When Is A Disclaimer Not A Disclaimer?

In a recent decision1 on an estate agent's liability to a purchaser for errors in a sales brochure, the Supreme Court clarified the scope and validity of disclaimers of liability addressed by professional service firms to third parties. In the lead decision, O'Donnell J expressed the view that giving effect to the disclaimer best reflected the proper allocation of risk in the transaction, and that this approach would ultimately provide clarity and efficiency for market participants.

Background

In 2000, the purchaser, Mr Walsh, an experienced property investor, viewed a property in Dublin which was being marketed by Jones Lang Lasalle ("JLL") on behalf of its client. JLL produced a sales brochure which contained details in relation to location, description, zoning, as well as precise calculations of floor area. The brochure also contained a disclaimer in small print to the effect that "Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending puchusers [sic] /lessees should satisfy themselves as to the correctness of the information given."

Based on the statements of floor area contained in the brochure, Mr Walsh purchased the property. When he came to make arrangements to let the property, it was discovered that the floor area had been significantly overstated in the brochure and he initiated proceedings against JLL for loss in rental income.

The High Court awarded Mr Walsh €350,000 damages on the basis of the overpayment for the premises, on the grounds that the disclaimer did not negative JLL's negligent misstatement about floor area in the brochure.

Decision

By a majority of three to two, the Supreme Court overturned the High Court decision and found that JLL was not liable to Mr Walsh for negligent misstatement.

Laffoy J (with whom O'Malley J concurred), having reviewed the development of the law on negligent misstatement, identified as a critical issue the question of whether or not there had been an assumption of responsibility by JLL to the intended recipient. If there was no assumption of responsibility then no duty of care arose.

This was a question which had to be answered objectively and the existence of the disclaimer was only one fact to be considered in this regard. Looking at the existence and effect of the disclaimer, Laffoy J was satisfied that there had been no assumption of responsibility by JLL. Hence, no duty of care arose and...