NextLeftAndCallGround
The concept of "duty of care" is a well established legal principle. Briefly it can be described thus:
A duty of care is owed to any person or class of person whom you should have in your contemplation when planning any act or omission. It involves the 'neighbour' principle, where a 'neighbour' is any person who fits into the category of persons who, by their relationship to you, should be so considered.
In the context of ATC vs pilot, the relationship has been extensively tested in courts in many jurisdictions, and there is not doubt that ATC owe a duty of care to pilots.
Given that a duty of care undoubtedly exists, an ATC (or more accurately the ATC provider, through the doctrine of vicarious liability) will be held liable for any damage (i.e. material loss or physical injury) which results from a failure to observe this duty of care.
The important point to note is that blind adherence to procedures will not always be adequate protection against a successful action in court.
For example: Assume that you procedures state that in class G, VFR aircraft are NOT entitled to a continuous radar advisory service. If you were to observe two VFR aircraft on radar which were about to collide, and did nothing, your employer may be sued for damages.
The overriding principle is 'reasonableness' or the 'man in the street/man on the Clapham omnibus' comparison, except that your actions would be judged by the standards of a 'reasonable' air traffic controller (a contradiction in terms?)
Y'all be careful now!
[Edited for spelling]
[ 02 November 2001: Message edited by: Four Seven Eleven ]