Hedley Byrne & Co Ltd v. Heller & Partners Ltd

An advertising agency lost over £17,000 after relying on a bank's reference about a client company. The House of Lords held that a careless statement can, in a special relationship, give rise to a duty of care. The bank still won, because it gave the reference without responsibility.

Quick Revision

Parties

Hedley Byrne & Company Limited (Hedleys) — appellants; a firm of advertising agents who relied on the bank reference.

Heller & Partners Limited (the bank) — respondents; merchant bankers and the bankers of Easipower Limited who gave the reference.

Easipower Limited — not a party; the client of the appellants and a customer of the respondents. It went into liquidation.

National Provincial Bank Limited — not a party; the appellants' bank. Its City office and its Piccadilly branch passed the enquiries and replies between the parties.

McNair, J. — the trial judge whose findings the Lords quote.

Procedural History

1. The appellants sued the respondents for damages. They said the replies were given negligently and in breach of a duty to exercise care.
2. McNair, J. tried the case. He assumed a duty existed and held that Mr. Heller was negligent. He said the reference was not made plain as a very guarded one. He also said its natural meaning was not justified by facts known to Mr. Heller.
3. McNair, J. then gave judgment for the respondents on the ground that they owed no duty of care. He found no contract and no fiduciary relationship. He held that Easipower's debts to the bank and the bank's possible benefit did not create a special relationship. He was bound by authority.
4. The Court of Appeal affirmed. The Lords note two reasons: the Court was bound by authority, and it was not satisfied that imposing the obligation on a banker would be reasonable. Pearson, L.J. gave the leading judgment. Harman, L.J. also gave a judgment. The Court of Appeal did not consider whether the finding of negligence should stand.
5. Before the House of Lords the respondents wished to challenge the finding of negligence. The Lords did not hear argument on it, since the appeal must fail even if Mr. Heller was negligent.
6. The House of Lords gave its opinions on 28 May 1963. Lord Reid, Lord Morris, Lord Hodson, Lord Devlin and Lord Pearce each held that the appeal must be dismissed.

Facts

1. The appellants were a firm of advertising agents. They placed orders for their client Easipower Limited for advertising time on television and space in newspapers. The orders were on credit terms. The appellants became personally liable to the television and newspaper companies.
2. The respondents were merchant bankers. Easipower was their customer and had recently opened an account with them.
3. In November 1957 the appellants had received a report about Easipower from another bank, though not by direct communication (Lord Morris).
4. In August 1958 the appellants wanted a banker's report on Easipower. They banked at the Piccadilly branch of National Provincial Bank Limited. That branch passed the request to the bank's City office.
5. On 18 August 1958 the City office telephoned the respondents. Both sides agree on a contemporaneous note of the call.
   • The caller wanted to know in confidence, and without responsibility on the respondents' part, the respectability and standing of Easipower.
   • The caller asked whether Easipower would be good for an advertising contract of £8,000 to £9,000.
   • Mr. L. Heller replied that the company had recently opened an account. He said it was believed to be respectably constituted and considered good for its normal business engagements.
   • He added that it was a subsidiary of Pena Industries, Ltd., which was in liquidation. Its managing director, Mr. Williams, was trying to buy its shares from the liquidator.
   • He said the respondents believed the company would not take on commitments it could not fulfil.
6. The oral answer was passed to the appellants orally. A confirming letter dated 21 August 1958 followed from the Piccadilly branch. It was headed confidential and stated that it was for private use and without responsibility on the part of the bank or the Manager (Lord Morris).
7. On 4 November 1958 the appellants wrote to the Piccadilly branch asking it again to check Easipower's financial structure and status. They asked for a check as exhaustive as reasonably possible (Lord Morris).
8. On 7 November 1958 the City office wrote to the respondents. It asked for their opinion in confidence on the respectability and standing of Easipower, of 27 Albemarle Street, London, W.1. It asked whether they considered Easipower trustworthy, in the way of business, for an advertising contract of £100,000 per annum.
9. On 11 November 1958 the respondents replied. The letter was marked confidential. It was for private use and without responsibility on the part of the bank or its officials. It said Easipower was a respectably constituted company, considered good for its ordinary business engagements. It added that the figures were larger than the respondents were accustomed to see.
10. On 14 November 1958 the Piccadilly branch passed that reply to the appellants under the same confidentiality and no-responsibility heading (Lord Morris). It is not suggested that this was improper or against modern custom.
11. The appellants relied on the statements. Easipower went into liquidation and the appellants lost over £17,000. They were unable to recover the bulk of the cost of the orders (Lord Hodson).
12. The respondents did not know the precise purpose of the enquiries. They did not know whether the City office wanted the information for itself or for a customer. They knew nothing of the appellants. They did know the enquiry concerned an advertising contract.
13. The enquiring bank did not name the appellants. It did not tell the appellants the name of the answering bank (Lord Morris).
14. Fraud was first alleged and then abandoned (Lord Morris). The appellants did not complain that Mr. Heller answered without adequate knowledge. They did not say he meant to create a false impression. They said the reply was calculated to create one and he ought to have realised that (Lord Reid).
15. The reference was given without charge and in the usual way (Lord Devlin).

Issues Raised

1. Whether, and in what circumstances, a person can recover damages for loss suffered by relying on an innocent but negligent misrepresentation (Lord Reid)?
2. Whether, in the circumstances, the bank owed the appellants a duty of care (Lord Morris)?
3. Whether the bank would have owed a duty but for the words without responsibility, or owed a duty but was given a defence by those words (Lord Morris)?
4. Whether a plaintiff can recover for financial loss caused by a careless statement outside the contractual, fiduciary and physical-damage categories (Lord Devlin)?
5. Whether a special relationship can exist between a banker who gives a reference and a third party who is not his customer, or whether Robinson v. National Bank of Scotland already decided otherwise (Lord Devlin)?
6. Whether, on the facts, the appellants fall outside any such relationship because of the disclaimer of responsibility (Lord Devlin)?
7. Whether Mr. Heller was in fact negligent? The Lords did not decide this (Lord Reid).

Arguments Contended

For the appellants (Hedley Byrne; Mr. Gardiner is named as counsel):

• The first argument was based on Donoghue v. Stevenson (Lord Reid).
• The duty arose from a special relationship. Reliance was placed on proximity as stated by Lord Esher in Heaven v. Pender, and on the cases that hold that persons who profess special skill must use it with reasonable care (Lord Hodson).
• Outside contract and fiduciary duty there must be proximity, but recovery is not limited to loss flowing from physical damage. Counsel cited no case of recovery for a careless statement causing financial loss without physical damage. He argued that in principle such loss ought to be recoverable and no authority prevents it (Lord Devlin).
• The appellants relied on the dissenting judgment of Denning, L.J. in Candler v. Crane, Christmas & Co. (Lord Hodson).
• On the facts of Le Lievre v. Gould, no liability arose, because the mortgagees there had stipulated for inspection by their own surveyor (Lord Hodson).
• The appellants relied on contract cases where very clear words are needed to exclude the duty of care that would otherwise flow from the contract (Lord Reid).
• The words of disclaimer were not sufficiently precise to exclude liability for negligence (Lord Pearce; Lord Hodson).
• The disclaimer covered only the bank that received the reference, or only the accuracy of detail (Lord Hodson).
• The respondents knew the reference was intended to be communicated by the City office to some unnamed customer for that customer's use. Only formal consideration was lacking (Lord Devlin).
• Bankers' references are important to the business world, and a duty of care is desirable in an integrated banking system (Lord Pearce).

For the respondents (Heller & Partners; Mr. Foster is named as counsel):

• There was no close enough relationship to give any duty. The respondents did not know the exact purpose of the enquiry or whether it was for the enquirer or a customer. They knew nothing of the appellants (Lord Reid).
• There is no general duty to be careful in speech. A plaintiff cannot recover financial loss from a careless statement unless the maker owed a special duty. That duty must be contractual, or fiduciary, or arise from proximity with the financial loss flowing from physical damage. These three categories are exhaustive. Candler v. Crane, Christmas & Co. decided this and is right in principle (Lord Devlin).
• If other special relationships are possible, none can be formulated for a banker who gives a reference to a third party who is not his customer. Robinson v. National Bank of Scotland already decided that point (Lord Devlin).
• Even if such a relationship exists, the appellants fall outside it. The reference was marked strictly confidential and given on the express understanding of no responsibility (Lord Devlin).
• It should not be inferred that the respondents knew the enquiry was for a customer. If they did, they did not intend the reference itself to reach the customer. It was only material for the customer's bank to advise on its own responsibility (Lord Devlin).
• Nocton v. Ashburton added fiduciary obligation to contract as a source of special duty and closed the door on any further expansion (Lord Devlin).
• The respondents firmly contended that they were not negligent, that no damage flowed from the references, and that they could challenge the trial judge's finding (Lord Morris; Lord Hodson).
• It is strange that innocent misrepresentation does not sound in damages, yet in special cases a person may sue in tort a third party whose negligent misrepresentation induced a contract. This was Harman, L.J.'s point, elaborated by counsel (Lord Hodson).
• Holding otherwise would create confusion in many aspects of the law and infringe the rule that innocent misrepresentation gives no right to damages (Lord Pearce).
• In the Court of Appeal, counsel conceded that a banker is not expected to make outside enquiries to add to what he already knows (Pearson, L.J., quoted by Lord Hodson).

