Spring v Guardian Assurance plc is a leading House of Lords decision addressing whether an employer owes a duty of care when providing a reference for a former employee. The case sits at the intersection of UK labour law and English tort law, and it clarified that negligent misstatement in an employment reference can give rise to liability in tort.
The decision also considered the limitations of defamation law in this context and the possibility of an implied contractual duty of care within employer–employee relationships.
Facts of Spring v Guardian Assurance plc
The plaintiff had been employed by a company engaged in estate agency services and in acting as an agent for the sale of insurance products issued by Guardian Insurance. Under regulations issued by LAUTRO, this company was recognised as an “appointed representative”. In that capacity, the plaintiff himself was designated as a “company representative” of Guardian Assurance, which authorised him to sell Guardian products and provide advice regarding their merits.
The plaintiff’s circumstances changed when his employer was acquired by Guardian. Following the takeover, the new chief executive experienced difficulties in working with the plaintiff, and the relationship deteriorated. Eventually, the plaintiff was dismissed, and this dismissal occurred without any explanation being offered.
Following his dismissal, the plaintiff sought to continue working in the insurance sector by establishing his own business. To do so, he approached the Scottish Amicable Life Assurance Society in an attempt to become one of their company representatives.
However, LAUTRO rules required that any member organisation take reasonable steps to ensure that an applicant was of good character and possessed the necessary aptitude and competence. These safeguards included the mandatory requirement of obtaining professional references.
In compliance with these rules, Scottish Amicable sought a reference from Guardian Assurance. Guardian provided unfavourable references regarding the plaintiff. The negative information was not confined to Scottish Amicable; Guardian sent similar unfavourable references to two other insurers who were also considering the plaintiff for representative roles.
As a result, the plaintiff believed that these references were inaccurate and negligently prepared. He claimed that the statements amounted to negligent misstatements causing him economic loss. Consequently, he brought legal proceedings against Guardian Assurance, alleging malicious falsehood, breach of contract and negligence.
Issues
The principal issue before the House of Lords in Spring v Guardian Assurance plc was whether an employer owes a duty of care in tort to a former employee when providing a professional reference. The question required the court to determine whether negligent misstatements in a reference, which result in foreseeable economic loss, could fall within the scope of the principles established in Hedley Byrne & Co Ltd v Heller & Partners Ltd, which recognised the tort of negligent misstatement.
A secondary issue concerned whether the duty of care might also arise from an implied term in the contract of employment. The court was required to consider whether the relationship between employer and employee is sufficiently close to justify implying such a duty.
The judgement also touched on the broader relationship between negligence and defamation. A claim for malicious falsehood had been rejected by the trial judge and was not appealed, but all the Lords acknowledged that in cases involving references, the defence of qualified privilege is usually available.
Under this doctrine, an employer providing a reference is protected unless the employee can prove malice, a demanding standard. This raised an important question: whether the law of negligence should fill the remedial gap left by the limitations of defamation law.
Spring v Guardian Assurance plc Judgement
The House of Lords, by a majority of four to one, held that Guardian Assurance owed a duty of care in tort when preparing the plaintiff’s references. This approach relied on the reasoning in Hedley Byrne and the development of negligence principles in Anns v Merton LBC.
The House concluded that the relationship between the parties was sufficiently proximate, that economic loss was foreseeable, and that it was just and reasonable to impose such a duty. The references were relied upon by prospective employers, and the plaintiff was clearly vulnerable to negligent misstatements.
By a narrower majority of three to two, the House of Lords also held that the duty could be expressed as arising from an implied contractual term in the employment relationship. The idea was that employers are expected to exercise reasonable care when providing information that could materially affect a former employee’s future career prospects. However, this contractual basis was not central to the majority’s reasoning.
The trial judge had rejected the claim of malicious falsehood, and the House of Lords did not revisit that point. Each of the Law Lords commented that a malicious falsehood claim would likely fail in employment reference cases unless malice could be demonstrated.
They relied on the policy principles underlying qualified privilege, articulated by Lord Diplock in Horrocks v Lowe and later expanded in New Zealand jurisprudence. That jurisprudence was cited with approval by Lord Keith, whose analysis reinforced why defamation law alone cannot adequately protect employees harmed by negligent but non-malicious references.
The majority held that providing a poor reference containing inaccurate information could amount to a breach of duty in tort. The employer’s responsibility was therefore not limited to refraining from malicious statements; it extended to avoiding careless or negligent misstatements.
Dissent
Although Lord Woolf agreed with the broader principle that negligent misstatement causing economic loss can be actionable in tort, he dissented regarding the outcome in Spring v Guardian Assurance plc. He cautioned against overextending the law of negligence, referring to the more restrictive approach adopted in Caparo Industries plc v Dickman.
According to that framework, foreseeability, proximity and fairness must be established with care, and Lord Woolf did not consider that the circumstances of this case justified an extension of liability.
His dissent highlighted a concern that imposing a duty of care in every reference situation could create practical difficulties for employers, who might become unwilling to provide references at all for fear of litigation.
Conclusion
Spring v Guardian Assurance plc remains a foundational authority on negligent references within employment law. The decision confirmed that employers must act with reasonable care when providing information upon which a former employee’s livelihood may depend. By grounding liability in tort and acknowledging the limitations of defamation law, the House of Lords created a more balanced system of protection for employees while signalling caution through the close division of opinion.