I THE IJIABILITY FOR GRATUITOUS ADVICE By E. I. SYKES, B.A., LL.B. N Banbury v. The Bank of Montreall Lord Finlay L.C. and Lord Atkinson were r~sponsible for certain obiter dicta regarding a topic which lies on the vague borderline between the provinces of the law of contract and the law of tort. The questions may thus be stated: To what ~xtent, if at all, is a person who gives gratuitous advice to another liable for loss and, if liability does exist, is it a liability in contract or in tort 1 Judges seem to have imported into this and related questions considerations derived from the law relating to bailments, and it is submitt!d that a short examination of the nature of the liability for breach of gratuitous bailment will form a basis for an approach to the main question of this article. Professor Winfield points outz that though the orthodox theory now is that bailment is a species of contract, it is really in some respects at least sui generis. Breach of bailment is sometimes a tort, sometimes a breach of contract. But the liability is not necessarily either contractual or delictual. Bailment may, on the one hand, exist independently of contract. Professor Winfield cites the case of R. v. Robson3 where it was held that a woman was properly convicted of larceny as bailee, in spite of the argument for the defence that bailment was a contract, and that she was incapable of contracting (as was then the case). On the other hand there are obvious differences distinguishing breach of bailment from liability in tort. In Professor Winfield's view bailment is a generic conception. Originally, the liability was delictual and the question of consideration was irrelevant. But the growth of the doctrine of consideration led the minds of lawyers in the seventeenth century to attempt to reconcile it with the existence of the liability for gratuitous bailment. In 1703, in Coggs v. Bernard/< the Court, obsessed with the necessity of finding consideration in the "contract" of bailment, found it in the fact that the owner had trusted the bailee with the goods. "The reason of the action is the particular trust reposed in the defendant to which he has concurred by his assumption."5 This principle covers cases in which a man has engaged another to do work with certain materials without reward. An action will not lie for non-performance, but will lie if the defendant actually enters upon the work and does it negligently.6 But the importance of such principle for present purposes lies in the fact that it has been analogically extended to cases where no bailment is involved. Coming nearer to our present subject, we must notice briefly the case of an agreement for gratuitous service which does not involve a bailment, but which involves more than the giving of advice. The 1. (1918) A.C. 626. 2. The Province of the Law of Tort, Ch. V. 3. (1861) 31 L.J.N.S. (M.C. 22). 4. (1703) 2 Ld. Raym. 5. (1703) 2 Ld. Raym. 909. 6. Elsee v. Gatwara (1793) 5 Term Rep, 143. 211
212 RES JUDICATAE typical instance is the case of a doctor who agrees without reward to perform an operation on a patient. In such cases it is generally agreed that there is a liability for negligence once the service is undertaken, although it is not generally stated whether this liability is for breach of contract or for a tort. Salmond and Winfield7 think there is liability in contract as well as in tort; they use the conception of "trust" which finds its authority in Coggs v. Bernard.8 The contract might be put: "If you will deliver your body into my charge and trust me with the care of it, I promise to take due care of it." So also in the case of the owner of a motor car receiving a friend as a gratuitous passenger. Having defined the considerations likely to influence the judicial mind in dealing with the topic of gratuitous advice de novo, we approach the two decisions in which the matter has been discussed. In De La Bere v. Pearson,9 the defendants, who were newspaper proprietors, advertised in their newspaper that their city editor would answer inquiries from readers of the paper desiring financial advice. The plaintiff, a reader of the paper, wrote to the, city editor asking him to recommend" a good stockbroker." The editor recommended a person who was, unknown to him, an undischarged bankrupt. The plaintiff, in reliance on this recommendation, sent money for investment to this person, who promptly misappropriated it. It was held by the Court of Appeal that the plaintiff could recover this amount from the defendant. Counsel for the defendant in the Court below, however, had admitted that a contractual liability arose, and in the Court of Appeal the argument for the defence that there was no contract between the parties does not seem to have been strongly pressed. The main question argued was that of remoteness of damages. The members of the Court of Appeal were unanimous in thinking that there was a contract between the plaintiff and the defendant, but in view of what has been above stated, and especially in view of the fact that the decision appealed from was on a narrower point, it is doubtful whether this point was actually at issue. Thus the headnote to the case and the comment of Salmond and WinfieldlO may possibly need some qualification. In so far as it is asserted that the case is an authority for the view that a contractual duty not to give negligent advice arises, some have found the consideration in the detriment incurred by the plaintiff in trusting the defendant with his financial security, while others have thought that the consideration lay in the tendency to benefit the circulation of the defendant's newspaper. The latter is the view taken by the Court of Appeal. In Banbury v. The Bank of Montrealll the question did not come up for actual judicial pronouncement. There the plaintiff, who was visiting Canada seeking investments, had been given a letter of introduction from the general manager of the defendant bank to the 7. Prim:iple8 of the Law of CcmtNete, p. 80. 8. (1703) 2 Ld. Raym. 909. 9. (1908) I.Ri.B. 280. 10. Supra, p. 81. 11. (1918) A.C. 626.