Court's Reasoning

The judgment has no numbered paragraphs, so no paragraph numbers are cited. Each step below is placed under the Lord who gave it.

Opinion of Lord Reid

1. Noted: The case raises the important question whether and when a person can recover damages for loss caused by relying on an innocent but negligent misrepresentation.
2. Noted: He adopts McNair, J.'s statement of the case. It describes the bankers' reference, the appellants' orders for Easipower and the appellants' decision not to cancel the orders in reliance on the references.
3. Noted: The Lords found it unnecessary to hear argument on whether Mr. Heller was negligent. He therefore expresses no opinion on it.
4. Noted: The complaint is not that Mr. Heller lacked knowledge or meant to mislead. It is that his words were calculated to create a false impression and he ought to have realised it.
5. Held: The argument that the parties were not close enough is rejected. The respondents knew the enquiry concerned an advertising contract. It was at least probable that the advertising contractors wanted the information.
6. Noted: It is immaterial that the respondents did not know who the contractors were. Nothing special could have influenced whether they gave information or in what form.
7. Noted: He therefore treats the case as one where a negligent misrepresentation is made directly to the person seeking information, opinion or advice. He does not decide what kind or degree of proximity is necessary.
8. Held: Donoghue v. Stevenson has no direct bearing on this case. It may encourage the development of existing lines of authority. It cannot entitle the courts to disregard them.
9. Noted: Apart from authority, the law must treat negligent words differently from negligent acts. Careful people often give definite opinions on social or informal occasions without the care they would show professionally. The appellants agree there is no duty of care on such occasions.
10. Noted: He refers to American and South African authorities that recognise this, although their law has gone further than English law. It is unusual to circulate dangerous articles casually. A friend's home-made wine could still harm guests, who might have an action against a negligent manufacturer.
11. Noted: A negligent article causes one accident, so proximity is easier to find. Words can be broadcast with or without the speaker's consent or foresight. To say the speaker owes a duty to every ultimate consumer of his words would be going very far.
12. Noted: A speaker could make it part of a contract that he is not liable for negligence. That contract would not protect him against a third party who was unaware of it.
13. Held: There is good sense behind the present law that an innocent but negligent misrepresentation generally gives no cause of action. As he put it, "There must be something more than the mere misstatement."
14. Held: The most natural extra requirement is that the speaker undertook some responsibility, expressly or by implication from the circumstances. This does not conflict with any authority binding on the House.
15. Noted: Where there is a contract, the question is whether there is a warranty. English law's refusal to recognise a jus quaesitum tertio (a right given to a third person) causes difficulties that are not relevant here.
16. Noted: Gratuitous services show that a person can owe a duty of care apart from contract. They pave the way to a duty of care in making a statement of fact or opinion.
17. Noted: Much of the difficulty was caused by Derry v. Peek. It was an action of deceit against directors for false statements in a prospectus. The directors believed their statements true but had no reasonable grounds.
18. Noted: The Court of Appeal held this was fraud in law. The House held that there is no fraud without dishonesty and that credulity is not dishonesty. The House never considered whether the directors owed a duty of care.
19. Noted: The Directors Liability Act 1890 quickly remedied the gap. A director is liable for untrue statements in a prospectus unless he proves he had reasonable ground to believe, and did believe, that they were true.
20. Held: Derry v. Peek did not establish a universal rule that an innocent but negligent misrepresentation cannot found an action absent contract. For twenty years it was assumed to have decided that, following Lord Bramwell's remark at p. 347. Nocton v. Ashburton showed this was much too wide.
21. Held: Statements to that effect in cases between 1889 and 1914 cannot now be accepted as accurate. The Court must determine the extent of the exceptions to the rule.
22. Noted: In Nocton v. Ashburton a solicitor was sued for fraud. Fraud was not proved but he was held liable for negligence.
23. Noted: Viscount Haldane, L.C. said that Derry v. Peek did not decide that a different sort of relationship must be tested by asking whether deceit lies (p. 947). Other obligations besides honesty can give a right to damages. Judges have worked these out as in a system of judge-made law.
24. Noted: He also said that Derry v. Peek excluded cases where a person whose special province it is to know a fact gives an erroneous answer to an enquirer (p. 950). He explained that constructive fraud means breach of the obligation enforced by a court of conscience (p. 954). If a special duty can be inferred for directors issuing a prospectus, Derry v. Peek is no authority against damages for misrepresentation without intent to deceive (p. 955).
25. Noted: He finds no dissent from the other Lords. Lord Shaw also quoted Lord Herschell's passage and approved (p. 971) a passage from Sir Roundell Palmer's argument. It requires a proximate relation that brings the parties virtually into the position of parties contracting with each other. Lord Reid calls this an interesting anticipation in 1871 of the neighbour test.
26. Noted: In Robinson v. National Bank of Scotland, 1916 SC (HL) 154, Lord Haldane repeated that Derry v. Peek did not affect fiduciary relationships, the duty of care from implied or express contracts, or the duty of care from other special relationships. Courts remain free to recognise them.
27. Held: Lord Haldane did not limit the duty of care to fiduciary relationships in the narrow sense recognised by the Court of Chancery. He spoke of other special relationships.
28. Held: He sees no logical stopping place short of all relationships where it is plain that the enquirer trusted the other to take such care as the circumstances required. It must have been reasonable to do so. The other must have given the information or advice knowing, or ought to have known, that the enquirer was relying on him.
29. Why: In negligence the objective standard of the reasonable man now applies, hence the words ought to have known.
30. Held: A reasonable man who knows he is trusted has three courses. He can keep silent or decline to answer. He can answer with a clear qualification that he accepts no responsibility or that the answer lacks careful reflection. Or he can answer without any qualification.
31. Held: If he takes the last course, "he must, I think, be held to have accepted some responsibility for his answer being given carefully". He is held to have accepted a relationship that requires him to take such care as the circumstances require.
32. Held: It follows that Candler v. Crane, Christmas & Co. was wrongly decided. The defendant accountants knew their employer wanted the accounts shown to a potential investor. They showed him the accounts, discussed them and let him copy them. It was a typical case of agreeing to assume a responsibility.
33. Noted: The majority of the Court of Appeal held they were bound by Le Lievre v. Gould, and that Donoghue v. Stevenson did not apply. He thinks they were right to hold this, given the rule that the Court of Appeal follows all rationes decidendi (the reasons for a decision) of its earlier decisions.
34. Noted: Lord Denning dissented and distinguished Le Lievre v. Gould on its facts. That is not enough under the Court of Appeal's rule if the ratio applies. This was not the occasion to consider whether that rule is a good one. The question is whether the ratio in Le Lievre v. Gould can be supported.
35. Noted: Cohen, L.J. attached importance to the New York decision Ultramares Corporation v. Touche (Cardozo, C.J.). Lord Reid thinks Glanzer v. Shepherd is more in point. There a weigher who knew the purchaser relied on his certificate was held to owe a duty to the purchaser, with whom he had no contract. Ultramares is nearer to Le Lievre v. Gould.
36. Noted: In Le Lievre v. Gould a surveyor, Gould, gave certificates to a builder. The builder showed the report to mortgagees without Gould's authority. It is difficult to find proximity there, so the actual decision may be correct. The decision was not put on that ground. If it had been, Cann v. Willson would not have been overruled.
37. Noted: Lord Esher and Bowen, L.J. reasoned that there was no contract, that Derry v. Peek restated the old law, and that there is no duty to be careful. Bowen, L.J. said the law does not treat writing on paper like a gun or dangerous instrument.
38. Held: Donoghue v. Stevenson shows Bowen, L.J. was wrong to limit the duty of care to guns and dangerous instruments. He was also wrong to limit the duty for statements to cases of contract. The ratio in Le Lievre v. Gould was wrong, and Cann v. Willson ought not to have been overruled.
39. Noted: Applying these principles, the appellants complain of misjudgment rather than carelessness in the ordinary sense. Bankers now commonly give references as part of their business. A banker finds it hard to reconcile his duty to his customer with a fairly balanced reply.
40. Noted: Enquirers cannot expect a full and objective opinion or accurate facts such as skilled men give in reply to other enquiries. It is unusually difficult to say what duty beyond honesty a banker undertakes if he replies without an adequate disclaimer or warning.
41. Noted: The facts of Robinson v. National Bank of Scotland (1916 SC 46). Harley and the two Inglis brothers wished to raise money from an insurance company. They said Harley would borrow and the brothers would guarantee. To satisfy the company, Harley's London bank wrote to M'Arthur, a branch agent of the National Bank of Scotland.
42. Noted: M'Arthur replied on 28 July 1910. The reply was ultimately held culpably careless but not fraudulent. Harley and the Inglis brothers did not proceed with their scheme in July but resumed negotiations in September. The company then wanted an additional guarantor and Harley approached Robinson. M'Arthur gave a further reference about the brothers on 1 October, but no point was made of it.
43. Noted: Robinson had been disbelieved on his claim to have been approached before the enquiry. The Lord Ordinary held he was not brought in before September. No Lord in the House questioned the finding that the 28 July letter was not obtained on his behalf.
44. Noted: The company lent to Harley with the brothers and Robinson as guarantors. Harley and the brothers became bankrupt and Robinson paid under his guarantee. He sued the bank and M'Arthur for fraud. He also alleged a duty to disclose facts M'Arthur knew, which played a very minor part.
45. Noted: In the Court of Session the alternative case was dealt with summarily. The Lord Justice Clerk found no duty of disclosure that would apply the principle of Nocton v. Ashburton. Lord Dundas said the solicitor and fiduciary cases had no application. He drew attention to the last sentence of the letter of 28 July, which said the information was confidential and given with no responsibility whatever. Lord Salvesen dissented and did not deal with the point. Lord Guthrie said there was no fiduciary relationship.
46. Noted: In the House of Lords an unusual course was taken. Earl Loreburn told counsel that their Lordships thought there was no special duty on M'Arthur and that the bank was not liable unless he was dishonest. Their Lordships were not yet satisfied he was dishonest. They were prepared to dismiss the appeal with no costs on either side, since the pursuer had been badly treated.
47. Noted: Counsel said no more, and judgment was given for the bank with no costs here or below.
48. Held: Robinson is very nearly indistinguishable from the present case. Lord Loreburn thought M'Arthur's knowledge that others might use his letter would let Robinson found on it if fraud were proved. It is not clear he decided that there was enough proximity for a special relationship. Lord Reid does not regard it as a binding decision on that question.
49. Noted: Lord Haldane said that when a mere enquiry is made by one banker of another who stands in no special relation, there is no duty except common honesty, absent special circumstances from which a contract to be careful can be inferred. Lord Reid takes contract to be careful to mean an agreement or undertaking to be careful.
50. Noted: Scots law allows a contract without consideration. Lord Haldane cannot have meant similar Scots and English cases to be decided differently for that reason. It was an extempore judgment. Lord Haldane contrasted a mere enquiry with special circumstances from which an undertaking to be careful can be inferred. In Robinson the letter's no-responsibility sentence excluded any such undertaking.
51. Held: The only possible distinction in the present case is that there was no adequate disclaimer here. But the appellants' bank, acting as their agent in the enquiry, began by saying it wanted to know in confidence and without responsibility on the respondents' part. The appellants cannot disregard that and claim the respondents incurred a responsibility.
52. Noted: The appellants relied on contract cases requiring very clear words to exclude the duty of care that flows from a contract. There are two answers.
53. Held: First, in a contract it is necessary to exclude liability for negligence. Here the question is whether an undertaking to assume a duty of care can be inferred. That is a very different matter.
54. Held: Second, even in contract, general words may be enough if the only liability to exclude is liability for negligence. He cites Scrutton, L.J. in Rutter v. Palmer, that a party is not exempt from liability for negligence unless adequate words are used. It was admitted that there was a duty to give an honest reply. Only negligence remained to exclude, and with no contract there was no question of warranty.
55. Held: The respondents never undertook any duty to exercise care in giving their replies. The appellants cannot succeed unless there was such a duty. The appeal must be dismissed.

