Hedley Byrne v Heller – gave birth to Professional Indemnity

Hedley Byrne v Heller – gave birth to Professional Indemnity

Hedley Byrne & Co Ltd v Heller & Partners Ltd[1964] AC 465 is an English tort law case on pure economic loss, resulting from a negligent misstatement. It has been heralded as the case that led to the development of Professional Indemnity.

Before this decision, the idea that a party may owe another a duty of care for statements that can be relied upon had been rejected. The only remedy for such losses was in contract law.

In this matter, the House of Lords overruled the previous position, and recognised liability for pure economic loss not arising from a contractual relationship, introducing the idea of “assumption of responsibility”.

So what happened?

Hedley Byrne were a firm of advertising agents. Their client, Easipower Ltd, put in a large order. Hedley Byrne wanted to check their financial position, and credit-worthiness, and subsequently asked their bank, National Provincial Bank, to get a report from Easipower’s bank, Heller & Partners Ltd., who replied in a letter that was headed, “without responsibility on the part of this bank”

It said that Easipower was, “considered good for its ordinary business engagements”.

The letter was sent for free. Easipower went into liquidation and Hedley Byrne lost £17,000 on contracts. Hedley Byrne sued Heller & Partners for negligence, claiming that the information was given negligently and was misleading. Heller & Partners argued there was no duty of care owed regarding the statements, and in any case liability was excluded.

Judgment

The court found that 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. This 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 being liable for negligence. However, on the facts, the disclaimer was found to be sufficient enough to discharge any duty created by Heller’s actions.

Because there was an express disclaimer of responsibility, there was therefore no liability.  This case established the doctrine of negligent misrepresentation, but in this particular case the disclaimer effectively barred the claim. The matter was appealed but was dismissed.