Have you ever wondered if your website disclaimers are really necessary? A recent case provides a leading example relevant to New Zealand law of how a disclaimer can protect an organisation against liability for an inaccurate website statements. If you haven't reviewed your website recently, or don't have appropriate disclaimers in place, the case is a timely reminder to do so.
Website disclaimers, while commonplace, have long been a slightly ‘grey' area of the law. The rationale is clear enough:
- A person can be held liable (in certain circumstances) to a third party for negligent statements.
- It is possible to disclaim liability for negligent statements.
It is customary for websites to include a disclaimer such as: "This information is of a general nature only, and is not professional advice". Or "This information is provided 'as is', and we accept no liability for its accuracy".
Surprisingly, however, there has not been an authoritative Commonwealth Court decision on their effectiveness until recently. As a result, there has been a degree of uncertainty over basic questions, such as:
- In what circumstances is there a legal "duty of care" between a website operator and members of the public reading the website?
- In what circumstances will a disclaimer protect the website operator from liability?
The UK Court of Appeal recently reviewed these issues for the first time in the case Patchett v SPATA  EWCA Civ 717 (15 July 2009), setting a precedent likely to be influential in any similar New Zealand case.
Mr & Mrs Patchett decided to install a swimming pool. They searched on Google, and found the website of the Swimming Pool & Allied Trades Association (SPATA). SPATA is a voluntary UK trade body representing UK swimming pool installers. On the "about us" page, it stated:
"Installing a swimming pool is a specialised task requiring skills and technical expertise in a number of different areas. One way of guaranteeing that the pool installation company has this expertise, is to make sure they are a member of the Swimming Pool and Allied Trades Association (SPATA) before contacting them for a quotation... SPATA pool installer members are fully vetted before being admitted to membership, with checks on their financial record, their experience in the trade and inspections of their work. They are required to comply fully with the SPATA construction standards and code of ethics, and their work is also subject to periodic re-inspections after joining. Only SPATA registered pool and spa installers belong to SPATASHIELD, SPATA's unique Bond and Warranty Scheme offering customers peace of mind that their installation will be completed fully to SPATA Standards - come what may!"
There was also a function for requesting an "information pack" (which would be sent by post) containing more information about the warranty and member requirements.
The website had a "member finder" function to help visitors find SPATA members near to them. The Patchetts used the function to locate Crown Pools Limited, who they hired to install their pool. Unfortunately, Crown became insolvent before completing the job, but after the Patchetts had paid their money.
It soon emerged that Crown was not an actual member of SPATA, and therefore had not been financially vetted by SPATA and was not eligible for the warranty scheme, despite the Patchetts having been referred to Crown via SPATA's website.
The Patchetts attempted to sue SPATA on the basis that statements on its website - which implied that all businesses it listed were members and therefore financially sound and warranted - were negligent.
Issues and result
The issue, essentially, was whether SPATA was liable for negligently implying that all businesses listed on its website were reliable, financially sound and included in the warranty program.
The Court (comprising three judges) found that the statements on SPATA's website were, to some degree, negligent. Specifically, the passage reproduced above failed to mention that there were two types of membership - "full membership" and "affiliate membership". Only "full" members were financially vetted and included in the warranty programme. The ‘member finder' included both types of member without differentiation. As Crown Pools Limited was only an "affiliate" of SPATA, it was not covered by the warranty scheme or financially vetted.
The statements on the website were, therefore, misleading, and capable of making SPATA liable for its negligent misstatement, if a legal duty of care existed.
However, the majority of the Court found that there was no duty of care. The statement encouraging users to request an information pack meant that SPATA would not have expected a user to act on the information without making further inquiry (by ordering the information pack). In other words, "reasonable users" would treat the website as the "first step in the process" and always request the information pack, which would explain the full story about the membership statuses.
As a result, the majority found that SPATA had not "assumed responsibility" for the accuracy of its statements, or acted as an "adviser" to users.
The minority of the Court disagreed. It found that the information pack was only offered, and there was "nothing ... which would suggest to the reader that it was necessary to obtain the information pack in order to make a further check on the credentials of the members listed on the website".
