Title
Arenson v. Casson Beckman Rutley & Co., [1977] A.C. 405 et seq.
Content
405

Arenson Appellant v Casson Beckman Rutley & Co. Respondents

House of Lords

Lord Simon of Glaisdale , Lord Wheatley , Lord Kilbrandon , Lord Salmon and Lord Fraser of Tullybelton

1975 July 14, 15, 16, 17; Nov. 11

[On Appeal from Arenson v. Arenson]

Held
, allowing the appeal, (per Lord Simon of Glaisdale, Lord Wheatley, Lord Salmon and Lord Fraser of Tullybelton) that the immunity of judges and arbitrators was exceptional to the general rule of liability for negligence; that there was no reason of public policy making it necessary to treat a "mutual" valuer as an exception to that rule, and that accordingly, the plaintiff's statement of claim disclosed a cause of action against the second defendants (post, pp. 419C-E, 425B-D, 426C - 427A, C-D, 436C - 437H, 439B - D , 442F).
406
Sutcliffe v. Thackrah [1974] A.C. 727 , H.L.(E.) applied.

Finnegan v. Allen [1943] K.B. 425 , C.A. considered.

Per Lord Simon of Glaisdale and Lord Wheatley. The essential prerequisite for a valuer to claim immunity as an arbitrator is that, by the time the matter is submitted to him for decision, there should be a formulated dispute between at least two parties which his decision is required to resolve (post, pp. 424E-F, 428E-F).

Per Lord Kilbrandon. Arbitrators at common law or under the Arbitration Acts have no such immunity as is suggested (post, pp. 431A-B, 432D).

Per Lord Salmon and Lord Fraser of Tullybelton. It may be that a person, even if formally appointed as an arbitrator, ought not in all cases to be accorded immunity (post, pp. 440D-E, 442D).

Decision of the Court of Appeal [1973] Ch. 346; [1973] 2 W.L.R. 553; [1973] 2 All E.R. 235 reversed.

The following cases are referred to in their Lordships' opinions:

Boynton v. Richardson's (A Firm) [1924] W.N. 262 .

Carus-Wilson and Greene, In re (1886) 18 Q.B.D. 7, C.A. 

Chambers v. Goldthorpe [1901] 1 K.B. 624, C.A. 

Finnegan v. Allen [1943] K.B. 425; [1943] 1 All E.R. 493, C.A. 

Hammond and Waterton, In re an Arbitration between (1890) 62 L.T. 808, D.C. 

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963] 3 W.L.R. 101; [1963] 2 All E.R. 575 , H.L.(E.).

Hopper, In re (1867) L.R. 2 Q.B. 367, D.C. 

Jenkins v. Betham (1855) 15 C.B. 168 .

Lingood v. Croucher (1742) 2 Atk. 395 .

Musurus Bey v. Gadban [1894] 1 Q.B. 533, D.C. 

Pappa v. Rose (1871) L.R. 7 C.P. 32; (1872) L.R. 7 C.P. 525 .

Rondel v. Worsley [1969] 1 A.C. 191; [1967] 3 W.L.R. 1666; [1967] 3 All E.R. 993 , H.L.(E.).

Sirros v. Moore [1975] Q.B. 118; [1974] 3 W.L.R. 459; [1974] 3 All E.R. 776, C.A. 

Stevenson v. Watson (1879) 4 C.P.D. 148 .

Sutcliffe v. Thackrah [1973] 1 W.L.R. 888 ; [1973] 2 All E.R. 1047 , C.A.; [1974] A.C. 727; [1974] 2 W.L.R. 295; [1974] 1 All E.R. 859 , H.L.(E.).

Tharsis Sulphur and Copper Co. Ltd. v. Loftus (1872) L.R. 8 C.P. 1 .

Turner v. Goulden (1873) L.R. 9 C.P. 57 .

The following additional cases were cited in argument:

Absalom (F. R.) Ltd. v. Great Western (London) Garden Village Society Ltd. [1933] A.C. 592 , H.L.(E.).

Anonymous Case (1748) 3 Atk. 644 .

Collins v. Collins (1858) 26 Beav. 306 .

Dean v. Prince [1954] Ch. 409; [1954] 2 W.L.R. 538; [1954] 1 All E.R. 749, C.A. 

Fray v. Blackburn (1863) 3 B. & S. 576 .

Livingston v. Ralli (1855) 5 E. & B. 132 .

London Export Corporation Ltd. v. Jubilee Coffee Roasting Co. Ltd. [1958] 1 W.L.R. 271; [1958] 1 All E.R. 494 ; [1958] 1 W.L.R. 661; [1958] 2 All E.R. 411, C.A. 
407
Lynall, decd., In re [1972] A.C. 680; [1971] 3 W.L.R. 759; [1971] 3 All E.R. 914 , H.L.(E.).

Mediterranean and Eastern Export Co. Ltd. v. Fortress Fabrics (Manchester) Ltd. [1948] 2 All E.R. 186 .

Prodexport State Co. for Foreign Trade v. E. D. & F. Man Ltd. [1973] Q.B. 389; [1972] 3 W.L.R. 845; [1973] 1 All E.R. 355 .

Roy v. Prior [1971] A.C. 470; [1970] 3 W.L.R. 202; [1970] 2 All E.R. 729 , H.L.(E.).

Wiseman v. Borneman [1971] A.C. 297; [1969] 3 W.L.R. 706; [1969] 3 All E.R. 275 , H.L.(E.).

APPEAL from the Court of Appeal.

This was an appeal by the plaintiff, Ivor Gerald Arenson, by leave of the Court of Appeal given on July 22, 1974, from their majority decision on February 22, 1973 (Buckley L.J. and Sir Seymour Karminski, Lord Denning M.R. dissenting), dismissing the plaintiff's appeal from an order of Brightman J. on March 29, 1972 [1972] 1 W.L.R. 1196 Brightman J. held that the plaintiff's statement of claim in an action by him against the first defendant, Archy Arenson, and the second defendants, Casson Beckman Rutley & Co., the respondents to the present appeal, disclosed no cause of action against the second defendants and ordered that as against them the statement of claim should be struck out and the action dismissed.

The facts are set out in the opinions of Lord Simon of Glaisdale and Lord Salmon.

415

Their Lordships took time for consideration.

November 11. LORD SIMON OF GLAISDALE.

My Lords, the question in this appeal is whether an accountant/auditor of a private company who on request values shares in the company in the knowledge that his valuation is to determine the price to be paid for the shares under a contract for their sale is liable to be sued if he makes his valuation negligently.

The first defendant, Archy Arenson (who has taken no part in the proceedings which have led to the instant appeal), was the controlling shareholder and chairman of a private company, A. Arenson Ltd. He took his nephew, Ivor Arenson, the plaintiff in this action and the appellant before your Lordships, into the business, and Archy Arenson and his wife gave the appellant a parcel of shares in the company. By two documents ("the contract letters") dated March 18, 1964, and October 1, 1968, the appellant agreed with the first defendant (inter alia) as follows, the terms being common to both letters:

"5.

In the event of my employment with the company terminating for whatsoever reason, I will offer to sell my shares to Mr. Arenson" (the first defendant) "and it is agreed that he will purchase them from me at the fair value.... 6. 'Fair value' shall mean in relation to the shares in A. Arenson Ltd., the value thereof as determined by the auditors for the time being of the company whose valuation acting as experts and not as arbitrators shall be final and binding on all parties."

The respondents to this appeal, a firm of chartered accountants, were at all material times the auditors of the company. They are the second defendants in the action.

On April 4, 1970, the appellant's employment by the company ceased. It appears that the secretary of the company thereupon orally requested the respondents to value the appellant's shares (though the detailed terms of this communication are not before your Lordships). The respondents replied to the company secretary by letter dated May 13, 1970, referring to the contract letters, and giving the "fair value" of the shares as £4,916 13s. 4d. On June 11, 1970, in reliance on that valuation, the plaintiff transferred his shares to the first defendant and received payment of £4,916 13s. 4d.

A few months later the company "went public," the transaction involving a report by the respondents. The appellant alleges that the transaction showed that the shares which he had sold were worth six times their value as assessed by the respondents. In consequence, on August 19, 1971, the appellant brought the action from which this appeal arises. Alleging that "the said valuation was misconceived and erroneous in one or more fundamental respects and was made on a wrong basis or wrong bases," he in effect claimed from the first defendant the difference between what he had been paid for the shares and the sixfold sum which he asserts was their true value. Further or in the alternative, the appellant claimed damages from the respondents, alleging that they "were negligent in making the said valuation."

By summons dated October 21, 1971, the respondents applied for an 416 order, under R.S.C. , Ord. 18, r. 19 and the inherent jurisdiction of the court, that the statement of claim should be struck out and the action dismissed as against themselves (the respondents), on the ground that the statement of claim disclosed no reasonable cause of action against them. The matter was adjourned to Brightman J., who delivered a reserved judgment [1972] 1 W.L.R. 1196 . He held that a clear line of authority (Pappa v. Rose (1871) L.R. 7 C.P. 32; (1872) L.R. 7 C.P. 525 ; Tharsis Sulphur and Copper Co. Ltd. v. Loftus (1872) L.R. 8 C.P. 1 ; Stevenson v. Watson (1879) 4 C.P.D. 148 ; Chambers v. Goldthorpe [1901] 1 K.B. 624 ; Boynton v. Richardson's (A Firm) [1924] W.N. 262 ; Finnegan v. Allen [1943] K.B. 425 ) established a principle whereby the appellant's claim against the respondents was misconceived and bound to fail. Brightman J. stated the principle as follows, at p. 1205:

"... where a person (though not an arbitrator) is in the position of an arbitrator, with a duty to hold the scales evenly between two other parties for the purposes of resolving by the exercise of his own judgment a matter that is not agreed between them, it is not expedient that the law should entertain an action against the opinion-giver alleging an error, whether negligent or not."