Opinion of Lord Morris of Borth-y-Gest

1. Noted: The important question is whether the bank owed Hedleys a duty of care. Hedleys must establish a duty, a failure to discharge it, and loss as a consequence.
2. Noted: Fraud was originally alleged but abandoned. The trial judge held the bank negligent but under no duty of care. The Court of Appeal agreed on the duty and did not consider the negligence finding. The House did not need to consider it either. The bank firmly contends it was not negligent.
3. Noted: Hedleys wanted a banker's report on Easipower in August 1958. The Piccadilly branch of National Provincial asked the bank's City office to obtain it. The City office telephoned the bank on 18 August 1958, asking in confidence and without responsibility about Easipower's respectability and standing and a contract of £8/9,000.
4. Noted: The bank gave an oral answer. It reached Hedleys orally, with a letter of confirmation dated 21 August 1958 headed confidential and without responsibility on the part of the bank or the Manager. On 4 November 1958 Hedleys asked the branch again to check Easipower.
5. Noted: On 7 November 1958 the City office asked the bank whether Easipower was trustworthy for a £100,000 per annum contract. The bank replied on 11 November 1958. On 14 November the branch passed the reply to Hedleys under a heading of confidentiality and no responsibility.
6. Held: It is a reasonable inference that the bank knew the enquiring bank asked because a customer might be making an advertising contract with Easipower. The bank must have known its answer would be passed on to that person.
7. Why: The bank's conditions are important. The unnamed and unknown identity of the person is not important to the legal issue.
8. Noted: It is inherently unlikely that the bank would have answered a direct enquiry from Hedleys. If it had, it would have stipulated for no responsibility.
9. Noted: The appeal does not raise when a banker may answer an enquiry apart from direct authorisation. He leaves that as Atkin, L.J. left it in Tournier v. National Provincial & Union Bank of England: if it is justified, it must rest on the customer's implied consent.
10. Noted: The legal issue has three parts. Did the bank owe a duty of care to Hedleys? Would it have owed one but for the words without responsibility? Or did it owe one but have a defence in those words?
11. Noted: If A assumes a responsibility to B to give deliberate advice, there could be liability if the advice is negligent. He says could because the ordinary courtesies of life would become impossible if every kindly act carried a legal obligation.
12. Noted: If A employs B for reward to advise, as with an accountant, solicitor or doctor, B could be liable in damages for negligent advice. The fact that the advice is given in words does not prevent liability.
13. Noted: Apart from employment or contract, a duty of care arises if a service is voluntarily undertaken. A doctor who treats an unconscious stranger must use reasonable skill and care. He cites Lord Atkinson in Banbury v. Bank of Montreal (p. 689) and Lord Loughborough in Shiells v. Blackburne. He compares Wilkinson v. Coverdale.
14. Held: There is no difference of principle in the case of a banker. If a non-customer formally asks for deliberate advice on financial matters, the bank need not agree. If it undertakes to give such advice, even gratuitously, it must take reasonable care. He excludes casual and perfunctory conversations.
15. Held: The bank would be liable if negligent even though, with no consideration, no enforceable contract arose.
16. Noted: Without direct dealings, duties are owed in many situations. A road user owes a duty to other road users. In Heaven v. Pender a dock owner who put up a staging outside a ship owed a duty to the painter's employee who used it. In George v. Skivington a chemist who sold hair wash knowing the wife would use it owed her a duty of care. This was held on demurrer (a pleading objection). Donoghue v. Stevenson made the manufacturer liable to the ultimate consumer.
17. Held: These illustrations show that, irrespective of contract, fiduciary relationship or direct dealing, a duty may be owed. In logic he sees no essential reason to distinguish injury caused by reliance on words from injury caused by reliance on a staging or a hair-wash bottle.
18. Held: Where A claims loss from acting on B's misstatement and there is no contract or fiduciary tie, the first enquiry is whether B owed A any duty. The next is the nature of that duty. It may be honesty alone, or honesty and reasonable care.
19. Noted: There may also be cases where one person issues a document that should result from the skill and judgment required in his calling. He knows and intends that another will rely on its accuracy. Cann v. Willson illustrates this.
20. Noted: In Cann v. Willson an owner wanted a mortgage loan. His solicitors told him to get a valuation. The defendants valued the property and sent the valuation to the solicitors. The solicitors drew the defendants' attention to the purpose and the responsibility. The defendants said the valuation was moderate. The solicitors passed it to the plaintiff and a co-trustee, who lent on the mortgage.
21. Noted: The owner defaulted and the property fell short. Chitty, J. held the defendants knew the purpose and sent the valuation to the plaintiff's agents to induce the trust money to be lent. He held the valuation was no valuation at all. He held them liable, mainly on the duty of care. He passed over contract and treated the fraud ground as an alternative (7 June 1888).
22. Noted: Chitty, J. compared Heaven v. Pender and George v. Skivington. He said that the defendants, by knowingly sending the valuation to induce the plaintiff to lend, incurred a duty to use reasonable care. Peek v. Derry was reversed in the House on 1 July 1889.
23. Held: Lord Morris sees no fault or flaw in Chitty, J.'s reasoning and upholds it. It is submitted that the bank knew some existing person, unknown by name, would rely on what it said, and so owed that person a duty of care. He examines this submission after considering Cann v. Willson further.
24. Noted: Le Lievre v. Gould overruled Cann v. Willson. That case led to Candler v. Crane, Christmas & Co. Lord Esher (p. 497) said Chitty, J. acted on an erroneous proposition overruled by Derry v. Peek. Bowen, L.J. (pp. 499, 501) said Heaven v. Pender was only an instance of premises and that Derry v. Peek decided there is no duty to be careful in such cases. He followed Romer, J. in Scholes v. Brook. A. L. Smith, L.J. reasoned similarly.
25. Held: Whatever was once thought, Nocton v. Ashburton (1914) gives authoritative guidance. Viscount Haldane said (p. 947) that the Lords in Derry v. Peek considered only the foundation of an action for deceit. They did not say that a different relationship must be tested by whether deceit lies. Later authorities exaggerated it. The judgment covered only part of the field in which liabilities arise.
26. Held: Viscount Haldane said (p. 955) that beside the duty of honesty there are cases of an essentially different character. These ask whether the parties' circumstances and relations give rise to duties of particular obligation. A special duty may arise from an implied contract at law or a fiduciary obligation in equity. Derry v. Peek decided only that the directors owed no fiduciary duty to the public.
27. Noted: Lord Dunedin said there is no negligence without a duty. Duties may be owed to the world at large (alterum non laedere), arise from contract, or arise from a relationship without contract, like trustee and beneficiary or guardian and ward.
28. Noted: Lord Shaw (p. 970) said Derry v. Peek was wholly an action of deceit. At p. 972 he said that once the parties' relations are those in which one must give information or advice the other may rely on as the basis of a transaction, responsibility attaches for error, even if given in good faith. Lord Parmoor (p. 978) said Derry v. Peek has no bearing on actions founded on breach of duty in which dishonesty is not necessary. He mentions that dishonesty involves mens rea (a guilty mind).
29. Held: Guided by Nocton v. Ashburton, it should not have been held in Le Lievre v. Gould that Cann v. Willson was wrong. Independently of contract, information or advice may establish a relationship creating a duty to be careful as well as honest.
30. Noted: Lord Moulton in Heilbut, Symons & Co. v. Buckleton (p. 51) stressed that a person is not liable for innocent misrepresentation. This is not impaired by recognising a remedy where a duty exists. Lord Bowen said in Low v. Bouverie that the doctrine applies only where there is no duty in law to be careful.
31. Held: The enquiry in such cases is whether there was a relationship between the parties creating a duty and, if so, whether the duty included a duty of care. Lord Haldane repeated in Robinson that Derry v. Peek did not affect fiduciary doctrine, the duty of care from implied or express contracts, or the duty from other special relationships.
32. Held: It should now be regarded as settled that a duty of care arises if someone with a special skill undertakes, "irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill". It makes no difference that the service is given by words.
33. Held: A duty of care also arises where a person is so placed that others could reasonably rely on his judgment, skill or ability to make careful enquiry. He takes it upon himself to give information or advice, or allows it to be passed on. He knows or should know the other will rely on it.
34. Noted: He applies this on the footing that the bank knew its answer would go to an unnamed customer of National Provincial. The statement that the City office wanted to know does not prevent that conclusion.
35. Held: The bank owed the unnamed person some duty. There was a duty of honesty. The great question is whether there was a duty of care. The bank need not have answered. Answering enquiries between banks is a matter of convenience, courtesy and mutual advantage.
36. Held: That the bank would probably not have answered Hedleys directly does not affect what it knew about the use of its answer. It cannot be left out when considering what the bank undertook.
37. Held: The bank did not undertake to spend time and trouble searching records, weighing features and producing a well-balanced report. Pearson, L.J. used those words. The enquiring bank and its customer would not expect that. This is what Lord Haldane meant by a mere enquiry.
38. Noted: In Parsons v. Barclay & Co. Cozens-Hardy, M.R. said a banker asked for a reference need not make outside enquiries. He need only answer honestly from the books and accounts before him. Here no formal detailed report was expected, such as a body paid to make all enquiries might give.
39. Held: There is much to be said for the view that a brief opinion on creditworthiness carries no higher duty than an honest answer. He need not decide that broadly, as it cannot be covered by a general statement.
40. Held: In his judgment the bank, by its words, effectively disclaimed any assumption of a duty of care. It answered only on the basis of no responsibility. Enquirers who chose to receive and act on the reply cannot disregard its terms. As he said, "They cannot accept a reply given with a stipulation and then reject the stipulation."
41. Held: Under accepted principles, as in Rutter v. Palmer, the words were apt to exclude liability for negligence. He would dismiss the appeal.