For that reason, the minority found that a duty of care did exist, which would make SPATA liable for its negligent statements.
Although the Court was divided on the outcome, the judgment provides some important findings which will be relevant in future cases, including in New Zealand:
- The Court confirmed that "no different legal principles apply to misrepresentations on a website than to those anywhere else in the public domain." While this has always been considered the position (after all, why should there be different treatment for websites?), it is useful to have a clear statement of judicial confirmation.
Although the majority did not find a duty of care in this case, the Court was unanimous that a duty of care can arise from statements on a website (and the minority did find a duty of care existed).
- The majority accepted that a negligent statement on a website could, in effect, be remedied by a disclaimer elsewhere on the site:
"SPATA could reasonably expect potential customers to have regard to all the information potentially available from the website and not just part of it".
The minority made similar observations.
This is of critical importance for website disclaimers, as the disclaimer may not appear on every page. It is common simply to have a link on some pages, or to have a disclaimer on selected pages only.
It should be noted that the critical statement in this case (the encouragement to request an information pack) was not actually a disclaimer, in that it did not expressly purport to "disclaim" anything.
But the majority's view was that the encouragement to seek an information pack made it unreasonable for a user to rely on the website alone, without requesting the information pack.
- The Court was unanimous that an express disclaimer (e.g. as commonly found on a "terms & conditions" page) would have protected SPATA.
It could be said that SPATA was lucky to avoid liability based on a fortuitous comment encouraging users to request the information pack.
The case reiterates some important messages for website operators:
1. Have a disclaimer
Ensure that your website has an appropriately worded disclaimer. These do not need to be lengthy, complex blocks of text. In the light of this case, the key points to make are:
- Instruct users to make their own, independent inquiries before acting on any information; and
- State that all information is of a general nature only and must not be taken as specific or complete advice.
Disclaimers cost nothing to add to a site (apart from legal advice, which need not be extensive), and should be considered a first line of defence against claims such as that faced by SPATA (whose misleading statements were entirely accidental).
2. Display the disclaimer prominently
Ensure that a disclaimer (or a link to it) is reasonably prominent on all relevant pages. While the Court accepted that a website should be read as a whole, the issue of bringing a disclaimer to the user's attention was not expressly discussed in this case. If a disclaimer was tucked away in a hard-to-find part of the website or not accessible for all users, the result may be different.
3. Don't mislead...
Of course, most problems can be avoided altogether by ensuring that your website is not misleading. The problem in this case arose not because of any statement actually being untrue, but because some information was incomplete, and therefore was misleading.
A disclaimer will be of limited (if any) effect under the Fair Trading Act 1986, where misleading conduct in trade occurs in New Zealand.
If only partial information is provided, expressly state that the information is a summary only. Alternatively, ensure that all relevant information is provided.
In SPATA's case, it could have:
- Provided full details about its membership structure and clarified that certain companies are only "affiliates" and not "full members"; or
- Stated that the membership information is a summary only, should not be relied on, and instructed users to contact SPATA for full membership details (which goes further than the majority found necessary, but would be more prudent).
The bottom line is that if you say something on your website, it must not be misleading.
4. Pay attention to your website
It is not uncommon to see websites with incomplete or outdated information, especially where the website is of a supplemental nature to the business or organisation, and the "primary" information is in physical form such as information packs.
It is also not uncommon for websites to be maintained entirely by a third party (e.g. a web hosting company) or a sole administrator. There are probably many (if not most) organisations with websites that have never been fully reviewed for accuracy and legal risks by the board or a senior manager.
The SPATA case highlights the importance of ensuring that websites are not misleading and that appropriate disclaimers (which could be included with other important terms and conditions) are in place. Websites should also be kept up to date to ensure they do not become misleading through obsolescence.
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This article by its nature cannot be comprehensive and cannot be relied on by clients as advice. It is provided to assist clients to identify legal issues on which they should seek legal advice. Please consult the professional staff of Clendons for advice specific to your situation.