I shall presume to call this "Brightman J.'s formulation." Although he did not use the term expressly, it is apparent that the learned judge considered the rule to be one of public policy.

The appellant appealed to the Court of Appeal. By reserved judgments delivered on February 22, 1973, they dismissed the appeal, Lord Denning M.R. dissenting [1973] Ch. 346 . The majority (Buckley L.J. and Sir Seymour Karminski) relied on the same authorities as Brightman J. Buckley L.J. summarised their effect in a passage which I presume to call "Buckley L.J.'s formulation," at p. 370:

"... these authorities establish in a manner binding upon us in this court that, where a third party undertakes the role of deciding as between two other parties a question, the determination of which requires the third party to hold the scales fairly between the opposing interests of the two parties, the third party is immune from an action for negligence in respect of anything done in that role."

Later in his judgment, at p. 371, Buckley L.J. reformulated the principle in such a way as to elucidate that by "question" he meant "matter in dispute or upon which other parties have opposed interests." A clear distinction, in his opinion, was to be drawn between the position of a third party who is required to adjudicate in such a way and one to whom the parties delegate the function of ascertaining some matter of fact. Buckley L.J. held the rule to be based on public policy (p. 370), which, though not precluding a duty from arising, gives immunity from the consequences of its breach (pp. 368-369). Sir Seymour Karminski delivered a short concurring judgment.

It will be noted that there is some difference between Brightman J.'s and Buckley L.J.'s formulations. Buckley L.J.'s as elucidated involves either "a dispute" or "opposed interests," while Brightman J.'s goes no further than "a matter that is not agreed between them." Buckley L.J.'s formulation was approved by my noble and learned friend, Lord Salmon, in 417 Sutcliffe v. Thackrah [1974] A.C. 727 , 764 as an accurate distillation of the authorities relied on, though he disapproved of the reasoning of these authorities and of Buckley L.J.'s resultant formulation of principle.

Apparently it had been suggested to the Court of Appeal (though not to Brightman J.) that the statement of claim might be so amended as to preclude the drastic expedient of striking out. The Court of Appeal was willing to consider such an application on production of a draft of the proposed amendment. This was produced on July 9, 1973, when the Court of Appeal gave leave to amend. The Court of Appeal's order of that date in effect: (1) declared that the (unamended) statement of claim disclosed no reasonable cause of action against the respondents; (2) ordered that the appellant should be at liberty to amend the statement of claim in accordance with the draft produced; (3) ordered that, on the footing of such amendment, Brightman J.'s striking out order should be discharged; (4) gave the appellant liberty to apply for leave to appeal to your Lordships' House. The costs of the application to Brightman J. and to the Court of Appeal were to be the respondents' in any event. The allegation of and claim in negligence against the respondents therefore remained on the record, though with a declaration that it thereby disclosed no cause of action. I apprehend that the Court of Appeal took this course because they considered that the issue might ultimately be appealed to your Lordships, and that, against such an event, it would be desirable for the trial judge de bene esse to make findings of fact in relation to the allegation of negligence against the respondents. But the procedure involves the trial judge hearing and ruling on evidence which a Court of Appeal judgment in the very case held to be irrelevant. The allegations contained in the amendment to the statement of claim do not affect the issue before your Lordships, and I desire to say nothing about them.

On February 12, 1974, your Lordships' House gave judgment in Sutcliffe v. Thackrah [1974] A.C. 727 . The plaintiff there had employed builders, who subsequently went into liquidation, to build a house for him, the contract being in the standard R.I.B.A. form. The defendants were appointed architects and quantity surveyors under the contract. The plaintiff brought an action in negligence against the defendants for (inter alia) over-certifying interim sums due from the plaintiff to the builders. The official referee found for the plaintiff and awarded him damages against the defendants. The Court of Appeal [1973] 1 W.L.R. 888 reversed the decision on the ground that the defendants were acting in an arbitral capacity and were accordingly absolved from liability for negligence. Your Lordships' House restored the judgment of the official referee. It will be necessary to refer to the opinions in greater detail later. At this stage it is sufficient to state: (1) the Court of Appeal in Sutcliffe v. Thackrah relied on the line of authority which the majority of the Court of Appeal followed in the instant case; (2) your Lordships' House expressly overruled Chambers v. Goldthorpe [1901] 1 K.B. 624 , which was directly in point, in that line of authorities; (3) the majority of the Appellate Committee expressly disapproved of Buckley L.J.'s formulation in the instant case (Lord Reid, p. 737; Lord Hodson, concurring, p. 753; Lord Salmon, p. 764).

418

In consequence of the decision in Sutcliffe v. Thackrah, the instant appellant applied to the Court of Appeal for leave to appeal immediately to your Lordships' House against their order of July 9, 1973, and, despite the respondents' opposition, the Court of Appeal on July 22, 1974, acceded to that application - obviously considering that the legal issue raised by the striking out application could now most conveniently be decided at an interlocutory stage.

Formally, the appeal to your Lordships is only against the costs order made by the Court of Appeal. But it has been rightly treated as raising the point of law which I posed at the outset of this speech - the legal issue falling to be decided on the basis that the facts set out in the statement of claim are correct. Although it would be deplorable were there to be a further appeal in point of law between the appellant and the respondents, the procedure by which the matter has come before your Lordships is an unusual, and in many ways an inconvenient, one for disposing of all the legal issues which may arise between the appellant and the respondents.

Counsel for the respondents, with the ratio decidendi of the majority of the Court of Appeal in the instant case no longer tenable, had perforce to support by a new formulation the actual decision that no action against the respondents lay in negligence. This he did with force and ingenuity - all the more exacting in view of decisions that a "mere valuer" is not immune from suit in negligence by the person who employs him in the valuation: Jenkins v. Betham (1855) 15 C.B. 168 ; Turner v. Goulden (1873) L.R. 9 C.P. 57 ; In re Carus-Wilson and Greene (1886) 18 Q.B.D. 7 ; In re an Arbitration between Hammond and Waterton (1890) 62 L.T. 808 . Counsel founded his argument on four propositions: (1) judges and arbitrators enjoy immunity from suit in negligence in respect of their decisions; (2) such immunity is conferred by law on grounds of public policy, namely, the desirability of speedy and final settlement of disputes; (3) Lord Reid in Sutcliffe v. Thackrah [1974] A.C. 727 , 738 (Lord Hodson concurring) considered that "many, probably most" of the decisions on which the Court of Appeal relied in that case, as in the instant one, could be justified on their facts, and only Lord Salmon specifically disapproved of any other than Chambers v. Goldthorpe [1901] 1 K.B. 624 ; (4) the generic nature of the immunity recognised in those cases not specifically disapproved was marked by the long standing and reiterated use of the phrase "quasi-arbitrator" (which Lord Morris of Borth-y-Gest, at pp. 742 and 744, and Viscount Dilhorne, at p. 754 cited in Sutcliffe v. Thackrah without apparent disapproval) - thereby according recognition that the role of the person concerned has some essential characteristic akin to that of an arbitrator. Counsel then went on to ask what this essential characteristic could be. Why should judges and arbitrators enjoy immunity from suit in negligence? Because, said counsel, they are in a particularly vulnerable situation; in the nature of things their decisions are liable to be displeasing to at least one of the parties affected thereby: as counsel put it, "they are liable to be shot at by both sides." This, then, is the first essential characteristic which is shared by arbitrator and "quasi-arbitrator," and the first prerequisite to constitute a person who is not an arbitrator under the 419 Arbitration Act 1950 a "quasi-arbitrator" so as to enjoy immunity from suit. The second such characteristic of an arbitrator, and prerequisite for immunity from suit, is that two or more parties have agreed to be bound by his decision on the question between them. The respondents satisfied both prerequisites; accordingly, they are "quasi-arbitrators" and immune from suit in negligence in respect of their decision. So far as public policy is concerned, no logical distinction can be drawn between the speedy and final settlement of disputes by an arbitrator and the obviation of disputes by a valuer in the position of the respondents: if public policy requires immunity in the one case, so it must also in the other.

Skilfully though this argument was deployed, I find it less than compelling. My main objections are that the journey starts at the wrong place and arrives at a wrong place. It starts with the immunity conferred on the arbitrator for reasons of public policy. But in my judgment this is a secondary and subordinate consideration of public policy. There is a primary and anterior consideration of public policy, which should be the starting point. This is that, where there is a duty to act with care with regard to another person and there is a breach of such duty causing damage to the other person, public policy in general demands that such damage should be made good to the party to whom the duty is owed by the person owing the duty. There may be a supervening and secondary public policy which demands, nevertheless, immunity from suit in the particular circumstances (see Lord Morris of Borth-y-Gest in Sutcliffe v. Thackrah [1974] A.C. 727 , 752). But that the former public policy is primary can be seen from the jealousy with which the law allows any derogation from it. Thus a barrister enjoys immunity, but only in respect of his forensic conduct (since his duty to the court may conflict with and transcend his duty to his client): Rondel v. Worsley [1969] 1 A.C. 191 . and a diplomatic envoy enjoys immunity, but only so long as he is in post (plus a reasonable time thereafter for him to wind up his official affairs): Musurus Bey v. Gadban [1894] 1 Q.B. 533 .

It is, in my view, wrong in principle to freewheel by analogy from the arbitrator's immunity, as if it were not exceptional, and as if the primary rule were not one of responsibility.

