Hedley Byrne & Co Ltd v Heller & Partners Ltd

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Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 is an English tort law case on economic loss in English tort law resulting from a negligent misstatement. Prior to the decision, the notion that a party may owe another a duty of care for statements made in reliance had been rejected,^[1] with the only remedy for such losses being in contract law.^[2] The House of Lords overruled the previous position, in recognising liability for pure economic loss not arising from a contractual relationship, applying to commercial negligence the principle of "assumption of responsibility".^[3]

Facts

Hedley Byrne were a firm of advertising agents. A customer, Easipower Ltd, put in a large order. Hedley Byrne wanted to check their financial position, and

• the relationship between the parties was "sufficiently proximate" as to create a duty of care. It was reasonable for them to have known that the information that they had given would likely have been relied upon for entering into a contract of some sort. That would give rise, the court said, to a "special relationship", in which the defendant would have to take sufficient care in giving advice to avoid negligence liability. The relationship was that the plaintiff trusted the defendant with the information and therefore the defendant ought to have been honest
• however, on the facts, the disclaimer was sufficient to discharge any duty created by Heller's actions. There were no orders for damages, because,^[4]

A man cannot be said voluntarily to be undertaking a responsibility if at the very moment when he is said to be accepting it he declares that in fact he is not.

Lord Morris of Borth-y-Gest wrote,^[5]

I consider that it follows and that it should now be regarded as settled that if someone possessing special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise. ...in my judgment, the bank in the present case, by the words which they employed, effectively disclaimed any assumption of a duty of care. They stated that they only responded to the inquiry on the basis that their reply was without responsibility. If the inquirers chose to receive and act upon the reply they cannot disregard the definite terms upon which it was given. They cannot accept a reply given with a stipulation and then reject the stipulation. Furthermore, within accepted principles... the words employed were apt to exclude any liability for negligence.

Effectively, the House of Lords had chosen to approve the dissenting judgment of

• Smith v Eric S Bush [1989] 1 AC 831; The defendants were surveyors for a mortgagee. They performed a survey of the house, declaring it to need no significant repair. Relying on the survey, the house was conveyed to a purchaser. The chimney stack in the house fell down, and the purchaser sued for the negligent statement. It was held that even though the defendants had issued a liability waiver, it could not stand up to the Unfair Contract Terms Act 1977's test of reasonableness. More importantly, however, the court held that it was fair, just and reasonable for the purchaser of a modest house to rely on the surveyors' evaluation, as it was such common practice. Thus, the court extended Hedley Byrne liability to highly proximate third-party consumers.
• will, splitting the testator's estate between the two plaintiffs
  , his daughters. He negligently failed to do this by the time of the testator's death, and the estate passed in accordance with the testator's wishes expressed in a previous will. The daughters sued the solicitor in negligence. It was held that the solicitor had assumed a special relationship towards them, creating a duty of care which he had carried out negligently, and therefore had to indemnify them for their loss.