, relationship between the pursuer and the defender in that case and the unique scope of the duty of care owed by the defender to the pursuer arising from that relationship, [that the decision] cannot be regarded as laying down any principle of general application in the law of tort or delict." Lord Bridge then quoted with approval a passage from the dissenting speech of Lord Brandon of Oakbrook in Junior Books to the effect that the basic principle stated by Lord Atkin in
Donoghue v. Stevenson was that "when a person can or ought to appreciate that a careless act or omission on his part may result in physical injury to other persons or their property, he owes a duty to all such persons to exercise reasonable care to avoid such careless act or omission. It is, however, of fundamental importance to observe that the duty of care laid down in Donoghue v. Stevenson was based on the existence of a danger of physical injury to persons or their property."
This reservation is not, however, directly material to the decision in the instant appeal which, as I have said, I agree should be dismissed.
Appeal dismissed with costs, not to be enforced without the leave of the court. Application for leave to appeal to the House of Lords refused.