Not only does the argument start from the wrong place, it arrives at an impossible place. The respondents' contention would leave the instant case in absurd discrepancy with Sutcliffe v. Thackrah [1974] A.C. 727 and throw the law into hopeless confusion. The only ways that Sutcliffe v. Thackrah can be distinguished are, first, that the architect there was for many purposes the building owner's agent whereas the instant respondents were agents of neither the appellant nor the first defendant, and, secondly, that the R.I.B.A. contract contained an arbitration clause. As for the former consideration, it is true that Lord Morris of Borth-y-Gest, at pp. 744-745, and Viscount Dilhorne, at p. 757, mentioned the relationship of agency; but they did not do so as the start or any intermediate part of their process of reasoning, but rather as its conclusion: since the architects were not made arbitrators they remained throughout agents of the building owner, and as such liable to him on the general principle of responsibility for negligence.

420

As for the arbitration clause, both Lord Morris of Borth-y-Gest, at p. 744, and Viscount Dilhorne, at p. 757, attached importance to it as showing that the architect was not an arbitrator but remained the agent of the building owner. Lord Salmon also mentioned the point, at p. 759, but I do not think that it formed part of his ratio decidendi, which was to answer the comprehensive question:

"... namely, the limits of the immunity which the law affords against claims in respect of negligence in general." (p. 757.) "... The question is - does this immunity extend beyond arbitrators properly so called, and if so, what are its limits?" (p. 758).

Lord Reid did not even mention the arbitration clause.

Moreover, all the members of the Appellate Committee which decided Sutcliffe v. Thackrah invoked the analogy of a valuer. Lord Reid (Lord Hodson concurring) said, at p. 736:

"But whatever be the grounds of public policy which have given rise to this immunity of persons acting in a judicial capacity, I do not think that they have anything like the same force when applied to professional men when they are not fulfilling a judicial function. The point can perhaps be most clearly illustrated by considering the case of a skilled man engaged to value some property or object. The circumstances may vary very much. The owner may wish to sell or insure the property and want to know its market value. No one doubts that in that case the valuer may be sued for negligence if his negligent valuation has caused loss to the owner. Or the owner may have reason to believe that a particular person A would buy the property from him and would accept a valuation by a skilled man. Or he may have agreed with A to sell at a price to be fixed by a skilled valuer, or by this particular valuer. and he may or may not have told the valuer about this when engaging him. There is modern authority to the effect that if the valuer knows that his valuation will affect or bind another person besides his client, the owner, then he can claim an arbitrator's immunity. But why should that be?"

Lord Morris of Borth-y-Gest, at p. 750, quoted with approval from the dissenting judgment of Romer L.J. in Chambers v. Goldthorpe [1901] 1 K.B. 624 , 642:

"'Suppose a person undertakes for reward to value or estimate for another work about to be done for his principal by a third person; in my opinion, he does not, so far as his principal is concerned, become in the position of an arbitrator in regard to his valuation or estimate, merely because he knows that his principal and the third person have by contract between them agreed that, in default of dispute previously arising with regard to the matter, his valuation or estimate is to be taken as conclusive, and as determining the price to be paid by his principal for the work to be done by the third person.'"

(Since Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 it cannot be a precondition for liability that the valuer has undertaken 421 the valuation "for reward." Viscount Dilhorne, at p. 756, cited with approval the same passage from Romer L.J.'s judgment. Lord Reid (Lord Hodson concurring) stated, at p. 738, that he had adopted a good deal of Romer L.J.'s reasoning. Lord Salmon actually founded his argument on the example of a valuer, at pp. 758-759:

"A well-known dealer in 18th century English paintings is brought an 18th century English painting to value for a handsome fee. He is not told why his client requires the valuation. It may be because he intends to sell it or insure it, or perhaps just out of curiosity. The dealer values the picture (entirely honestly but wrongly) at £500. Relying on this valuation, the client asks £500 for the picture, and sells it for that sum. It is subsequently established that the picture was worth £50,000 and that this should have been obvious to anyone in the dealer's position who had exercised reasonable care and the skill which he professed. In such circumstances, the client would have an unanswerable claim against the dealer in negligence. Now suppose exactly the same facts, save that when the client brought the picture to the dealer he told him that the valuation was wanted because he was going to sell the picture to a friend, and the friend had agreed to buy the picture for the value which the dealer put upon it, providing he could afford to do so. It would appear on the authority of certain cases, to which I will refer later, that the dealer would then be immune from being sued by his client because of his additional duty to act impartially and fairly towards his client's friend. It is said that this factor, of itself, puts the dealer in the same position as if he were performing the functions of a judge or arbitrator; and accordingly, so the argument runs, public policy requires that he should have complete immunity in respect of his undoubted negligence, which had admittedly caused his client a loss. I am afraid that I can find no sensible basis for such an astonishing proposition."

Lord Salmon tested the position of the architect in Sutcliffe v. Thackrah by reference to that of the valuer, at p. 759:

"I confess that I can see no more reason for regarding the architect as being in the same position as a judge or arbitrator than there is for so regarding the valuer."

These passages emphasise the final reason why, as it seems to me, the argument for the respondents not only starts from the wrong place but also ends up in a wrong place - namely, that it is liable to cause injustice without in any way advancing justice. A person adversely affected by a negligent valuation (possibly for rich reward) is left without a remedy. He is, in fact, in a worse position than under a formal arbitration, where he has the right to demand a case to be stated for the opinion of the court.

Furthermore, several of the intermediate steps by which the respondents' argument proceeds seem to me to be on shaky ground. Lord Reid did indeed say that "Many, probably most, of the decisions can be justified on their facts." But he went on to make it apparent that those were cases in which "there was a sufficient judicial element to require an arbitrator's 422 immunity" (p. 738). (I shall have to return later to the concept of "sufficient judicial element.") Similar were the explanations of Pappa v. Rose, L.R. 7 C.P. 32; L.R. 7 C.P. 525 (p. 747) and Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 by Lord Morris of Borth-y-Gest, at p. 748, and Viscount Dilhorne, at pp. 754, 755. Lord Salmon regarded Pappa v. Rose as correctly decided on a ground irrelevant to the issue before your Lordships (p. 761) and the Tharsis case as wrongly decided (p. 762). With regard to Stevenson v. Watson, 4 C.P.D. 148 , Lord Morris of Borth-y-Gest, Viscount Dilhorne and Lord Salmon all regarded the architect there as having been appointed by "the special terms" of a building contract to occupy the position of arbitrator (pp. 749, 755, 763-764). So much for the cases relied on as yielding a principle in favour of the respondents.

Then there is the alleged criterion of liability to be "shot at by both sides." This could, however, arise in the case of a "mere" valuer - i.e., one admittedly not a "quasi-arbitrator." Thus, it has never been doubted that Jenkins v. Betham (1855) 15 C.B. 168 was correctly decided. An incoming rector was entitled to payment for dilapidations from his predecessor. Each appointed a valuer with a view to agreeing the figure. They did agree, but on a common incorrect basis, so that the figure was much too low. The incoming rector was held to be entitled to damages from his own valuer. But, since Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.[1964] A.C. 465 , the outgoing rector's valuer also might well have been held to be jointly liable to the incoming rector.

Finally, there is the alleged criterion of immunity that the valuation, etc., should be final and conclusive between the parties, such being, it was argued, a characteristic of arbitration. But that is not necessarily so. An arbitrator's award may be subject to review, if he has been appropriately requested to state a case, and there are some other controls over arbitrators by the courts. Finality and conclusiveness do not seem to me to be so characteristic of arbitration as to suggest that anyone not an arbitrator whose decision is final and binding is a "quasi-arbitrator." enjoying immunity from suit in negligence. Even strictly judicial decisions are generally subject to review by way of appeal or rehearing.

I think that a good part of the difficulty which has arisen in this branch of the law has come from the use of the word "quasi-arbitrator." "Quasi" is all too apt to confuse, and to mask valid juridical distinctions. "Quasi-arbitrator" could mean any of the following: (1) such person as is described in Buckley L.J.'s formulation; (2) such person as is described in Brightman J.'s formulation; (3) such person as satisfies the two criteria put forward by counsel for the respondents; (4) an arbitrator at common law in contradistinction from one under the Arbitration Act 1950 ; (5) a person who is not an arbitrator under the Arbitration Act but nevertheless "acts in a judicial capacity" or "character," or "fulfils a judicial function."

Meaning (1) is excluded by Sutcliffe v. Thackrah [1974] A.C. 727 . A fortiori meaning (2), since it does not necessitate the "quasi-arbitrator" acting in any way judicially apart from acting fairly - a criterion shown by Sutcliffe v. Thackrah to be insufficient. I have already given my 423 reasons why I have not been able to accept meaning (3). I am inclined to think that meanings (4) and (5) are merely different ways of putting the same essential concept. But (5) was the way it was considered in Sutcliffe v. Thackrah, and it was the "judicial function" which was discussed in argument before your Lordships.

The main issue in this part of the case was whether it was of the essence of a judicial decision that it answers a question (the respondents' contention) or decides a dispute (the appellant's contention). The latter seems to me to be the right view both in principle and on authority. It is true that judges sometimes answer questions. Examples are references by the Home Secretary to the Court of Appeal (Criminal Division), certain references to the Judicial Committee of the Privy Council and summonses by executors or trustees for the construction of a will or settlement. But these are exceptional, and not the characteristic, activities of judges. The general judicial role in society is to resolve disputes which the parties themselves cannot resolve by conciliation, compromise or surrender.

That is, indeed, the theme that runs throughout the speeches in Sutcliffe v. Thackrah [1974] A.C. 727 . It is only necessary to cite a few passages. Lord Reid said, at p. 735:

"There is a general rule that a person employed to perform duties of a professional character is liable in damages if he causes loss to his employer by failure to take due care or to exercise reasonable professional skill in carrying out his duties. So why should he not be liable if the duties which he is employed to perform are of a judicial character? The reason must, I think, be derived at least in part from the peculiar nature of duties of a judicial character. In this country judicial duties do not involve investigation. They do not arise until there is a dispute. The parties to a dispute agree to submit the dispute for decision," and, at p. 736: "On the other hand, the valuer could be engaged by both parties as an arbitrator if there is a dispute about the value of certain property. The dispute would be submitted to him for decision and the parties would put their contentions before him. Then he would have to judge between them and have an arbitrator's immunity."

