Facts
In Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] AC 465, the appellants, Hedley Byrne (HB), a firm of advertising agents, were planning to undertake an extensive advertising program for a customer, Easipower Ltd. Due to doubts about Easipower’s financial position, HB instructed their bankers to obtain a financial report.
The bankers’ head office contacted the respondents, Heller & Partners, a firm of merchant bankers, who supplied a favorable report on Easipower. However, the report contained a disclaimer stating that the information was “without responsibility on the part of this bank or its officials.”
HB relied on this report and incurred significant liabilities when Easipower later went into liquidation. HB sought to recover the loss from Heller & Partners, alleging negligent misrepresentation and a failure to exercise proper care in providing the information. The Court of Appeal initially ruled that no duty of care existed in these circumstances.
Issue
The key issue was whether a duty of care existed to prevent economic loss caused by negligent misrepresentation, even in the absence of a contractual or fiduciary relationship.
Holding
The House of Lords ruled that a negligent, though honest, misrepresentation (whether spoken or written) could give rise to an action for damages for financial loss, apart from any contract or fiduciary relationship.
The law will imply a duty of care when a party seeks information from someone with special skill, trusts them to exercise due care, and the party knows or ought to know that reliance will be placed on their skill and judgment. However, in this case, because there was an express disclaimer of responsibility, no such duty was implied.
Lord Morris of Borth-y-Gest stated,
“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” (at AC 503).