Opinion of Lord Hodson

1. Noted: The appellants, advertising agents, claim damages for the respondents' negligence in giving references on Easipower's creditworthiness. Easipower went into liquidation, and the appellants could not recover the bulk of the cost of its advertising orders.
2. Noted: The trial judge found the bankers negligent, the appellants having relied and lost. He entered judgment for the respondents because the law imposed no duty to take care in giving references, only a duty to act honestly.
3. Noted: The respondents maintain they were not negligent and that no damage flowed from the references. They took first the point that no duty was owed, which is decisive if right. The underlying question is whether the bankers, who always disclaimed responsibility, ever assumed any duty.
4. Noted: The appellants rely on a duty assumed or imposed when the respondents gave the reference knowing the appellants or another third party might rely on it. The case was argued first on the footing of a special relationship. It rested either on proximity as introduced by Lord Esher in Heaven v. Pender, or on cases where those holding out special skill must use it with reasonable care.
5. Noted: Donoghue v. Stevenson shows that the area of negligence is extensive. Lord Macmillan said (p. 619) that grounds of action are as various as human errancy and the categories of negligence are never closed. The room for diversity lies in what circumstances create the relationship.
6. Noted: There the manufacturer sold ginger beer in a bottle that could not be inspected. Wrottesley, J. in Old Gates Estates, Ltd. v. Toplis & Harding & Russell thought he could not award damages in tort for a negligent valuation. He confined Donoghue v. Stevenson to danger to life, limb or health.
7. Held: Lord Hodson does not think that is the true view of Donoghue v. Stevenson. The decision has been extended to cases without an expectation of inspection, in Grant v. Australian Knitting Mills, and to repairers, in Haseldine v. C. A. Daw and Son, Ltd. It has never been applied to damages for negligent statements.
8. Noted: In Candler v. Crane, Christmas & Co. (1951) the Court of Appeal by a majority held a careless false statement was not actionable without a contractual or fiduciary relationship. This was unchanged by Donoghue v. Stevenson. Cohen, L.J. referred to Lord Esher's language in Le Lievre v. Gould, that a person near to another or to his property owes a duty not to cause personal injury or injure his property.
9. Noted: Asquith, L.J. said the neighbour doctrine had not been applied where the damage was not physical. The majority went no further than Wrottesley, J., except that injury to property was covered. They and the trial judge held they were bound by Le Lievre v. Gould, which Lord Atkin called authoritative in Donoghue v. Stevenson.
10. Noted: Lord Esher refused to extend proximity to the parties in Le Lievre v. Gould. The majority in Candler could not draw a valid distinction between the two cases.
11. Held: Lord Hodson agrees with Denning, L.J. that there is a valid distinction. In Le Lievre v. Gould the mortgagees had the opportunity to inspect and had stipulated for inspection by their own surveyor. In Candler the accountants knew the plaintiff was a potential investor and that the accounts were needed to be shown to him.
12. Noted: Le Lievre v. Gould held that Cann v. Willson was overruled. The facts of Cann v. Willson were in pari materia (of like nature) with Candler. Chitty, J. held the defendants liable because they owed a duty independently of contract, and because they had made reckless statements the plaintiff acted on.
13. Noted: Derry v. Peek overruled the Court of Appeal on the second ground. The first ground was untouched. It depended on George v. Skivington, which Donoghue v. Stevenson expressly affirmed.
14. Noted: Asquith, L.J. pointed out that the hair wash in George v. Skivington was negligently compounded, and the declaration also said the defendant called it safe. Lord Hodson sees no valid distinction here between a negligent statement, such as a wrong label leading to injury, and a negligent compounding of ingredients.
15. Noted: When Le Lievre v. Gould was decided, Derry v. Peek was probably thought to go further than it did. It decided that honest but reckless statements by directors were not actionable as fraud. It inferentially decided they were not actionable in negligence, which was not pleaded.
16. Noted: Nocton v. Ashburton showed that an action does lie for negligent misstatement where the circumstances disclose a duty to be careful. He quotes Lord Haldane at pages 955-956. A special duty may arise from the circumstances and relations of the parties. It may give rise to an implied contract at law or a fiduciary obligation in equity.
17. Noted: Lord Haldane said Derry v. Peek decided that no special duty to be careful in statement could be inferred from those facts, and that the directors owed no fiduciary duty to the public. He added that a special relationship must be clearly shown whenever alleged.
18. Held: Lord Hodson has done no more than summarise the argument addressed to the Court of Appeal in Candler and given effect in Denning, L.J.'s dissent. He respectfully agrees with it so far as it dealt with the facts. It is to be preferred to the majority's judgment. The majority's opinion is supported by the ratio decidendi of Le Lievre v. Gould, which they cannot be criticised for following.
19. Held: This only carries the appellants to the point that, if they can establish a special duty, they succeed on breach of it.
20. Held: Apart from fiduciary relationships like trustee and beneficiary, solicitor and client, parent and child, or guardian and ward, there are other circumstances in which the law imposes a duty to be careful. The duty is not limited to avoiding personal injury or injury to property. It covers avoiding pecuniary loss, provided the relationship is sufficiently close.
21. Noted: Courts of Equity recognised a fiduciary relationship in almost every shape, as Field, J. said in Plowright v. Lambert. He referred to a case which said a confidential relationship could be created voluntarily by offering to give advice, so that the adviser was afterwards disabled from purchasing. The source text breaks off at this point.
22. Held: It is difficult to see why liability should depend on the nature of the damage. Lord Roche in Morrison Steamship Company, Ltd. v. Greystoke Castle (Cargo Owners) (p. 280) gave an example. A negligent lorry driver damages a lorry. The goods in the second lorry are not damaged, but the goods owner is put to expense that he can recover by direct action.
23. Held: The Court of Appeal majority in Candler were not unmindful of Nocton v. Ashburton. They thought Lord Haldane had in mind only strict fiduciary relationships. Lord Hodson thinks the words need not be so limited.
24. Held: Old authorities support this. Shiells v. Blackburne, Wilkinson v. Coverdale and Gladwell v. Steggal show a duty of reasonable care in the absence of a fiduciary relationship. It arises where persons hold themselves out as having special skill.
25. Held: Lord Loughborough's statement in Shiells v. Blackburne is always accepted as authoritative. It ought not to be dismissed as a dictum, even though the plaintiff there failed to meet the standard it set. It says a person who gratuitously undertakes to do a thing to the best of his skill, in a situation implying skill, is liable for gross negligence if he omits that skill.
26. Noted: Proximity is harder to establish for words than for other activities. Mere casual observations are not to be relied on, as in Fish v. Kelly. These matters go to difficulty of proof, not principle.
27. Noted: In Woods v. Martins Bank, Ltd. Salmon, J. held the bank had held itself out as adviser on investments. It had not given reasonably careful advice, and it was liable even if the plaintiff was not a customer at the time.
28. Noted: The judge based this on a fiduciary relationship, since he was bound by Candler. Lord Hodson would have thought the decision sustainable as a special relationship, even if the word fiduciary was strained.
29. Noted: Lord Hodson does not overlook Harman, L.J.'s point in the Court of Appeal, elaborated by counsel for the respondents. It seems strange that innocent misrepresentation does not sound in damages, yet a person may sue in tort a third party whose negligent misrepresentation induced him to contract.
30. Noted: Lord Wrenbury said in Banbury v. Bank of Montreal (p. 713) that innocent misrepresentation is not the cause of action. It is evidence of the negligence that is.
31. Held: On whether there was a special relationship here, he cannot exclude the actual terms of the reference. The appellants cannot get over the difficulty those words create. They cannot say the respondents seek to contract out of their duty by insufficient language, if the truth is that no duty of care was ever assumed or imposed.
32. Held: The first question is whether a duty was ever imposed, and the language used must be considered first. He sees no objection in law or morals to a giver of a reference protecting himself. He may give it without responsibility beyond the honesty of his opinion. That means without responsibility for negligence in giving the opinion.
33. Held: He cannot accept that the responsibility disclaimed was limited to the bank to which the reference was given. He cannot accept that it referred only to accuracy of detail.
34. Held: Similar words were in Robinson v. National Bank of Scotland (1916 SC (HL) 154, p. 159), whose facts cannot be distinguished in any material respect. In the Inner House the disclaimer words were treated as significant.
35. Noted: In the House of Lords the opinion was that the representations were careless, inaccurate and misleading but the pursuer had no remedy for lack of a special duty. That conclusion was reached apart from the disclaimer. Lord Hodson quotes Viscount Haldane's passage at p. 157, repeating what he said in Nocton v. Ashburton.
36. Held: Robinson is conclusive against the appellants. It is not weakened by the fact that the case ended before full argument, with the House willing to dismiss without costs because the pursuer had been badly treated.
37. Held: He concurs with Pearson, L.J., who gave the leading judgment in the Court of Appeal. Apart from authority, it is not clear that a banker giving a brief answer accepts more than a duty to answer honestly. The banker is not expected to make outside enquiries, nor to spend time producing a well-balanced report.
38. Why: A duty of care adds little to the duty of honesty for an impromptu answer. A seriously wrong answer is only some evidence of dishonesty.
39. Noted: This is to the same effect as Cozens-Hardy, M.R. in Parsons v. Barclays Bank Ltd. He said a banker asked for a reference need not make outside enquiries. To hold otherwise would be dangerous and would end a wholesome and long-established custom.
40. Held: It would be unreasonable to burden bankers giving references. If more than honesty were required, they might have to go to great trouble to explore all available material.
41. Noted: Low v. Bouverie held that a trustee who answers a stranger's enquiries about the beneficiary need only give honest answers to the best of his actual knowledge and belief. He need make no enquiries himself.
42. Held: A banker giving references in the ordinary exercise of business should be in no worse position than the trustee. A banker may still find himself in a special relationship involving liability, as in Wood v. Martins Bank Ltd. There are no special features here that let the appellants succeed.
43. Held: It is not possible to catalogue the special features that must exist before a duty of care arises. Having read Lord Morris's speech, he agrees with it. A duty of care arises in a particular sphere. The person must be so placed that others reasonably rely on his judgment, skill or ability to make careful enquiry. He must give information or advice, or let it be passed on, to a person he knows or should know will rely on it. He would dismiss the appeal.