 Lord Morris of Borth-y-Gest said, at p. 744:

"If there is no arbitration to which the provisions of the Arbitration Act apply but if two or more people informally agree to refer a disputed matter to the decision of some person of their own selection they may place him in the position of quasi-arbitrator and the common understanding of them all may be that the chosen person in accepting the charge does not expressly or implicitly undertake to do more than to give his honest opinion." and at p. 745: "One of the features of an arbitration is that there is a dispute between two or more persons who agree that they will refer their dispute to the adjudication of some selected person whose decision upon the matter they agree to accept.... A valuer may not be exercising any judicial function. There may be a situation in which two people 424  wish to know the value of some property with a view possibly to their making some contract in regard to it. They may have no dispute because neither has any precise idea as to the value."

At p. 750, Lord Morris expressly dissented from the view of Collins L.J. in Chambers v. Goldthorpe [1901] 1 K.B. 624 , 640 that "... no formulated dispute is necessary before such 'third person' has both the duties and also the immunities of a quasi-arbitrator." Viscount Dilhorne said, at p. 754:

"That persons who are appointed as arbitrators, or as it has been called quasi-arbitrators, to resolve a dispute which has arisen or which may arise cannot be sued for negligence in respect of their decisions is, I think, clear law."

Viscount Dilhorne expressed the view, at p. 757, that Pappa v. Rose, L.R. 7 C.P. 32 and Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 were only correctly decided if on the true view of the contracts in those cases the broker and the average adjuster respectively "were appointed... to resolve disputes... which might arise or had arisen." Lord Salmon said, at p. 759:

"... there are the most striking differences between the roles of the valuer and architect in the circumstances to which I have referred and the role of a judge or arbitrator. Judges and arbitrators have disputes submitted to them for decision."

The reason why Lord Salmon thought that the Tharsis case was wrongly decided was that there did not seem to him to be any dispute between the parties (p. 762).

There may well be other indicia that a valuer is acting in a judicial role, such as the reception of rival contentions or of evidence, or the giving of a reasoned judgment. But in my view the essential prerequisite for him to claim immunity as an arbitrator is that, by the time the matter is submitted to him for decision. there should be a formulated dispute between at least two parties which his decision is required to resolve. It is not enough that parties who may be affected by the decision have opposed interests - still less that the decision is on a matter which is not agreed between them.

Counsel for the respondents relied strongly on Finnegan v. Allen [1943] K.B. 425 . It may be that there was a dispute between the parties there (see pp. 431, 432). Lord Morris of Borth-y-Gest in Sutcliffe v. Thackrah [1974] A.C. 727 seems to have thought that Finnegan v. Allen was rightly decided, on the basis that on the "somewhat special" facts (p. 751) the valuer was "fully in the position of an arbitrator" (p. 752), having had "a formulated point of difference" referred to him (p. 752). Lord Salmon seems to have doubted Finnegan v. Allen (pp. 759-760). None of the other learned lords mentioned it, although Lord Reid must have disapproved it along with Buckley L.J.'s formulation in the instant case unless he thought that it could be supported on the lines of Lord Morris of Borth-y-Gest's explanation. Certainly much of the language of the judgment in Finnegan v. Allen (which Buckley L.J.'s formulation 425 followed closely) cannot stand with the speeches in Sutcliffe v. Thackrah, and I think the decision can only be supported as viewed by Lord Morris of Borth-y-Gest - that there was a formulated point of difference (i.e., a dispute) which was referred to a person who was constituted an arbitrator by the terms of the contract.

My Lords, in this speech I have done no more than attempt to answer the question which I posed at its outset, and to declare that in my opinion the statement of claim is not misconceived and bound to fail as against the respondents But the facts as they are judicially determined may differ from those alleged in the statement of claim. It will then still be open to the respondents to show that their role was a judicial one (as I have tried to explain it), so that they were appointed arbitrators - though in the nature of things this will have to overcome the obstacle that the contract letters declared that their valuation was to be made "acting as experts and not as arbitrators." If the respondents succeed in this, they can claim immunity. Even if they fail, it does not follow that they are liable in damages. It will be for the trial judge to determine the nature of the duty of care owed by the respondents and whether they were in breach of it. As Lord Salmon said in Sutcliffe v. Thackrah [1974] A.C. 727 , 760:

"... there is no topic about which greater differences of informed opinion may sometimes exist than the value of shares in a private company...."

But, in the meantime, the question before your Lordships is whether the statement of claim discloses a cause of action against the respondents. In my opinion it does, and I would therefore allow the appeal.

LORD WHEATLEY. My Lords, the full narration by my noble and learned friends Lord Simon of Glaisdale and Lord Salmon of the essential facts and of the somewhat strange history of this case resulting in its arrival in your Lordships' House renders it unnecessary for me to set them out again.

Whatever other considerations underlie it, the simple issue in this case is whether the order of the Court of Appeal dated February 22, 1973, which declared that the original, i.e., the unamended, statement of claim disclosed no reasonable cause of action against the respondents was well founded. If it was not, or even if it was premature, and in the result the case has to be sent to trial on the basis that the case on the unamended statement is still a live issue, then the anomalies in relation to the admission or rejection of evidence which might have arisen under that order of February 22, 1973, would disappear.

Your Lordships were presented with an anthology of cases which concluded with Sutcliffe v. Thackrah [1974] A.C. 727. I do not propose to examine the earlier cases in detail. They have now to be looked at in the light of the decision and of the speeches in your Lordships' House in Sutcliffe v. Thackrah. But of that more anon. In my opinion the proper and simple approach to the issue is to consider what the respondents, the auditors of the company, were called upon to do, what were their legal obligations in that regard and whether, in the event of their failure to carry out these obligations with consequential loss to the appellant, the 426 latter is precluded from the legal remedy of damages which he seeks by reason of an immunity which the law has conferred on persons in the position of the respondents here. At this stage the pleadings of the appellant have to be accepted pro veritate. In the event which occurred the appellant and Archy Arenson had agreed by the letters of March 18, 1964, and October 1, 1968, that the fair value of the shares to be transferred from the appellant to Archy Arenson would be determined by the auditors of the company acting as experts and not as arbitrators, and that this valuation would be final and binding on both parties. A verbal request was made by the secretary of the company to the respondents asking them to place a value on the shares in accordance with the letters of March 18, 1964, and October 1, 1968. The respondents undertook the request and in due course provided a non-speaking valuation. In that situation certain duties of care in relation to the valuation were incumbent on the respondents. That is not in dispute. Since Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 it is clear, if it ever was in doubt, that all persons who express an opinion which is negligent are liable for that negligence to persons who are within a relationship which is recognised by the law and who have suffered damage as a result thereof. Again it is not disputed that the appellant's pleadings bring this case within that category. The respondents, however, successfully argued in the courts below that, be that as it may, they were free from any legal liability through the operation of what is known as the immunity doctrine. This is a doctrine which provides immunity to persons for the consequences of negligence in the exercise of their legal duties by reason of the position which they occupy. This immunity has been given to judges and extended to arbitrators and semble to quasi-arbitrators. Since it is a defence to what otherwise would be a good claim for damages on the ground of negligence, the onus is on the party claiming the immunity to establish it - cf. Lord Reid in Sutcliffe v. Thackrah [1974] A.C. 727 , 738. Their Lordships in that case recognised that the existence or non-existence of the immunity will depend on the circumstances of the particular case. Accordingly, in the present case the respondents can only succeed at this stage if ex facie of the appellant's pleadings they can establish a case for their immunity. Looking to the terms of the letters which constituted their appointment, and particularly to the specific provision that they were to act as experts in the valuation and not as arbitrators, and to what they were being called upon to do, it seems to me that the respondents could not extract from these documents or from the appellant's pleadings as a whole the foundation of a case of immunity, unless they could satisfy your Lordships that in all cases a valuer acting as an expert is entitled to the immunity irrespective of the terms, conditions and purposes of his appointment. This extreme proposition was not advanced by the respondents' counsel, although they stoutly maintained that the circumstances in the present case provided that immunity. With this latter point I disagree. I am accordingly of the opinion that the appellant's case of negligence on his unamended claim should be allowed to go to trial. Even if the appellant's pleadings and associated documents do not disclose ex facie a case of immunity for the respondents, facts may emerge at the trial which cast 427 a different light on the situation. I accordingly consider that the appropriate course is to allow the facts to be elicited and then to consider and apply the law. On that narrow ground alone I would allow the appeal.

However, since it is reasonable to infer that the Court of Appeal granted leave to appeal to your Lordships' House on July 22, 1974, in order that the majority decision of February 22, 1973, could be reconsidered in the light of the decision and speeches in Sutcliffe v. Thackrah[1974] A.C. 727 which had subsequently been delivered, and since this involves a general review of the law in this field, it is manifestly desirable that such a course should be followed. In that exercise I feel that I can avoid a good deal of unnecessary repetition, as, having had the benefit of seeing in draft the speech of my noble and learned friend Lord Simon of Glaisdale, I find it unnecessary to deal with the law in detail, being in agreement with what he has said and concurring with it. I therefore content myself with a number of observations.

(1) It is clear from the speeches of Lord Reid, Lord Morris of Borth-y-Gest and my noble and learned friend Lord Salmon in Sutcliffe v. Thackrah that, while a valuer may by the terms of his appointment be constituted an arbitrator (or quasi-arbitrator) and be clothed with the immunity, a valuer simply as such does not enjoy that benefit.

