English tort case on economic loss from negligent misstatements
Hedley Byrne &amp; Co Ltd v Heller &amp; 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, with the only remedy for such losses being in contract law. 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".
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 creditworthiness, and so asked their bank, to acquire a report from Easipower’s bank, Heller &amp; Partners Ltd., who replied in a letter that was headed,
"without responsibility on the part of this bank"
...Easipower is,
"considered good for its ordinary business engagements".
The letter was sent for free. Easipower soon went into liquidation, and Hedley Byrne lost £17,000 (equivalent to 470,000 in 2023) on contracts. Hedley Byrne sued Heller &amp; Partners for negligence, claiming that the information was given negligently and was misleading. Heller &amp; Partners argued:
Judgment.
The court found:
Lord Morris of Borth-y-Gest wrote,
Effectively, the House of Lords had chosen to approve the dissenting judgment of Lord Justice Denning in "Candler v Crane, Christmas &amp; Co" [1951] 2 KB 164.
Application.
In later years there has been a steady trend towards regarding the law of negligence as depending on principle so that, when a new point emerges, one should ask not whether it is covered by authority but whether recognised principles apply to it. "Donoghue v Stevenson" [1932] AC 562 may be regarded as a milestone, and the well-known passage in Lord Atkin's speech should I think be regarded as a statement of principle. It is not to be treated as if it were a statutory definition. It will require qualification in new circumstances. But I think that the time has come when we can and should say that it ought to apply unless there is some justification or valid explanation for its exclusion. For example, causing economic loss is a different matter: for one thing it is often caused by deliberate action. Competition involves traders being entitled to damage their rivals' interests by promoting their own, and there is a long chapter of the law determining in what circumstances owners of land can and in what circumstances they may not use their proprietary rights so as to injure their neighbours. But where negligence is involved the tendency has been to apply principles analogous to those stated by Lord Atkin ([as in] "Hedley Byrne v. Heller" [1964] A.C. 465).
In such normal practices of reliance, in the consumer setting, the court extends Hedley Byrne liability and overrides many disclaimers.
References.
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