Opinion of Lord Devlin

1. Noted: The appellants wanted to know whether they could safely give credit to certain traders. Their bank, National Provincial, approached the traders' bank. The respondents gave a reference without charge and in the usual way. It was so carelessly phrased that it led the appellants to think the traders creditworthy when they were not. The appellants seek the resulting loss.
2. Noted: Mr. Foster gave three reasons why the appellants should not recover. The first is a general statement of the law. There is no general duty not to make careless statements. No one challenges that. There is a duty to be honest in speech, but not a duty to be careful in speech.
3. Noted: There is not even a general duty to be careful in action. The duty is limited to those in a relationship of proximity, as in Donoghue v. Stevenson. A plaintiff cannot recover financial loss from a careless statement unless the maker owed him a special duty of care. Mr. Foster says that duty must be contractual, fiduciary, or arise from proximity with financial loss flowing from physical damage. He says these categories are exhaustive, as Candler v. Crane, Christmas & Co. decided.
4. Noted: Mr. Gardiner agrees that outside contractual and fiduciary duty there must be proximity. He disputes that recovery is then limited to loss from physical damage. He cites no case of liability for a careless statement causing financial loss otherwise than through physical damage. He submits that principle allows recovery and no authority prevents it. This is the first and most fundamental issue.
5. Noted: Mr. Foster's second reason is that no special relationship can be formulated for a banker who gives a reference to a non-customer third party. He says Robinson already decided this. His third reason is that, on the facts, the appellants fall outside any such relationship. He relies on the reference being marked strictly confidential and given with no responsibility.
6. Held: He approaches the first question as Lord Atkin approached the like question in Donoghue v. Stevenson. If Mr. Foster's proposition were the result of the authorities, Lord Atkin's words at p. 582 would apply. It would be a grave defect in the law and so contrary to principle that he would hesitate long before following any such decision without the authority of the House.
7. Held: If the law were settled as Mr. Foster says, it would leave a man without a remedy where the law can well give one. It would also be profoundly illogical. No system of law is workable without logic at its root.
8. Held: Originally negligence was thought confined to deeds, not words, and Derry v. Peek was supposed to have decided that. If so, the law would be gravely defective. Parliament immediately made good the deficiency on the facts of Derry v. Peek. It is unthinkable today that directors could be as careless as they liked in a prospectus.
9. Held: A simple distinction between negligence in word and in deed would be intelligible but unworkable. Take a car left for overhaul and repair. The defendant is liable to the injured driver if he repairs it negligently and says it is safe. He is liable if he negligently finds no repair needed and says it is safe. He is liable if he negligently omits to overhaul it and says it is safe.
10. Held: It would be absurd to argue in any of these cases that the proximate cause was the negligent statement, for which the driver could not recover. Where there would be a duty of service in contract, one cannot distinguish the inspection, the acts done or omitted, and the advice given. Denning, L.J. noted this in Candler with the example of an analyst who negligently certifies food harmless. Mr. Foster does not argue that the distinction lies there.
11. Held: The distinction is now said to depend on whether financial loss is caused through physical injury or directly. He finds neither logic nor common sense in this. Take a doctor who negligently advises a patient that he can safely pursue his occupation, and the patient's health suffers and he loses his livelihood. The patient has a remedy.
12. Held: If the doctor negligently advises that the patient cannot safely pursue his occupation, when he can, and the patient loses his livelihood, there is said to be no remedy. But if the patient was a private patient who paid half a guinea, he recovers all. He calls this nonsense, which arises from a refusal to make sense. The line is simply where those retreating from the extreme position have reached.
13. Noted: He will examine only decisions of the House, except Le Lievre v. Gould, which has stood unquestioned for about 70 years. He will yield only to compulsion, not persuasion. The five relevant House decisions are Derry v. Peek, Nocton v. Ashburton, Robinson v. National Bank of Scotland, Donoghue v. Stevenson and Greystoke Castle.
14. Held: Greystoke Castle lies outside the main stream. A collision damaged a ship. Cargo owners, whose cargo was undamaged, became liable for a general average contribution. They sued the second ship, and the House held they could recover that financial loss. The House laid down no general principle. But the case makes it impossible to argue that financial loss without physical damage is by nature irrecoverable.
15. Noted: The effect of Derry v. Peek has been stated authoritatively in Nocton v. Ashburton. He quotes Lord Haldane at p. 947, supported by Lord Shaw (p. 970) and Lord Parmoor (p. 978). The Lords considered only the foundation of an ordinary action for deceit. They took the relationship there as giving no special duty beyond honesty.
16. Held: Derry v. Peek had no plea of innocent or negligent misrepresentation (14 App Cas at 338), so the House made no pronouncement on it. Had there been one, he is sure the House would have rejected it. But what the Lords may be taken to have thought is not the law of England. On this point the House laid down no law at all.
17. Held: Le Lievre v. Gould wrongly treated Derry v. Peek as having decided that, absent contract, no negligence action lies without fraud. Lord Esher said so at p. 498 and A. L. Smith, L.J. at p. 504. The House in effect said this was wrong in Nocton v. Ashburton.
18. Held: He need not decide how far a court of equal authority was later bound by Le Lievre v. Gould. Its decision on its facts may be correct though its reasoning was too wide. Asquith, L.J. (p. 193) and Denning, L.J. (p. 181) differ on its effect. After 1914 a lawyer looks to Nocton v. Ashburton, not Le Lievre v. Gould, to find the exceptions. No principle in Le Lievre v. Gould is so deeply embedded that the House ought not to disturb it.
19. Noted: Both sides call Nocton v. Ashburton the most important authority. The appellants say it removed the restrictions Derry v. Peek was thought to impose. The respondents say it only added fiduciary obligation to contract and closed the door on more. Lord Haldane began (p. 943) by saying the question had been much argued and uncertain, and that the difficulties concerned form, not substance.
20. Noted: The main difficulty lies in finding the cause of action from the statement of claim. Lord Ashburton sought relief after advancing money on mortgage to several persons, including Nocton. The statement of claim was a long narrative with complaints. It was only in paragraph 13 that Nocton's advice to advance £65,000 was said not to be that of a solicitor advising in good faith. There was no allegation of retainer and nothing pleaded in contract.
21. Noted: The declaration sought was that the plaintiff was improperly advised and induced by Nocton, as his confidential solicitor, to advance £65,000. Paragraphs 31 to 33 said Nocton allowed the plaintiff to believe he advised independently and in good faith when advising a release of part of the security. No separate relief was sought for that.
22. Noted: No substantial point of law was raised until the case reached the House. Neville, J. held the only issue was fraud, which was not proved. The Court of Appeal agreed with his view of the pleadings. Cozens-Hardy, M.R. said a negligence claim would have been practically undefended, but it was too late to amend because a new cause of action would be statute-barred. The Court of Appeal reversed in part on the facts and found fraud in relation to the release.
23. Noted: In the House, respondent's counsel was told the House was unlikely to differ from Neville, J. on fraud. His argument, reported at p. 943, was that the allegations were wide enough to found a claim for dereliction of duty by a person in a fiduciary relation. He noted that old equity cases often used the word fraud for breach of fiduciary obligation. He was then stopped.
24. Noted: The first question was whether the statement of claim covered negligence. Lord Parmoor thought it did and decided the appeal on that ground (p. 965). Lord Dunedin in the end did the same. He also agreed with Viscount Haldane.
25. Noted: Viscount Haldane, with Lord Atkinson agreeing, thought negligence was possibly covered. He did not say the claim must be read as either deceit or negligence. He said (p. 946) it was close to a third form, the old Chancery bill to enforce compensation for breach of a fiduciary obligation. He rejected the view that proof of moral fraud in deceit had narrowed that remedy.
26. Noted: Lord Shaw held (p. 967) that the pleadings disclosed a claim independent of fraud. It was for misstatements by a person entrusted with a duty to another, in failure of that duty. He asked (p. 968) what the relation of the parties was at the time of the transaction. He said (p. 969) the defendant was the plaintiff's solicitor and so under a duty to advise.
27. Noted: At p. 972 Lord Shaw said that once the relation is one where a duty to give information or advice, on which the other may rely, is laid on one person, responsibility for error attaches. It attaches even if given in good faith. The situation was one where it was equivalent to contract that the duty should be fulfilled. Lord Shaw nowhere calls the relationship fiduciary.
28. Noted: Viscount Haldane at p. 948 laid down the principle in much the same terms. Liability for negligence in word has developed differently from liability in act. Even so, a man may come under a special duty to take care in giving information or advice. Whether that duty is assumed depends on the relationship. There are many cases where it may be properly treated as a special duty of care in statement.
29. Noted: Viscount Haldane applied this principle only to breach of fiduciary duty. That was inevitable on the facts, since on his reading of the pleading he had to show equitable fraud.
30. Held: The House in Nocton v. Ashburton clearly thought the Derry v. Peek view, as in Le Lievre v. Gould, too narrow. It thought that outside contract there could be a special relationship imposing a duty to give careful advice and accurate information. The majority did not extend this beyond breach of fiduciary obligation. None of them said it was limited to it. So the House can proceed on the footing that there is such a general principle, and say to what cases beyond fiduciary obligation it extends.
31. Held: Robinson v. National Bank of Scotland is chiefly relevant to Mr. Foster's second point. On his first point it is no authority that special duties are limited to contract and fiduciary duty. It is clear authority that Lord Haldane did not limit the principle in Nocton v. Ashburton to fiduciary relationships. He repeated at p. 157 that the courts remain free to recognise duties of care arising from other special relationships.
32. Noted: In Donoghue v. Stevenson Lord Atkin did two things. He stated a general conception at p. 580 and formulated a specific proposition at p. 599. At p. 584 he warned against stating propositions of law in wider terms than necessary, lest essential factors be omitted and English law's adaptability be restricted.
33. Noted: The general conception is now called the principle of proximity. You must take reasonable care to avoid acts or omissions you can reasonably foresee would injure your neighbour. Your neighbour is a person so closely and directly affected that you ought reasonably to have him in contemplation.
34. Noted: The specific proposition is that a manufacturer who sells products intending them to reach the consumer without reasonable possibility of intermediate examination, knowing that lack of care will injure the consumer's life or property, owes the consumer a duty of reasonable care.
35. Held: A judge should not be asked, on the facts of each case, to say whether there is proximity between plaintiff and defendant. That would misuse a general conception and is not how English law develops. Lord Atkin used the conception to open up a category giving rise to a special duty. Donoghue v. Stevenson widened an old category or created a new similar one. An existing category grows as instances multiply until the cell divides.