(2) It accordingly follows that when a valuer is claiming that immunity he must be able to establish from the circumstances and purpose of his appointment that he has been vested with the clothing which gives him that immunity.

(3) In view of the different circumstances which can surround individual cases, and since each case has to be decided on its own facts, it is not possible to enunciate an all-embracing formula which is habile to decide every case. What can be done is to set out certain indicia which can serve as guide-lines in deciding whether a person is so clothed. The indicia which follow are in my view the most important, though not necessarily exhaustive. They are culled from the speeches in Sutcliffe v. Thackrah cited by my noble and learned friend Lord Simon of Glaisdale and from several other passages therein. In particular I would refer to the following passages.

Lord Morris of Borth-y-Gest [1974] A.C. 727 , 745 said, after pointing out that the circumstances of his appointment (including the determination of a dispute) might place a person in the position both of a valuer and arbitrator:

"But it by no means follows that everyone who has a duty of valuing, a duty which obviously must be fairly and honestly discharged, is an arbitrator. A valuer may not be exercising any judicial function."

Then my noble and learned friend Lord Salmon said, at p. 759:

"As in the case of the valuer, it is said that the architect is performing much the same functions and must, therefore, be regarded as being in the same position as a judge or arbitrator and must accordingly be accorded the same immunity. I confess that I can see no more reason for regarding the architect as being in the same position as a judge or arbitrator than there is for so regarding the valuer. No reason has ever been suggested. I suspect that this is because none exists. The descriptions 'quasi-arbitrator' and 'quasi-judicial functions' have 428 been invoked but never defined. They cannot mean more than in much the same position as an arbitrator or judge. In reality, however, there are the most striking differences between the roles of the valuer and architect in the circumstances to which I have referred and the role of a judge or arbitrator. Judges and arbitrators have disputes submitted to them for decision. The evidence and the contentions of the parties are put before them for their examination and consideration. They then give their decision. None of this is true about the valuer or the architect who were merely carrying out their ordinary business activities."
Then later my noble and learned friend, after quoting a passage from Cockburn C.J. in In re Hopper (1867) L.R. 2 Q.B. 367 , 372-373, said, at p. 763:

"In In re Hopper Cockburn C.J., with whom Blackburn and Lush JJ. agreed, was in effect saying that the question as to whether anyone was to be treated as an arbitrator depended upon whether the role which he performed was invested with the characteristic attributes of the Judicial role. If an expert were employed to certify, make a valuation or appraisal or settle compensation as between opposing interests, this did not, of itself, put him in the position of an arbitrator. He might, e.g., do no more than examine goods or work or accounts and make a decision accordingly. On the other hand, he might, as in In re Hopper, hear the evidence and submissions of the parties, in which case he would clearly be regarded as an arbitrator. Everything would depend upon the facts of the particular case. I entirely agree with this view of the law."

I likewise agree with my noble and learned friend's summation of the law.

The indicia are as follows: (a) there is a dispute or a difference between the parties which has been formulated in some way or another; (b) the dispute or difference has been remitted by the parties to the person to resolve in such a manner that he is called upon to exercise a judicial function; (c) where appropriate, the parties must have been provided with an opportunity to present evidence and/or submissions in support of their respective claims in the dispute; and (d) the parties have agreed to accept his decision.

(4) Applying the foregoing tests to the present case it is clear to me that the respondents here cannot pray in aid the appellant's pleadings to satisfy the requirements of immunity. On the contrary, they appear to negative the claim. In this regard I agree with and adopt the analysis and rejection by my noble and learned friend Lord Simon of Glaisdale of Mr. Dillon's submissions in support of his contention that the requirements for immunity have been satisfied in the present case. I agree with Mr. Muir Hunter's submission that the valuation here was not to decide a dispute or difference but to avoid a dispute or difference. There is nothing in the appellant's pleadings and relevant documents to suggest that a dispute or difference between the parties existed and was being remitted to the respondents for a judicial (or quasi-judicial) determination, and nothing to suggest that the remit was so treated.

(5) The validity of the decisions from Pappa v. Rose, L.R. 7 C.P. 32 onwards on which the respondents' counsel relied has to be considered and 429 tested against (a) what was said in Sutcliffe v. Thackrah [1974] A.C. 727 , particularly in the rejection of Chambers v. Goldthorpe [1901] 1 K.B. 624 , and (b) the indicia to which I have referred. So viewed, I find them difficult to justify. I will only deal with Finnegan v. Allen [1943] K.B. 425 , because it is said that for over 30 years it has been the guiding basis on which valuations such as the present one have proceeded, and to overturn it could lead to unfortunate and possibly serious repercussions in relation to past transactions where an action based on negligence may still be open. I recognise that this would be unfortunate and that your Lord-ships' House would be slow to interfere with an understanding of the law which has regulated such transactions over a long number of years, but if the law has to be restated in a manner which seems to run contrary to that decision, then your Lordships' House will not be deterred from restating it because of the consequences. In my opinion the law requires to be re-stated, and the consequences may not be so grievous as they might appear to be at first blush, since negligence of a certain nature has to be established before a claim for damages can succeed in circumstances where immunity cannot be established. In my opinion Finnegan v. Allen cannot pass the test unless, as envisaged by Lord Morris of Borth-y-Gest in Sutcliffe v. Thackrah, at p. 752, there were present there special facts which placed the valuer in the position of an arbitrator. It would appear from what was said by Lord Greene M.R. in Finnegan v. Allen, at p. 432, that there was a dispute between the parties, and as each case has to be decided on its own facts that factor may have justified the decision, although I personally have doubts about that.

However, Sutcliffe v. Thackrah and the present case should provide the authoritative guides for the future and I am prepared to leave it at that. I would accordingly allow the appeal.

LORD KILBRANDON. My Lords, I agree that the respondents are not immune from suit at the instance of the appellant on the ground of negligence, that the question whether they were guilty of negligence must. along with the allegations of fraud which have been made by amendment, be sent to trial and that as a consequence of these decisions the appeal must be allowed. It is more in the matter of the implications of these decisions, and in the nature of their philosophical foundations, that I have experienced doubt and difficulty. Since these disabilities do not affect the result at which I arrive, I will try to state them shortly.

I will begin with the position of the valuer, observing parenthetically that I am as mistrustful of the phrase "mere valuer" as I know some of your Lordships are of the office of "quasi-arbitrator." Not infrequently the duties undertaken by an arbitrator or even by a judge are found on inspection to involve nothing more than the making of a valuation. As to the liability of a valuer in negligence, I need not re-quote the old authorities, but will confine myself to the compelling passage in the speech of my noble and learned friend, Lord Salmon, in Sutcliffe v. Thackrah [1974] A.C. 727 , 758-759 in which his Lordship instances the giving of a valuation by an expert on pictures. My Lords, I entirely agree that it would be absurd if the situation were that, when an expert is asked by one customer to value a picture, 430 he is liable in damages if he is shown to have done so negligently, but that if two customers had jointly asked him to value the same picture he would have been immune from suit. The latter is precisely the situation displayed here, leaving out what I think is not relevant at this stage, that the formal request was made by a third party (the company) on behalf of the customers. Two people wanted to know, for reasons which are immaterial, the value of a parcel of shares. They had contracted with one another that in such a situation a particular expert should be asked to give his opinion, which opinion they were bound to accept as final in accordance with their contract. This is just the same as two customers employing a valuer. It does not matter whether there has arisen between the customers and the valuer a relation of "neighbourhood" which fixes on the latter an obligation to act with reasonable care, or whether - and more rationally as I would have thought - one holds that the contract between them and the valuer includes an implied term that he will exercise proper skill and care. The formality that the secretary of the company made the contract on behalf of the "customers" (shareholders) is of no significance. He made it for the shareholders, not for the company. It is not a case of looking for a cause of action in the shareholders on a contract between the valuer and a third party. The result, whether in tort or contract, is the same - a liability in damages arising out of negligence - and conceptual subtilties, however edifying, are not helpful.

I do not think there can be much doubt as to the nature of the relationship from which such liability, at least in a case like the present, must be held to arise. It is seen in a wider range of activities, and can by no means be confined today to the relation between a professional man and his client. If I engage a man to exercise his expertise on my behalf, and it matters not whether he is to prepare a conveyance of land or to drive a straight furrow across it, then spondet peritiam artis, et imperitia culpae adnumeratur. That there have been recognised some exceptions to this rule the authorities testify, as do they to the gradual narrowing of such pleadable immunities. What the limits of these immunities are, granted that they do not cover the situation of the respondents, must, I think, be considered before a decision can be reached today, since it is in my view necessary to find some satisfactory statement of principle which will explain and justify the boundary lines which have now to be drawn.

The question which puzzled me as the argument developed was, what was the essential difference between the typical valuer (the auditor in the present case) and an arbitrator at common law or under the Arbitration Acts? It is conceded that an arbitrator is immune from suit, aside from fraud, but why? I find it impossible to put weight on such considerations as that in the case of an arbitrator (a) there is a dispute between parties, (b) he hears evidence, (c) he hears submissions from the parties, and that therefore he, unlike the valuer. is acting in a judicial capacity. As regards (a), I cannot see any juridical distinction between a dispute which has actually arisen and a situation where persons have opposed interests, if in either case an impartial person has had to be called in to make a decision which the interested parties will accept. As regards (b) and (c), these are certainly not necessary activities of an arbiter. Once the nature and the limits of the 431 submission to him have been defined, it could well be that he would go down at his own convenience to a warehouse, inspect a sample of merchandise displayed to him by the foreman and return his opinion on its quality or value. I have come to be of opinion that it is a necessary conclusion to be drawn from Sutcliffe v. Thackrah [1974] A.C. 727 and from the instant decision that an arbitrator at common law or under the Acts is indeed a person selected by the parties for his expertise, whether technical or intellectual, that he pledges skill in the exercise thereof and that if he is negligent in that exercise he will be liable in damages.

