I don't think I said anywhere (correct me if I'm wrong) that we're asking anything to do with their ability in the new job. We're asking about how they performed in their previous job.
> the people providing the references are at the mercy of your interpretations and how their statements are later represented.
I think this is a major reason why people don't reference. I'm always honest with my references. A competitor hired away a disastrous hire I made a few years ago. I met the CEO a few months later, after the guy had been let go from there, and said "Why didn't you just call!" -- he'd have saved a bunch of time and money.
> Even if you don't hire the person for entirely different reasons they could end of being held liable for loss of earnings if it's decided that some of the information was untruthful, unsubstantiated or illegal.
If you're an adult about it then there's not a lot which can put you off a hire at the referencing stage. You just have to recognise that not everyone gets along, and everyone has different sensibilities and cultural pros and cons. The point of our referencing is that we want to work with this person, so we want to be prepared to help them excel and hit the ground running.