36. Noted: Lord Thankerton (p. 603) and Lord Macmillan (pp. 619-620) approached it in the same way. They asked directly whether the relationship gave rise to a duty to take care. Lord Thankerton's term special relationship is the term Lord Haldane used in Nocton v. Ashburton. The field is different but the object of the search is the same.
37. Held: The appellants pressed Donoghue v. Stevenson too hard. Proximity should apply to words as to deeds, but as a general conception it gets them little further. Applying the specific proposition literally to a certificate or bankers' reference will not do. Enquiring into the possibility of intermediate examination of a certificate is not fruitful.
38. Held: The real value of Donoghue v. Stevenson is to show how law can be developed to solve particular problems. The question is whether this relationship fits a category giving rise to a special duty. The first step is to see how far the authorities have gone, for new categories do not spring up overnight.
39. Noted: The problem here is a by-product of the doctrine of consideration. Had the respondents made a nominal charge, it would not exist. If a contract without consideration were possible, the question would be whether there was a contract, not whether there was a special relationship.
40. Held: The respondents cannot deny they performed a service. Their sheet anchor is that it was gratuitous, so no liability arises. That is not the law. A promise to perform a service without consideration cannot be enforced as a contract. But if the service is performed negligently, the promisee can recover in tort.
41. Noted: This is the foundation of the liability of a gratuitous bailee (a person who holds another's goods). In Coggs v. Bernard (1703) the defendant spilt some of the plaintiff's brandy. The declaration was upheld though no consideration was alleged. Gould, J. said the reason of the action is the trust reposed in the defendant, to which he concurred by his assumption and in which he miscarried by neglect.
42. Noted: The proposition is not limited to bailment. In Skelton v. London & North Western Railway Co. Willes, J. (p. 636) applied it to negligence generally. If a person undertakes a voluntary act, he is liable if he performs it improperly, but not if he neglects to perform it. In Banbury v. Bank of Montreal Finlay, L.C. (p. 654) said a bank advising a customer on investments is under no obligation to advise. If it does, it is liable for negligent advice.
43. Noted: The principle has been applied where the loss is purely financial. In Wilkinson v. Coverdale (1793) the defendant gratuitously undertook to renew the plaintiff's fire policy. He neglected formalities that made it inoperative. An action lay.
44. Noted: In two similar cases the defendants won because negligence was not proved. Both proceeded on the basis that an action would lie in law. In Shiells v. Blackburne (1789) the defendant entered the plaintiff's leather as wrought leather instead of dressed leather, and the leather was seized. In Dartnall v. Howard (1825) the defendants bought an annuity for the plaintiff on the personal security of two insolvent persons. Judgment was arrested since they appeared to be gratuitous agents and negligence or dishonesty was not averred.
45. Noted: Many cases reached the same result by setting up nominal consideration and suing in contract. In Coggs v. Bernard Holt, C.J. (p. 189) rested the obligation on both grounds. He said the owners trusting him with the goods was consideration enough. He said the promise was not a nudum pactum (a bare promise). He said that if a man enters on a thing and takes the trust upon himself, an action lies if he miscarries.
46. Noted: De La Bere v. Pearson Ltd. is a case decided on sufficiency of consideration. The newspaper invited readers' financial enquiries. Its city editor named a stockbroker who was an undischarged bankrupt, as he should have found out. Vaughan Williams, L.J. (p. 287) found consideration in the reader consenting to publication of the question. Sir Gorell Barnes, President (p. 289), found it in the reader making the invited enquiry.
47. Noted: In Everett v. Griffiths, on a doctor's liability toward the person he certified, Scrutton, L.J. (p. 191) said submission to treatment would be good consideration.
48. Held: These instances show that the law reached a just result one way or another. Today the result can and should be reached by the law of negligence. It is unnecessary and undesirable to construct an artificial consideration. He agrees with Sir Frederick Pollock that the cause of action is better seen as default in performing a voluntary undertaking independent of contract.
49. Held: The principle has not yet been clearly applied where the undertaken service includes obtaining and imparting information. He cannot see why it should not be. It would probably have been but for the wrong belief that Derry v. Peek negatived liability for negligent statements.
50. Held: It cannot matter whether the information is fact, opinion or both. It cannot matter whether it came from special enquiries, from facts already known, or from professional knowledge. One cannot distinguish between a duty to enquire and a duty to state.
51. Held: There is ample authority to say that special relationships giving rise to a duty of care in word as in deed are not limited to contract or fiduciary duty. They also include relationships that Lord Shaw (p. 972) called equivalent to contract. These are relationships involving an assumption of responsibility where, but for absence of consideration, there would be a contract.
52. Held: Where there is an express undertaking or warranty, there is little difficulty. The difficulty lies in finding an implied undertaking. Absence of consideration is then not irrelevant. Payment is very good evidence that the informer knows he is being relied on. Without consideration, greater care is needed in separating social from professional relationships and contractual from non-contractual ones.
53. Held: It may be material whether the adviser acts purely from good nature or gets a reward indirectly. A bank does not give a reference simply to assist commerce. It would discourage its customers if their deals fell through because it refused to testify to their good credit.
54. Noted: He has read the other opinions and their definitions of the relationship that creates a responsibility to those who act on information or advice. He understands none of the Lords to hold that the responsibility is imposed by law on certain types of persons or situations. It is voluntarily accepted or undertaken, either generally or specifically for a particular transaction.
55. Noted: A general relationship is one like solicitor and client or banker and customer. The appellants here were not customers or potential customers of the bank, unlike the plaintiff in Woods v. Martins Bank, Ltd.
56. Held: Responsibility can attach only to the single act of giving the reference, and only if that act implied a voluntary undertaking to assume responsibility. This is the foundation of the ground on which the House dismisses the appeal.
57. Held: It is not possible to formulate exactly all the conditions under which the law will imply a voluntary undertaking, any more than those under which it implies a contract. He is prepared to adopt any of the other Lords' statements as showing the general rule. He gives the same respect to Denning, L.J.'s statement in his Candler dissent on when a duty of care in making a statement exists.
58. Held: He goes no further, for two reasons. The first is that Lord Shaw's speech in Nocton v. Ashburton and the idea of a relationship equivalent to contract cover this case. The appellants must show the respondents intended the reference to be passed by National Provincial to an unnamed customer for that customer's use. All that was lacking was formal consideration.
59. Held: The case falls within the authorities he has cited, of which Wilkinson v. Coverdale is the closest example.
60. Held: He is content with the proposition that wherever there is a relationship equivalent to contract there is a duty of care. The relationship may be general or particular. Solicitor and client is a general one, with Nocton v. Ashburton as authority. Banker and customer is another, with Salmon, J. in Woods v. Martins Bank, which he approves. There may be others yet to be established.
61. Held: Where there is a general relationship, it is enough to prove it, and the duty follows. Where a particular relationship is created ad hoc (for the occasion), as here, the court must examine the facts for an express or implied undertaking of responsibility.
62. Noted: He regards this proposition as an application of the general conception of proximity. Future cases may need a new and wider proposition independent of contract. For example, a statement may not be supplied for any particular person, as the ginger beer in Donoghue v. Stevenson was not.
63. Noted: It will then be necessary to return to proximity and evolve a specific proposition, as was done in Donoghue v. Stevenson. The speeches today, Denning, L.J.'s judgment and the Restatement proposition with its cases will guide. He prefers to see what shape such cases take before committing to any formulation.
64. Held: He takes literally Lord Macmillan's dictum that the categories of negligence are never closed. English law is wide enough to embrace any new category or proposition that exemplifies the principle of proximity.
65. Noted: The second reason for caution is that he wants to guard against restrictive terms even when the essential condition is met. A defendant might say to a plaintiff, do not waste money employing a professional, I will do it for nothing, you can rely on me.
66. Held: In that case the defendant could not escape liability just because he belonged to no profession, had no qualifications or skill and did not claim any. Those factors show the unlikelihood of a legal responsibility being assumed and may often be decisive. But they are not theoretically conclusive and cannot be defined.
67. Why: If they were defined, plaintiffs would sue in contract as in De La Bere v. Pearson and set up something to serve as consideration. That would be undesirable. The best way to avoid it is to settle the law so that consideration makes no difference.
68. Held: Various decisions were said to have been decided differently had the appellants' contention been correct. He will not go through them. But Le Lievre v. Gould and all decisions based on its reasoning can no longer be regarded as authoritative. He specifically includes Devlin, J.'s decision in Heskell v. Continental Exporters (1950) 1 All E. R. 1033 at p. 1044. Similar facts in future must be judged afresh in light of the principles now laid down.
69. Noted: He spent time on Mr. Foster's first reason because it was so fundamental. The correct answer on the facts cannot be found until the criteria for a duty to take care are established. Once that is done, applying them here is short.
70. Held: A person for whose use a banker's reference is furnished is not prevented from claiming against the banker simply because no consideration passed. The question is whether the appellants can set up a claim equivalent to contract and rely on an implied undertaking to accept responsibility.
71. Held: Mr. Foster's second point fails. This House did not lay down in Robinson that a banker's reference can never give rise to such a claim. On those facts the bank was not furnishing the reference for the pursuer's use. It undertook no responsibility for his use, quite apart from its general disclaimer.
72. Held: The pursuer in Robinson never saw the reference. The Lord Justice-Clerk (1916 S.C. 58) said he was given only a gloss of it. This makes the connection between pursuer and defendants too remote to be a relationship of a contractual character.
73. Noted: On the facts here, Mr. Foster's third head argues for the same result. He submits it should not be inferred that the respondents knew the reference was for a customer. If they did, he says they did not intend the reference itself to reach the customer. It was only material for the customer's bank to advise on its own responsibility.
74. Held: He would need to examine these contentions were it not for the general disclaimer of responsibility, which is in any event conclusive. He agrees entirely with Lord Reid's reasoning and conclusion on this.
75. Held: "A man cannot be said voluntarily to be undertaking a responsibility" if at the very moment of accepting it he declares he is not. The problem of reconciling words of exemption with the existence of a duty arises only when a party claims exemption from a responsibility he has already undertaken or is contracting to undertake. For this reason alone he would dismiss the appeal.