THE LIABILITY FOR GRATUITOUS ADVICE 213 branch managers thereof asking them if the plaintiff applied to them for advice to place themselves at his disposal. The plaintiff presented the letter to the branch manager at Victoria, British Columbia, upon whose oral advice he invested 2,000 upon mortgage to secure a loan to It company. The company having failed to pay either principal or interest, he brought an action against the bank claiming damages for negligence and breach of duty whilst acting as his bankers. The case was decided against the plaintiff on the ground that there was no evidence upon which the jury could find that the branch manager had the requisite authority from the general manager to give such advice, and the question of the liability of the defendant had there been sufficient authority was not directly in point. Two of their Lordships, however, made some remarks on the point. Lord Finlay12 was in favour of the existence of such a liability and seemed to think similar considerations would apply as in the case of bailments. The consideration would be simply the confidence reposed in the person who undertook the duty of giving the advice. Such a person need not undertake the duty at all, but, if he does undertake it, he must exercise due care in discharging it. He thought there was no difference between the case of a physician who treats a patient gratuitously and that of a lawyer or banker who advises a client or customer gratuitously. But, rather significantly, he goes on to say that, though he thought that even where the advice was given for motives of charity or benevolence, there would still be liability, yet here was not a case of merely gratuitous advice. The whole transaction was a business one. The bank was to undertake the receipt and application of the money if advanced, and it had an interest in the success of the contract. Lord Atkinson13 agreed that the liability could not be confined to physical as distinct from mental acts. There was no difference between the case of a doctor treating a patient for heart disease and that of a doctor merely telling the same patient that he has heart disease without treating. It would appear from the dicta in Banbury's case and from the decision in De La Bere v. Pearson (though as indicated above it is doubtful what the ratio decidendi of that case is), that if the question did now come up for decision in a clear form such a right of action would be recognized by the Court. The granting of such a remedy would also appear to be socially desirable, subject to certain limitations. It is necessary, however, to ask whether such a liability can be placed on any logical legal ground. Neither Lord Finlay nor Lord Atkinson suggest any answer and only bald statements are given in De La Bere v. Pears.on. Counsel for the plaintiff in Banbury's case contended for liability in both contract and tort. But it seems clear that in a case of mere advice liability in tort would be excluded by the rule in Derry v. Peek!4 that for an innocent misrepresentation of fact, even if made negli- 12. lbid., at p. 657. 13. Ibid., at P. 689. 14. (1889) 14 A.C. 3M.
214 R.ES JUDICATAE gently, no action will lie, quite apart from the question whether all statements made in the course of giving advice can be fitted into the definition of "representation of fact." Moreover, despite Lord F.inlay's remarks, there appears to be a clear distinction between the case of a doctor performing a gratuitous operation on, or administering drugs to, a patient and that of a doctor merely giving gratuitous advice on the patient's ailment. In the former case there is a liability in tort because a man owes a duty, apart from contract, not to do or cause physical harm to a person. Excluding the question of liability in tort, can we fit the liability for negligently tendering gratuitous advice into the categories of the law of contract without being guilty of Procrustian violence? Can we satisfy the requirements of the rule that consideration is necessary to the validity of a simple contract? There seems to be no warrant for applying to this question ideas deduced from the law of bailments, and saying with Lord Finlay that the consideration is the trust reposed in the person advising, or adopting Salmond and Winfield's notion of a "consideration of trust.' '15 Carried to its logical conclusion, this would make the breach of any gratuitous promise actionable so long as the promisee acted on the faith of it being observed. The consideration would be the confidence reposed in the person who gives the promise. In the law of bailments this notion of trust is, since Coggs v. Bernard, firmly entrenched, but there it has the justification that there is a physical thing entrusted to the bailee and a parting with possession thereof by the bailor. The solution of the problem seems, however, to have been suggested in another remark by Lord Atkin, that in Banbu,ry's case the whole transaction was "a business one. " It is submitted that where there is a business nexus between adviser and advised, and the advice given arises out of that nexus, consideration can be said to exist because of the possibility of a whole series of reciprocal benefits between the parties. Thus, in Banbury's case, consideration would lie in the handling by the bank of the plaintiff's business and the possibility of increasing that business, and in De La Bere v. Pearson, in the possibility of increased sales and circulation of the defendant's newspaper. In the case of a solicitor giving advice it would lie in the establishment of the solicitor-client relation with all its possibilities of mutual benefits. Of course, the mere promise to give advice would not be enough to found any liability, but once the task is undertaken the existence of the business relation would be enough to found a duty to carry out the task without negligence, provided the advice arises directly out of and in virtue of the business relation. This also implies that the person giving advice does so as a skilled person and in such circumstances that he must reasonably be taken as anticipating the other person would act upon such advice, as otherwise an animus contrahendi would not exist. The only question, of course, is the rather formidable one of the extent and scope of the phrase, "business relation." Should it include all cases of skilled persons who give advice in such circumstances that 15. Principles of the Law of Contracts. p. 79.
THE LIABILITY FOR GRATUITOUS ADVICE 215 they must be taken as assuming that the other person intends to act upon it, such advice being given in connection with the matters in which they are skilled? Can we say that in such relations as doctor and patient, banker and customer, financial adviser and inquirer, that the "business" element is essential or merely fortuitous? It is submitted with some diffidence that in cases where some element of a business relationship exists between the parties, there is liability for gratuitous advice given in virtue of that relationship, and that this liability is contractual. In many cases other considerations will intervene. In many cases there will be involved the doing of physical acts to the plaintiff, and therefore there will be superadded a liability in tort, e.g., a negligent surgical operation, provided the facts bring the case within one of the heads of liability in tort. And where there is advice given falsely and fraudulently, there will be liability in tort provided certain conditions are fulfilled. In such mixed cases of advice and physical services, it may be very material to separate the contractual and delictual elements, as in cases where the defence of infancy is raised. If the view indicated in De La Bere v. Pearson and Banbury's case is ultimately vindicated, the time will certainly be ripe for the abandonment of the word "gratuitous" as applied to such contracts. The promise to give" free" advice is gratuitous, but the implied promise to use due care in giving advice, in circumstances as above defined, is given for good consideration.