Hedley Byrne & Co Ltd v Heller & Partners Ltd

The absence of a contract or established fiduciary relationship does not preclude liability for a negligent statement causing economic loss. A duty of care may arise where a person voluntarily assumes responsibility for information or advice, knows or ought to know that another will reasonably rely on relevant skill and judgment, and communicates in a business or professional context.

Mere foreseeability or an innocent misstatement is insufficient. The relationship must justify an undertaking of responsibility. An effective disclaimer given with the statement can prevent that undertaking from arising. A recipient who accepts information expressly supplied without responsibility cannot impose a duty inconsistent with that qualification.

Hedley Byrne & Co Ltd v Heller & Partners Ltd concerned credit references supplied by the respondent merchant bank about one of its customers. The appellant advertising agents obtained the references through their own bank. They relied on the favourable information when continuing advertising commitments and lost more than £17,000 when the customer entered liquidation.

McNair J found that the references had been given negligently but entered judgment for the respondents because no duty of care was owed. The Court of Appeal affirmed that decision. Each reference had been requested or supplied on terms stating that it was given without responsibility.

The central questions were whether negligent words could give rise to a duty of care independently of contract or a fiduciary relationship, whether such a duty could protect against purely financial loss, and whether the disclaimers prevented liability in this case.

1. Disposition. The House unanimously dismissed the appeal. Lord Reid, Lord Morris of Borth-y-Gest, Lord Hodson, Lord Devlin and Lord Pearce concluded that the respondents had not undertaken a duty to exercise care because the references were expressly given without responsibility. The House therefore did not determine whether the respondents had in fact been negligent.
2. Duty arising from an assumption of responsibility. Per Lord Reid, a duty may arise where the person seeking information or advice reasonably trusts the maker to exercise appropriate care, and the maker knows or ought to know of that reliance. Lord Morris held that a person possessing special skill who undertakes to apply it for another's assistance may owe a duty independently of contract. Lord Hodson agreed with that formulation. Lord Devlin described the relevant relationship as one equivalent to contract, while Lord Pearce emphasised a business or professional transaction in which reliance on skill and care is contemplated.
3. Negligent statements and economic loss. The common reasoning rejected a universal rule that innocent but negligent words can never found an action outside contract or fiduciary relations. Derry v Peek 14 App Cas 337 concerned deceit and did not close the categories of special relationships capable of creating a duty of care. Nocton v Ashburton [1914] AC 932 confirmed that obligations other than honesty may arise from the parties' relationship. Purely financial loss was not inherently irrecoverable where the necessary duty existed.
4. Earlier restrictive authority. The majority reasoning in Candler v Crane, Christmas & Co [1951] 2 KB 164 was wrong, while Lord Denning's dissenting approach was approved. The ratio of Le Lievre v Gould [1893] 1 QB 491, insofar as it treated contract or fraud as indispensable, was also wrong. The reasoning in Cann v Willson 39 Ch D 39, which recognised a duty to an intended recipient of a negligently prepared valuation, was restored and approved.
5. Effect of the disclaimer. Per Lord Reid, the respondents could not be treated as accepting responsibility when the enquiry itself stipulated that their answer was to be without responsibility. Lord Morris and Lord Pearce held that the words were apt to exclude liability for negligence and prevented the special relationship from arising. Lord Devlin likewise held that a person cannot voluntarily undertake responsibility while expressly declaring that it is not accepted. The appellants could not accept the references while rejecting the conditions on which they were supplied.

• House of Lords: In Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, the House unanimously dismissed the appeal and affirmed judgment for the respondents. It recognised that negligent statements could generate a duty of care but held that the disclaimers prevented such a duty arising here.
• Court of Appeal: The court affirmed the first-instance judgment. It considered itself bound by authority and was not satisfied that the proposed obligation should be imposed on a banker.
• High Court: McNair J found that the references had been given negligently but entered judgment for the respondents because they owed the appellants no duty of care.