Opinion of Lord Pearce

1. Noted: He begins with Lord Haldane's statement in Nocton v. Ashburton (p. 948). Liability for negligence in word has developed differently from liability for negligence in act. Even so, a man may come under a special duty to take care in giving information or advice. Lord Haldane would be sorry to stereotype the cases where that duty is assumed. It depends on the parties' relationship, and many relationships may give rise to a special duty of care in statement.
2. Noted: The law of negligence has been deliberately limited by the insistence on a duty owed to the plaintiff. There can be no actionable negligence in vacuo. It would be impracticable to give relief to everybody who suffers damage through another's carelessness.
3. Noted: Negligence in word creates problems different from negligence in act. Words are more volatile than deeds. They travel fast and far, are used without being expended, and combine with innumerable facts and other words. Yet they are dangerous and can cause vast financial damage.
4. Noted: How far words are relied on unchecked is often doubtful and difficult, by analogy with the absence of intermediate inspection in Grant v. Australian Knitting Mills Ltd. If merely hearing or reading words created proximity, there might be no limit to the persons to whom the speaker could be liable. Damage by negligent acts is more visible and its limits more easily defined.
5. Noted: Pasley and Another v. Freeman (1789) recognised a duty of honesty in words to the world at large. This protected the economic, as opposed to the physical, interests of the community. Attempts to extend it to a duty of care were curbed by Derry v. Peek.
6. Noted: In Cann v. Wilson a valuer employed by an owner to value property for a mortgage was held liable for a negligent valuation, which he put before the proposed mortgagee's solicitor. Chitty, J. said the defendants knowingly placed themselves in that position and incurred a duty to use reasonable care. He likened it to the hairwash in George v. Skivington, later approved in Donoghue v. Stevenson. So for economic damage alone he drew an analogy from physical damage to a purchaser's wife.
7. Held: Le Lievre v. Gould overruled Cann v. Wilson on the ground, erroneous as it seems to him, that it could not stand with Derry v. Peek. Its particular facts justified its decision, as Denning, L.J. explained in Candler v. Crane, Christmas & Co. (p. 181). But its ratio decidendi was wrong, since it attributed to Derry v. Peek more than that case decided.
8. Noted: Nocton v. Ashburton pointed out that too much had been ascribed to Derry v. Peek. He quotes Lord Haldane at p. 947, that later authorities showed a tendency to assume it meant more than it did. It covered only part of the field in which liabilities arise. There are other obligations besides honesty whose breach may give a right to damages.
9. Noted: Lord Haldane spoke to the same effect in Robinson v. National Bank of Scotland at p. 157. An exaggerated view was taken of Derry v. Peek. The doctrine of fiduciary relationships, the duty of care from implied and express contracts, and from other special relationships all remain.
10. Held: Lord Haldane was thus preserving in terms the area of special relationships that create a duty of care. He was not restricting it to cases where courts of equity would find a fiduciary duty.
11. Noted: Donoghue v. Stevenson greatly extended negligence in act on the wide principle of the good neighbour, sic utere tuo ut alienum non laedas (use your own so as not to harm another's). It is argued that those principles apply fully to negligence in word. Wrottesley, J. in Old Gate Estates, Ltd. may have put it too narrowly in confining it to life, limb or health.
12. Held: But the House in Donoghue v. Stevenson was dealing with negligent acts causing physical damage. Its opinions cannot be read as dealing with negligence in word causing economic damage. It did not purport to say how far economic loss alone can found an action in negligence by act. Morrison Steamship Co. Ltd. v. Greystoke Castle held that it could. Otherwise problems peculiar to words would have been considered. Donoghue v. Stevenson gives only an analogy from its broad outlook.
13. Noted: How wide the duty of care is depends ultimately on the courts' assessment of society's demands for protection from carelessness. Economic protection has lagged behind protection of person and property. The size and width of the range of possible claims may have deterred extension.
14. Noted: In the United States, Glanzer v. Shepherd (1922) held a public weigher liable to a purchaser. The vendor had employed him, and his certificate negligently overstated the goods supplied. The weigher knew vendor and purchaser both depended on his skill and care. That the vendor paid him was merely an accident of commerce.
15. Noted: The case was followed and developed. In Ultramares (1931) the Court disliked exposing defendants to liability for an indeterminate amount, for an indeterminate time, to an indeterminate class. It held that auditors who supplied thirty copies of their accounts, without knowing the specific purpose of obtaining financial help, were not liable to a plaintiff who lent on them.
16. Noted: In South Africa, under a different system of law, Perlman v. Zonkendyk [1934] C.P.D. 151 and Herschell v. Marupi [1954] 3 SALR 464 show a similar advance and later restriction.
17. Noted: Shiells v. Blackburne gives guidance. A general merchant voluntarily and without reward entered another's parcel of goods, with his own, at the Customs House for export. He used a wrong denomination and both parcels were seized. The plaintiff failed on the facts to show gross negligence.
18. Noted: Lord Loughborough said a bailee performing a gratuitous act for the bailor's benefit alone is liable only for gross negligence. But a man who gratuitously undertakes to do a thing to the best of his skill, in a situation or profession implying skill, is liable if he omits it. A ship broker or Custom House clerk who undertook the entry would be liable for a wrong entry.
19. Noted: Heath, J. said a surgeon would be liable if he gratuitously undertook to attend a sick person. A person of a different occupation who gives gratuitous help, and does not exert all his skill or gives improper remedies to the best of his ability, is not liable.
20. Noted: In Gladwell v. Steggall a girl of 10 recovered damages for injury to health from a surgeon and apothecary. She sued in tort for breach of a duty arising from his employment by her, although the bill went to her father. In Wilkinson v. Coverdale Lord Kenyon accepted that a defendant who gratuitously undertook to take out an insurance policy, and did it negligently, could be liable in damages.
21. Held: In those cases there was no dichotomy between negligence in act and in word, or between physical and economic loss. The basis is that persons who hold themselves out in a calling, situation or profession, and take on a task within it, owe a duty of skill and care. In terms of proximity, they are particularly close to those they know are relying on their skill and care, although not contractually.
