In a recent decision1 on an estate agent’s liability to a purchaser for errors in a sales brochure, the Supreme Court clarified the scope and validity of disclaimers of liability addressed by professional service firms to third parties. In the lead decision, O’Donnell J expressed the view that giving effect to the disclaimer best reflected the proper allocation of risk in the transaction, and that this approach would ultimately provide clarity and efficiency for market participants.
In 2000, the purchaser, Mr Walsh, an experienced property investor, viewed a property in Dublin which was being marketed by Jones Lang Lasalle ("JLL") on behalf of its client. JLL produced a sales brochure which contained details in relation to location, description, zoning, as well as precise calculations of floor area. The brochure also contained a disclaimer in small print to the effect that “Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending puchusers [sic] /lessees should satisfy themselves as to the correctness of the information given.”
Based on the statements of floor area contained in the brochure, Mr Walsh purchased the property. When he came to make arrangements to let the property, it was discovered that the floor area had been significantly overstated in the brochure and he initiated proceedings against JLL for loss in rental income.
The High Court awarded Mr Walsh €350,000 damages on the basis of the overpayment for the premises, on the grounds that the disclaimer did not negative JLL’s negligent misstatement about floor area in the brochure.
By a majority of three to two, the Supreme Court overturned the High Court decision and found that JLL was not liable to Mr Walsh for negligent misstatement.
Laffoy J (with whom O’Malley J concurred), having reviewed the development of the law on negligent misstatement, identified as a critical issue the question of whether or not there had been an assumption of responsibility by JLL to the intended recipient. If there was no assumption of responsibility then no duty of care arose.
This was a question which had to be answered objectively and the existence of the disclaimer was only one fact to be considered in this regard. Looking at the existence and effect of the disclaimer, Laffoy J was satisfied that there had been no assumption of responsibility by JLL. Hence, no duty of care arose and there was no liability to Mr Walsh.
O'Donnell J (with whom O'Malley J concurred) was critical of the High Court having blurred the distinction between negligent misstatement and negligence. Even though the High Court had felt that there was sufficient proximity to justify imposing a duty of care, O'Donnell J reiterated the important distinction that for negligent acts, liability should be imposed unless there are special circumstances ("duty of care unless") whereas for negligent statements, liability should not be imposed unless there are special circumstances ("duty of care only if").
In the case of a negligent act, a disclaimer operates as an exclusion clause excusing a party from liability arising from a breach of a duty of care which had been found to exist. In such circumstances, the disclaimer would have to be construed strictly and in accordance with legal doctrine; against the person who sought to rely on the disclaimer.
However, in a case of negligent misstatement (as he found this to be), the disclaimer is to be considered only as one (albeit crucial) piece of evidence in the overall factual context in determining whether or not there had been an assumption of responsibility and, thereby, a duty of care.
The specific facts which O’Donnell J identified as being relevant in this regard included:
- The fact that the contract for sale included no warranty as to the floor area of the property;
- As a result, Mr Walsh did not appear to have any claim against the vendor for the losses claimed;
- Mr Walsh could have but did not perform measurements of the floor area himself prior to purchasing the property;
- Although JLL was paid by the vendor based on the purchase price, the risk which would be assumed by it if the disclaimer was not effective would dwarf the profit which that JLL would make on the transaction; and
- There was no act or statement by JLL other than the production of the brochure on which to ground an assumption of a duty of care by it.
In light of these facts and the express terms of the disclaimer (and notwithstanding its admitted deficiencies), O’Donnell J held that JLL had not assumed full responsibility to all potential purchasers for the accuracy of statements in the brochure.
MacMenamin J, (with whom McKechnie J concurred) dissented and, in so doing, highlighted authorities to the effect that an appropriate disclaimer was necessary to negative a duty of care. Considering the content and location of the disclaimer (in the context of the brochure overall) he found that the disclaimer was not appropriate and therefore would be ineffective to exonerate JLL.
This decision provides a warning to professional service providers, be they estate agents or otherwise, to ensure to include robustly and clearly-worded disclaimers in all promotional material or any material used to induce the entry into a contract. It also clarifies the requirement to include such disclaimers in all materials used in the marketing and pre-contractual process and, where reasonable, to bring them to the attention of the target audience. The decision also makes it clear that in a case of a negligent misstatement, a disclaimer will not be analysed to the same standard as would be the case in negligence.
As to the question of what would potentially constitute a robustly and clearly-worded disclaimer: adopting the opinion of MacMenamin J in his dissenting judgment, a "crystal-clear" disclaimer should, at least:
- Make it clear that any particulars do not constitute an offer or contract;
- Disclaim responsibility on the part of the author and, where appropriate, its principal, for the statements made;
- State that there is to be no reliance on statements as factual representations;
- Direct that potential readers or recipients satisfy themselves as to the accuracy of any statements made; and
- Clarify that no representation or warranty is made in relation to the subject matter of the document.
Equally, the decision provides a stark warning to purchasers or others entering into a professional contract of the same ilk, to not overly rely on information provided to them in the marketing and pre-contractual process by the agents of their counterparty; to make pre-contract enquiries as to the scope and terms of the proposed sale or contract; and to seek the inclusion in the contract of express warranties supporting any statements in promotional documents upon which the purchasers have relied.
This case should not be viewed as a confirmation that a clearly-drafted disclaimer in similar circumstances will always disclaim liability. The agent or professional must be careful not to encourage reliance to be placed on a statement as to do so could have the effect of diluting or negating the effect of a disclaimer. The onus on the agent or professional, in this regard, could be greater where they are dealing with a less-sophisticated purchaser, for example, in a residential property transaction, or where certain particulars or facts are legally required to be included in the brochure for sale, such as an up-to-date BER rating.