If this conclusion were to be established by law, I do not think the consequences would be dramatic or even noticeable. It would become a generally accepted term of a reference to arbitration - because the referee would insist on it - that he be given by the parties immunity from suit for negligence at the instance of either of them. I am afraid I cannot go along with my noble and learned friend, Lord Salmon, when he suggests that such insistence would be damaging to a man's professional reputation. I think he would be saying something like this: "I will accept your reference. I shall take every care and give you the whole benefit of my skills. But probably one of you will be dissatisfied with my award. I decline absolutely to accept the risk of having to defend a negligence suit, even though I be confident that I have not been negligent. I have no ambition, nor can I afford, to be a successful defendant, even in a leading case." So commercial life would go on very much as before.

If, then, arbitrators are not immune from suit, what about the judges? Here I believe one is in a different region to which different principles apply. I do not rely on considerations of public policy, although no doubt it is the general acceptance of the principles which has caused a public policy to be adopted. The whole subject has recently been reviewed in Sirros v. Moore [1975] Q.B. 118 . I am aware that in trying to formulate a principle I am straying more towards contract than towards tort, but as I explained earlier I am not distressed by that. The state - I use the word for convenience - sets up a judicial system, which includes not only the courts of justice but also the numerous tribunals, statutory arbitrators, commissioners and so on, who give decisions, whether final or not, on matters in which the state has given them a competence. To these tribunals the citizen is bound to go if he wants to maintain particular rights or to obtain an opinion carrying authority ultimately enforceable by the public agencies; like as before them the citizen must appear to answer claims or complaints made against him. (This is subject to the rights citizens may have to make agreements one with another to submit their civil differences elsewhere.) The citizen does not select the judges in this system, nor does he remunerate them otherwise than as a contributor to the cost of government. The judge has no bargain with the parties before him. He pledges them no skill. His duties are to the state: it is to the state that the superior judge at least promises that he will do justice between all parties, and behave towards them as a judge should. I do not suppose that there is any English lawyer, and he would be a bold Scottish lawyer, who would say that here there is a contract between the state and the judge with a jus 432 quaesitum tertio in the litigant. It is for the state to make such arrangements as may be necessary for the correction of careless or erroneous judicial decisions; if those arrangements are deemed to be inadequate, it is for Parliament to put the matter right. and if it be necessary to state the matter in terms of the law of tort, litigants are not persons to whom judges owe a legal duty of care - a duty which does not exist in the abstract, but only between persons in particular relationships. The fact that he is under a moral duty is nihil ad rem. Judges in this context include, of course, persons forming tribunals and other bodies such as I referred to above. You do not test a claim to immunity by asking whether the claimant is bound to act judicially; such a question, as Lord Reid pointed out in Sutcliffe v. Thackrah [1974] A.C. 727 , 737, leads to arguing in a circle. Immunity is judged by the origin and character of the appointment, not by the duties which the appointee has to perform, or his methods of performing them. I say nothing here about the immunity of counsel and witnesses, which again raises quite different and, to this appeal, irrelevant considerations.

I have, I fear, been led rather far from the actual substance of this appeal, but my reason is this. Since I can find no satisfactory distinction between the liability for negligence of persons in the position of the respondents and that of arbitrators, had I not been of opinion that arbitrators at common law or under the Acts have no immunity, I would have been unable to agree that the appeal should be allowed.

LORD SALMON. My Lords, Mr. Archy Arenson was the chairman, managing director and controlling shareholder of a private company called A. Arenson Ltd. In 1964 he took his nephew, the appellant, into his company's employment. He also made a gift to his nephew of a small parcel of shares in the company on the terms of a letter dated March 18, 1964, which reads as follows:

"March 18. 1964.

"Dear Mr. and Mrs. Arenson,

"In consideration of your procuring the company to continue to emply me, I hereby agree the following arrangements concerning the shares of which you have made me a gift:

"1.

I will not sell the shares other than to Mr. Arenson or to Mrs. Arenson should he predecease her.

"2.

Should I wish to dispose of my shares, Mr. Arenson will purchase them from me at the fair value, but I shall not require him to purchase from me for five years from the date hereof.

"3.

Should I wish to sell the shares after the death of Mr. Arenson I will first offer them for sale to Mrs. Arenson who shall have the right to purchase them at the fair value but she shall not be under an obligation so to do. 433 

"4.

Should Mr. Arenson decide to dispose of his shares in the company, then I hereby agree to sell my shares in the company to Mr. Arenson at the same price per share as Mr. Arenson will be receiving in respect of his shares.

"5.

In the event of my employment with the company terminating for whatsoever reason, I will offer to sell my shares to Mr. Arenson and it id agreed that he will purchase them from me at the fair value. Should Mr. Arenson be dead then Mrs. Arenson shall have the option to purchase the shares from me atthe fair value.

"6.

'Fair value' shall mean in relation to the shares in A. Arenson Ltd., the value thereof as determined by the auditors for the time being of the company whose valuation acting as experts and not as arbitrators shall be final and binding on all parties.

"Please indicate you acceptance of the above conditions by signing the carbon copy sent herewith, and returning it to me.

"Yours sincerely.

"I. Arenson

"Enc. We agree to the above terms and conditions. [signed over 6d. stamp]."

Another letter in precisely the same terms, dated October 1, 1968, later passed between the appellant and his uncle. The appellant's employment with A. Arenson Ltd. was terminated on April 4, 1970. Some time prior to May 13, 1970, the company's secretary verbally asked the company's auditors, Casson Beckman Rutley & Co., the respondents, to place a value on the shares held by the appellant. From the respondents' letter of May 13, 1970, it appears that they had been put in possession of copies of the letters of March 18, 1964, and October 1, 1968, to which I have referred. The respondents wrote to the company's secretary on May 13, 1970, as follows:

"Casson Beckman Rutley & Co.,
27. Queen Anne Street,
London, W1M 0DA.
May 13, 1970.

"AB/PDB
"The Secretary,
A. Arenson Ltd.,
Lincoln House,
Colney Street,
St. Albans, Herts.

"Dear Sir,

"Valuation of Shares-I. Arenson

"1.

We refer to your verbal request to place a value on teh shares hed by Mr. I. Arenson in your company in accordance with the letters of March 18, 1964, and October 1, 1968. 434

"2.

The shares held by Mr. I. Arenson in teh company are as follows:

"

1,750 ordinary shares of £ 1 each fully paid.

"

500 6 per cent. non-cumulative preference shares of £ 1 each fully paid.

"3.

In our view the fair value of these shares on April 4, 1970, was as follows:

"(a)

The 500 6 per cent. non-cumulative preference shares of £ 1 each fully paid at a valuation of £ 166 13s. 4d.

"(b)

The 1,750 ordinary shares of £ 1 each fully paid at a valuation of £ 4, 750.

"Yours faithfully,

"[Signed].“

We do not know whether the respondents were asked to make the valuation on behalf of the company (which presumably was interested in the value of its own shares) or on behalf of Mr. Archy Arenson and the appellant, nor do we know whether the respondents charged any fee for this valuation and, if so, to whom, or whether they made their valuation as part of their ordinary duties as the company's auditors. Nor do I think that this matters because since the decision of this House in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 it is clear that quite apart from any contractual obligation the respondents must have owed a duty both to Mr. Archy Arenson and to the appellant to use reasonable care and skill in making their valuation. On June 11, 1970, the appellant, in reliance on the respondents' valuation, transferred his shares to his uncle for £4,916 13s. 4d. About three months later, on September 10, 1970, a holding company was incorporated to acquire all the issued share capital of A. Arenson Ltd. After about a further four months the shares in the holding company were offered for sale to the public by a prospectus dated January 14, 1971. The prospectus included an accountant's joint report prepared and signed by the respondents and another firm of accountants which placed a value on the company's share capital of £1,699,983. This value, if applied pro rata to the shares formerly owned by the appellant, would have made them worth not less than £29,500, that is to say, about six times more than the value put upon them by the respondents only seven months previously. There is an apparently striking disparity between the value placed on the shares by the respondents' valuation of May 13, 1970, and the valuation placed upon them by the respondents in the prospectus of January 14, 1971. This disparity might be attributed to the fact that there is normally a substantial difference between the value per share of a small minority holding and the value per share of the entire holding in a private company, whether this factor could account for a difference of 600 per cent. is a question which will have to be decided at the trial. There may also have been a remarkable improvement in the company's fortunes between May 13, 1970, and January 14, 1971, entirely unforeseen on the earlier date, which may help to explain the disparity between the two valuations. 435 However this may be, shortly after the publication of the prospectus the appellant issued a writ against his uncle and the respondents. The only part of the appellant's claim which is relevant to this appeal is that part which claims damages for negligence against the respondents in relation to their valuation of May 13, 1970. For the purposes of this appeal it must be assumed that the allegations of fact in the statement of claim are correct: that the respondents were negligent in preparing their valuation of May 13, 1970, which as a result was a gross undervaluation causing the appellant substantial damage. Upon this hypothesis, the important question for your Lordships to decide is whether, in the circumstances, the law confers an immunity upon the respondents against being sued for the damage which they caused the appellant by their negligence.

The respondents, relying upon their alleged immunity from suit, applied for the statement of claim to be struck out as disclosing no cause of action against them and for the action to be dismissed as against them. Brightman J. concluded that, by authority binding upon him, the respondents were immune from suit and he accordingly granted their application. The appellant then appealed to the Court of Appeal which on February 22, 1973, by a majority (Lord Denning M.R. dissenting) upheld Brightman J.'s decision that the respondents were immune against any claim based on negligence and that accordingly the statement of claim, as it then stood, disclosed no cause of action against them. The Court of Appeal, however, stood over the further hearing of the appeal so as to give the appellant an opportunity of applying for leave to amend his statement of claim by pleading a reasonable cause of action against the respondents on some ground other than negligence.

