Glasgow firm refused small business fund assistance fails in duty of care challenge to decision not to award grant

About this case:

• Citation:
  [2025] SC GLA 10
• Judgment:
  External link
• Court:
  Sheriff Court
• Judge:
  Sheriff D N Taylor

4U2 Ltd averred that Glasgow City Council had negligently misrepresented the reason for the refusal of the application and that it had suffered loss as a result. The defender challenged the relevancy and specification of the pursuer’s averments and argued no case for a duty of care had been made out.

The case was heard by Sheriff David Taylor at Glasgow Sheriff Court.

Explosive expansion of law

An application for grant assistance was made by the pursuer to the defender, which administered the fund on behalf of the Scottish government, in June 2020. The pursuer averred that, at the time, the defenders had represented that the application was refused for want of evidence that self-catering accommodation was the pursuer’s primary source of income. However, in further representations of March 2023 they said that the application was refused for want of evidence that the pursuer was actively trading.

The pursuer’s case was that if the second reason given in 2023 was the true reason for refusal, this rendered the original representations in June 2020 as false. This was therefore a straightforward case of negligent misrepresentation. Had they been asked in 2020 to provide evidence of active trading; they would have done so and thereby suffered no loss.

The defender contended that the pursuer’s averments were flawed, as there could be more than one reason for the refusal of an application. Furthermore, the email of June 2020 was not a refusal of the application, but rather a request for further information.  In any event, the pursuer did not specify what evidence they would have produced that would have resulted in a successful application.

It was submitted for the defender that the pursuer’s case was bound to fail even if it proved everything it offered to prove. With reference to Robinson v Chief Constable of West Yorkshire Police (2018), no cases cited by the pursuer involved a duty of care to avoid economic loss being imposed on a public body issuing an administrative decision. Such a duty would involve an explosive expansion of the law that would impose an onerous burden on decision makers, and furthermore the pursuer’s claim would be properly categorised as pure economic loss.

Undue burden

In his decision, Sheriff Taylor said of the test for duty of care: “It is accepted by the defender that in appropriate cases a public body can owe a duty of care to a party to avoid making a negligent misrepresentation. What is in issue is whether those circumstances exist in this case. The pursuer argues that its case is not a novel one as it falls within the established parameters of a claim for damages for negligent misrepresentation. The difficulty with that proposition is that it ignores the factual and legal context in which the allegedly negligent misrepresentation was made.”

He continued: “In none of the cases cited by the pursuer has the court imposed a duty of care on a public body to avoid causing economic loss when issuing its reasons for an administrative decision. For these reasons I do not regard the imposition of a duty of care upon the defender in this case as being an incremental development in the law.”

Assessing whether it was fair, just and reasonable to impose a duty in these circumstances, Sheriff Taylor noted: “The fact that the pursuer had a remedy in judicial review is significant. The pursuer refers to his remedy in judicial review in his own pleadings. What is also significant is the effect that imposing a common law duty upon the defender in these circumstances would have upon public authorities. Public authorities and other public bodies make administrative decisions on a daily basis. To impose a duty of care on such bodies to avoid causing a party economic loss when issuing the reasons for their decisions would place an undue burden on them.”

He concluded: “The statements made by the defender were made in the course of the defender issuing reasons for its decision on the pursuer’s application for a grant. The statements cannot be regarded as advice or recommendations given by the defender. In that respect the present case is distinguishable from the authorities cited by both parties where invariably the negligent misstatement occurred in the course of advice or recommendations made by the defender.”

The action was accordingly dismissed.