On July 9, 1973, the Court of Appeal (1) gave leave to the appellant to re-serve an amended statement of claim which added, amongst other things, a claim alleging fraud against the respondents and collusion between them and Mr. Archy Arenson, (2) discharged the order of Brightman J. on the footing that the statement of claim should be so amended and re-served and (3) ordered that all the costs hitherto incurred should be borne by the appellant in any event. The amended statement of claim was re-served on July 11, 1973.

On February 12, 1974, the appeal to your Lordships' House in Sutcliffe v. Thackrah [1974] A.C. 727 was allowed. In that case, the majority of your Lordships carefully considered and strongly criticised that part of the decision of the Court of Appeal in the present case which held on February 22, 1973, that the respondents were immune against the claim in negligence. On July 22, 1974, the Court of Appeal gave leave to the appellant to appeal from its order of July 9, 1973. Thereupon the appellant presented a petition to your Lordships' House praying for a declaration that the unamended statement of claim did disclose a reasonable cause of action against the respondents and for an order reversing the order of the Court of Appeal relating to costs.

This appeal now comes before your Lordships in somewhat peculiar circumstances. The only order made by the Court of Appeal on July 9, 1973, was in respect of costs. But that order was clearly based on the majority decision of the Court of Appeal delivered on February 22, 1973, 436 holding that the unamended statement of claim disclosed no cause of action against the respondents because, in the circumstances of the case, the respondents were immune against any claim based on their alleged negligence. When the Court of Appeal granted leave on July 22, 1974, for an appeal to your Lordships' House, they clearly did so because of your Lordships' decision in Sutcliffe v. Thackrah [1974] A.C. 727 and in order to enable your Lordships to consider and rule upon their decision of February 22, 1973. In my view, it is clearly desirable both in the interests of the parties (as counsel have agreed) and in the public interest that your Lordships should now clarify the law by ruling whether or not the Court of Appeal's majority decision of February 22, 1973, was correct.

In Sutcliffe v. Thackrah the immediate question which arose for decision was whether an architect who had been engaged by a building owner under the R.I.B.A. form of contract and had caused his client damage by negligently issuing an interim certificate for substantially more than the amount due enjoyed the same immunity from suit as a judge or arbitrator. The Court of Appeal rightly considered that it was bound by its own majority decision in Chambers v. Goldthorpe [1901] 1 K.B. 624 to uphold the architect's alleged immunity and with marked reluctance did so.

Your Lordships' House then unanimously reversed the decision of the Court of Appeal and overruled Chambers v. Goldthorpe . My noble and learned friends Lord Morris of Borth-y-Gest and Viscount Dilhorne confined their opinions strictly to the question as to whether the law afforded immunity to an architect on the facts of that particular case. Lord Morris of Borth-y-Gest expressly stated that he found it unnecessary to consider whether the Court of Appeal's decision in the present case was correct. Viscount Dilhorne did not refer to it. The majority of your Lordships however thought that the question relating to an architect's immunity should not be considered in isolation and could best be solved in the context of the wider issue, namely, what are the limits of the immunity which the law affords against actions for negligence in general? Such immunity can only exist when there are strong grounds for holding that public policy demands it. This rarely occurs because the law recognises that there is normally an overriding requirement of public policy that those who cause damage by a breach of their legal obligations to take reasonable care should be answerable in the courts to compensate those to whom they have caused damage by their negligence. Sovereign states, monarchs and their accredited representatives enjoy immunity from suit on grounds of a public policy founded on international comity. Judges, barristers, solicitors, jurors and witnesses also enjoy immunity in respect of anything they say or do in court during the course of a trial: the law recognises that such an immunity is vital to the efficient and speedy administration of justice and therefore necessary on grounds of public policy. The law also accords the same immunity to arbitrators when they are carrying out much the same functions as judges.

The question which arose in Sutcliffe v. Thackrah [1974] A.C. 727 and arises on the present appeal is, does this immunity extend beyond such arbitrators and, if so, what are its limits? I think that your Lordships' 437 House decided that this immunity is not afforded to any so called arbitrator or quasi-arbitrator who claims it unless he can show that the functions in the performance of which he was negligent were, in reality, judicial in character. Clearly all your Lordships were confident that the functions of the architect employed under the R.I.B.A. form of contract were not judicial in character, nor, according to the majority of your Lordships, were the functions of valuers such as those performed by the respondents in the present case. In none of the authorities forming the basis of the Court of Appeal's decision was any cogent reason given for extending immunity from suit beyond the limits which I have enunciated and which had been clearly laid down in In re Hopper, L.R. 2 Q.B. 367 , 374. Buckley L.J. was accordingly constrained to attempt to distil a principle from those authorities which might justify the decisions at which they arrived and by which the Court of Appeal was bound. He said [1973] Ch. 346 , 370:

"In my judgment, these authorities establish in a manner binding upon us in this court that, where a third party undertakes the role of deciding as between two other parties a question, the determination of which requires the third party to hold the scales fairly between the opposing interests of the two parties, the third party is immune from an action for negligence in respect of anything done in that role."

I respectfully agree with Lord Reid's criticism of that passage when he said [1974] A.C. 727 , 737:

"I can see no good grounds for this view. If there is any validity in my conjecture as to the reason of public policy giving rise to the immunity of arbitrators, those reasons do not apply to this situation. Persons who undertake to act fairly have often been called 'quasiarbitrators.' One might almost suppose that to be based on the completely illogical argument - all persons carrying out judicial functions must act fairly, therefore all persons who must act fairly are carrying out judicial functions."

Lord Hodson entirely agreed with Lord Reid's speech. It has been ingeniously argued on behalf of the respondents that when Lord Reid expressly disagreed with the passage in Buckley L.J.'s judgment stating the ground upon which the majority of the Court of Appeal decided to uphold the immunity claimed by the respondents Lord Reid was merely disagreeing with the grounds of the decision but not with the decision itself. I entirely reject that argument; it seems to me untenable, especially having regard to what Lord Reid had previously said, at p. 736.

I hope that in my speech in Sutcliffe v. ThackrahI also made it plain that, in my opinion, for the reasons fully set out at pp. 758-759 (which I need not repeat), the functions of the architect in that case, just like the functions of the respondents in the present case, were entirely different from the functions performed by a judge and that there were therefore no grounds of public policy which could possibly justify the immunity claimed being accorded to the architect in the one case or to the valuers in the other. 438

It is plain that the letters of March 18, 1964 and October 1, 1968, which apparently were shown to the respondents before they made their valuation, stated that in making the valuation they would be "acting as experts and not as arbitrators." It seems to me that these words were only stating the obvious, and I do not wish to place too much emphasis upon them, particularly as to do so might encourage attempts to distinguish the present case from future cases in which these words are omitted but in which it is nevertheless equally obvious that the valuers were discharging no function even remotely resembling a judicial function.

Since the principle promulgated by Buckley L.J. upon which he attempted to justify the old decisions had been completely rejected by your Lordships' House in Sutcliffe v. Thackrah [1974] A.C. 727 , it was of necessity abandoned on the hearing of this appeal and a new ground had to be improvised for supporting the Court of Appeal's decision that public policy demanded that so called quasi-arbitrators in the position of the respondents should enjoy immunity against being sued for damages caused by their own negligence. It was accordingly argued that without such immunity it would be very difficult, if not impossible, to persuade accountants to make valuations in circumstances such as the present, and that thus, contrary to the public interest, the commercial community would be deprived of a very valuable service. The suggested reason for this supposed reluctance to make such valuations was that accountants would not accept the risk, as counsel put it, of being "shot at from both sides." It was one thing for an expert to express his opinion on value to a client who was a buyer or a seller but quite another for him to express his opinion on value in circumstances such as the present. In the one case, he was risking being sued for negligence only by his client; in the other, either the buyer or the seller might be dissatisfied with the valuation, and the expert would therefore be exposing himself to the wholly unacceptable dual risk of being sued by both. In spite of the remarkable skill with which this argument was developed, I cannot accept it. Were it sound, it would be just as relevant in Sutcliffe v. Thackrah as in the present case. The architect owed a duty to his client, the building owner, arising out of the contract between them to use reasonable care in issuing his certificates. He also, however, owed a similar duty of care to the contractor arising out of their proximity: see Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465 . In Sutcliffe v. Thackrah, the architect negligently certified that more money was due than was in fact due, and he was successfully sued for the damage which this had caused his client. He might, however, have negligently certified that less money was payable than was in fact due and thereby starved the contractor of money. In a trade in which cash flow is especially important, this might have caused the contractor serious damage for which the architect could have been successfully sued. He was thus exposed to the dual risk of being sued in negligence but this House unanimously held that he enjoyed no immunity from suit. The fallacy of the argument based on dual risk is, however, best exposed by the facts of the present case in which the respondents, apparently without any marked reluctance, took on not only a dual but multiple risk of being sued in negligence when they signed the report in the prospectus issued to the public on January 14, 1974. If they 439 had negligently overvalued the shares, they could have been sued by all those members of the public who had bought shares on the faith of the negligent overvaluation. If they had negligently undervalued the shares they could have been sued by their clients. This is the kind of risk which has been accepted by innumerable firms of accountants ever since the decision of this House in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. apparently without any injury to themselves or to the public interest.

I attempted an exhaustive analysis of almost all the relevant authorities on this branch of the law in my speech in Sutcliffe v. Thackrah [1974] A.C. 727 which I now adopt without repeating it. I would sum it up by stating that it was long ago rightly decided in In re Hopper, L.R. 2 Q.B. 367 , that a valuer enjoys the immunity of a judge or arbitrator only if what he does assumes the character of a judicial inquiry, for example, by the parties submitting their dispute to the valuer for adjudication and the valuer listening to or reading the contentions made by or on behalf of the parties and to any evidence which they may put before him and then publishing a decision which is final and binding save for any appeal which the law allows. See also In re Carus-Wilson and Greene, 18 Q.B.D. 7.

The immunity relates not only to claims for damages for negligence. It relates to all kinds of civil claims including, for example, claims for damages for defamation. It exists not for the protection of judges and arbitrators but for the protection of the public in cases in which truly judicial functions are being discharged.

The heresy adopted by the majority of the Court of Appeal derives from the trilogy of cases consisting of Pappa v. Rose, L.R. 7 C.P. 32 , Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 , and Stevenson v. Watson, 4 C.P.D. 148 . For the reasons I explained in Sutcliffe v. Thackrah, the first has been misunderstood, possibly as a result of the inaccuracy of the headnote in the report of the appeal. As it emerged from the Exchequer Chamber, no question of immunity arose in that case; the second case was wrongly decided, and the third case was probably rightly decided because of the exceptional terms of the contract which may well have put the architect in the position of an arbitrator appointed to discharge a truly judicial function. These three cases formed the basis of the decision in Chambers v. Goldthorpe [1901] 1 K.B. 624 which your Lordships' House has recently overruled and together with Chambers v. Goldthorpe formed the basis of the decision of the Court of Appeal in Finnegan v. Allen [1943] K.B. 425 which for the reasons which I agree in Sutcliffe v. Thackrah was, in my view, wrongly decided. Finnegan v. Allen is indistinguishable from the present case save that counsel for the appellant in that case seems to have admitted in argument that no action would lie for want of care or skill in making the valuation. In my opinion, that case should be overruled. In that case Goddard L.J., for whose views I have always had the greatest respect, stated that if a dispute arose between a buyer and a seller, for example, as to whether goods sold and delivered corresponded with the sample or were of merchantable quality, an expert appointed as an arbitrator to inspect the goods and decide the question in dispute was automatically immune, in any circumstances, from being sued in negligence by either party. This 440 may be so, but I prefer to offer no concluded opinion on this question. Undoubtedly such an expert may be formally appointed as an arbitrator under the Arbitration Acts, notwithstanding that he is required neither to hear nor read any submission by the parties or any evidence and, in fact, has to rely on nothing but his examination of the goods and his own expertise. He, like the valuer in the present case, has a purely investigatory role; he is performing no function even remotely resembling the judicial function save that he finally decides a dispute or difference which has arisen between the parties. If such a valuer who is appointed as arbitrator makes a decision without troubling to examine the goods, surely he is in breach of his duty to exercise reasonable care; so would he be if he made only a perfunctory and wholly careless examination.

I find it difficult to discern any sensible reason, on grounds of public policy or otherwise, why such an arbitrator with such a limited role, although formally appointed, should enjoy a judicial immunity which so called quasi-arbitrators in the position of the respondents certainly do not. Such an arbitrator, like any accountant who signs a report in a prospectus, could always protect himself against action for negligence, if he wished to do so, by stipulating that he is willing to act only on condition that he should be under no obligation (which the law would otherwise impose) to use reasonable care. I do not suppose, however, that insistence upon such a condition would be likely to improve his chances of obtaining business, and that no doubt is why such a condition is so rarely imposed.

The question as to whether there may be circumstances in which a person, even if he is formally appointed as an arbitrator, may not be accorded immunity does not, however, arise for decision in the present case, but it may have to be examined in the future. Whatever the true answer to that question may be, I am convinced for the reasons I have indicated that the respondents, who were certainly not formally appointed arbitrators, do not in law enjoy the immunity which they claim and that accordingly the majority decision in the Court of Appeal cannot be upheld.

My Lords, I would accordingly allow the appeal.

LORD FRASER OF TULLYBELTON. My Lords, I agree that this appeal should be allowed.

It has long been established in both England and Scotland that judges are immune from actions for negligence in the performance of their duty. The reason no doubt is that public policy requires that they should not be liable to harassment for actions by disappointed litigants; "... otherwise no man but a beggar, or a fool, would be a judge" (Stair, Institutions of the Law of Scotland, IV. 1.5.). Immunity against actions for negligence is enjoyed by arbitrators for much the same reason; in Lingood v. Croucher (1742) 2 Atk. 395 Lord Hardwicke L.C. quoted, at p. 396, a dictum by Lord King L.C. that if arbitrators were liable to be sued that "... would effectually discourage persons of worth from accepting of being arbitrators;..." But the immunity of judges and arbitrators forms an exception to the general rule that a person who professes special skill or knowledge is liable for negligence if he fails to show such knowledge and skill and to take such care and precautions as are reasonably expected of a normally skilled and competent member of the profession or trade in question. 441 The question in this case is whether that immunity extends beyond arbitrators and includes persons in the position of the respondents, who, when they made their valuation of the appellant's shares, undoubtedly had a duty to act fairly and impartially between the appellant, as vendor, and the purchaser of the shares. Persons in such a position are sometimes called (ungrammatically but conveniently) "mutual" valuers and I shall so refer to them. There may, of course, be cases where, either by statute or by contract, the liability of a mutual valuer for negligence is expressly excluded, but we are here concerned with the principle which applies in the absence of such express exclusion.

The respondents rely on a line of cases starting with Pappa v. Rose, L.R. 7 C.P. 525 . The effect of these cases was summarised by Buckley L.J. in his opinion in the present case in the Court of Appeal thus [1973] Ch. 346 , 370:

"In my judgment, these authorities establish in a manner binding upon us in this court that, where a third party undertakes the role of deciding as between two other parties a question, the determination of which requires the third party to hold the scales fairly between the opposing interests of the two parties, the third party is immune from an action for negligence in respect of anything done in that role. He may be liable for fraud or collusion with one of the opposed parties, but if he acts honestly he is immune."

Buckley L.J.'s judgment was delivered on February 22, 1973, and at that date the statement that I have quoted was, in my opinion well founded. But on February 12, 1974, in Sutcliffe v. Thackrah [1974] A.C. 727 this House held that an architect who certified the amount payable by the owner of a building to the builder was not entitled to the same immunity as an arbitrator, and Lord Reid, with whose speech Lord Hodson agreed, expressed disapproval of the statement which I have quoted from the judgment of Buckley L.J. So did Lord Salmon. As a result of the decision of this House in Sutcliffe v. Thackrah the statement of claim in the present case was amended and the plaintiff with leave of the Court of Appeal has appealed to your Lordships' House.

It is unnecessary for me to refer particularly to Pappa v. Rose, L.R. 7 C.P. 525 and the cases that followed it. My noble and learned friend, Lord Salmon, examined these cases in his speech in Sutcliffe v. Thackrah and I agree with him that the decision of the Exchequer Chamber in Pappa v. Rose has been misunderstood. One of the cases which followed it, Finnegan v. Allen [1943] K.B. 425 , was a claim against auditors who were alleged to have made a negligent valuation of shares, and it is, in my opinion, indistinguishable from the present case. In so far as it was decided by applying the doctrine of Pappa v. Rose it cannot help the present respondents, and the position of the mutual valuer must now be considered afresh.

The force of the argument for the respondents seems to me to lie in the difficulty of stating a logical reason for denying to a mutual valuer, who is instructed to assess the value of property, knowing that the vendor and purchaser have agreed in advance to be bound by his valuation, the same immunity as is given to an arbitrator. It seems to me, with all respect 442 to my noble and learned friend, Lord Salmon, that their functions are in many ways similar. Both are giving decisions which will bind parties with conflicting interests. Both have a duty to act impartially between the parties. Both can reach their decision by using their own skill and judgment without hearing evidence, and, unless they have immunity, both are liable to be shot at from opposite sides. The main difference between them is that the arbitrator, like the judge, has to decide a dispute that has already arisen, and he usually has rival contentions before him, while the mutual valuer is called in before a dispute has arisen, in order to avoid it. He may be employed by parties who have little or no idea of the value of the property to be valued and who rely entirely on his skill and judgment as an expert. In that respect he differs from some arbitrators. But many arbitrators are chosen for their expert knowledge of the subject of the arbitration, and many others are chosen from the legal profession for their expert knowledge of the law or perhaps because they are credited with an expertise in holding the balance fairly between parties. It does not seem possible, therefore, to distinguish between mutual valuers and arbitrators on the ground that the former are experts and the latter are not. I share the difficulty of my noble and learned friend, Lord Kilbrandon, in seeing why arbitrators as a class should have immunity from suit if mutual valuers do not. It may be, as my noble and learned friend, Lord Salmon, has suggested, that a person, even if he is formally appointed as an arbitrator, ought not in all cases to be accorded immunity. But, as both parties accepted the immunity of arbitrators, we heard no argument on that matter and I express no opinion upon it.

There is even greater difficulty in distinguishing, so far as immunity is concerned, between the mutual valuer and a valuer who is instructed by a single client. The latter is undoubtedly liable for negligence in accordance with the general rule. Why should the former be immune? It cannot be because a valuer who is instructed by a single client is only liable for negligence to his own client, because, as Hedley Byrne showed, he may be liable also to other people if he knew or ought to have known that they would rely on his skill and judgment. So the mutual valuer is by no means unique in being open to attack from several quarters. In my opinion no sufficient reason has been shown for treating him as an exception to the general rule of liability for negligence. I would allow the appeal.

Solicitors: Slowes ; Reynolds, Porter, Chamberlain & Co .

J. A. G.M. G.

Referring Principles
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