22. Noted: Everett v. Griffiths applied the reasoning of Shiells v. Blackburne. The Court of Appeal held a doctor owed a duty of care to a man he did not work for but had a duty to examine under the Lunacy Act.
23. Noted: Denning, L.J. relied on it in his Candler dissent. He concluded that accountants, surveyors, valuers and analysts owe a duty of care in reports on which others, not their clients, rely in the ordinary course of business. The duty is owed apart from contract to any third person to whom they show the accounts, or know their employer will show them, to induce investment or other action.
24. Noted: He excludes strangers of whom they have heard nothing and to whom the employer hands the accounts without their knowledge. His test of proximity is whether the accountants knew the accounts were required for submission to the plaintiff and use by him. Lord Pearce notes this gives a result somewhat like paragraph 552 of the Restatement.
25. Held: Lord Pearce agrees with Denning, L.J.'s words. They are consonant with the earlier cases and with Lord Haldane's observations.
26. Held: The argument that this would create confusion and infringe the rule that innocent misrepresentation gives no right to damages is not accepted. The true rule is that innocent misrepresentation by itself gives no right to damages. Where the parties meant the statement to be a warranty, it gives damages on that ground (Heilbutt, Symons & Co. v. Buckleton).
27. Held: If an innocent misrepresentation is made between parties in a fiduciary relationship, it may give a right to damages for negligence. There is also a duty of care created by special relationships that are not fiduciary. They give rise to an assumption that care as well as honesty is demanded.
28. Noted: The question is whether there was a special relationship imposing a duty of care on the defendants toward the plaintiffs, as undisclosed principals for whom National Provincial made the enquiry. The answer depends on the circumstances. A casual social approach would not give rise to such a relationship or duty, as in Fish v. Kelly.
29. Held: To import such a duty, the representation must normally concern a business or professional transaction. Its nature must make clear the gravity of the enquiry and the importance and influence attached to the answer. It is conceded Salmon, J. rightly found a duty in Woods v. Martins Bank, Ltd., but its facts were wholly different.
30. Held: A most important circumstance is the form of the enquiry and of the answer. Both were plainly stated to be without liability. Mr. Gardiner says the words are not precise enough to exclude liability for negligence. But nothing except negligence could create liability here, apart from fraud. The words would give no protection against fraud, since they would be part of it.
31. Held: He does not accept that, even if the parties were already in a contractual or other special relationship, the words would give no immunity to a negligent answer. In any event they clearly prevent a special relationship arising. They are part of the material for deciding whether a duty of care was assumed.
32. Held: If both parties say expressly that there shall be no liability, and neither is deliberately taking advantage of the other, he cannot say liability was assumed.
33. Noted: In Robinson v. National Bank of Scotland the correspondence also expressly excluded responsibility. That may have weighed with Lord Haldane at p. 157 when he spoke of a mere enquiry by one banker of another who stands in no special relation, with no duty except common honesty absent special circumstances from which a contract to be careful can be inferred.
34. Held: He appreciates Mr. Gardiner's emphasis on the importance of bankers' references and the desirability of a duty of care. On the facts before the House, it is not possible to hold there was a special duty of care and liability for negligence. He would dismiss the appeal.

Statutes and provisions

• Directors Liability Act 1890: a director is liable for untrue statements in a prospectus unless he proves he had reasonable ground to believe, and did believe, that they were true (Lord Reid). It remedied the gap left by Derry v. Peek. The judgment gives no section number.
• Lunacy Act: Everett v. Griffiths concerned a doctor's duty to examine a person under this Act (Lord Pearce). The judgment gives no year or section.
• Statutory enactments since Derry v. Peek: Lord Morris says he need not refer to them.
• Restatement, paragraph 552: a proposition noted by Lord Devlin and Lord Pearce as giving similar guidance to Denning, L.J.'s test. The judgment does not set it out.
• No article or section of the Constitution or of any other Act is discussed.

Authorities

• Donoghue v. Stevenson [1932] A.C. 562: appellants' first argument. No direct bearing here (Lord Reid). Lord Devlin: its general conception of proximity applies to words, but its specific proposition cannot be applied literally. Lord Pearce: it dealt only with negligent acts causing physical damage. Lord Hodson and Lord Devlin: categories of negligence never closed. Lord Morris: cited it as a manufacturer-liability illustration.
• Derry v. Peek (1889) 14 App Cas 337: deceit only. It did not decide that negligent misstatement cannot found an action (Lord Reid, Lord Morris, Lord Hodson, Lord Devlin, Lord Pearce).
• Nocton v. Ashburton [1914] A.C. 932: authoritative guidance that Derry v. Peek was too widely read. Special duty to take care in statement can arise from relationship (all five Lords). Lord Devlin analysed its pleadings and speeches in detail.
• Robinson v. National Bank of Scotland, 1916 SC (HL) 154: nearly indistinguishable and relied on by respondents (Lord Reid). Lord Hodson: conclusive against appellants. Lord Devlin: not a general rule, as the pursuer was not the person for whose use the reference was given. Lord Pearce: correspondence excluded responsibility.
• Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164: held wrongly decided (Lord Reid). Denning, L.J.'s dissent preferred (Lord Hodson) and his test approved by Lord Pearce and respected by Lord Devlin.
• Le Lievre v. Gould [1893] 1 QB 491: its ratio was wrong (Lord Reid, Lord Pearce). It and decisions based on its reasoning are no longer authoritative (Lord Devlin).
• Cann v. Willson (39 Ch D 39): Chitty, J.'s reasoning upheld. It ought not to have been overruled (Lord Reid, Lord Morris, Lord Pearce). Lord Hodson notes its facts were like Candler.
• Heaven v. Pender (11 Q.B.D. 503): dock owner's duty; source of the proximity notion (Lord Morris, Lord Hodson).
• George v. Skivington (L.R. 5 Ex. 1): chemist's duty for hair wash; affirmed in Donoghue v. Stevenson (Lord Morris, Lord Hodson, Lord Pearce).
• Old Gates Estates, Ltd. v. Toplis & Harding & Russell [1939] 3 All E.R. 209: Wrottesley, J. confined Donoghue v. Stevenson to danger to life, limb or health. Lord Hodson and Lord Pearce: too narrow.
• Grant v. Australian Knitting Mills [1936] A.C. 85: extension of Donoghue v. Stevenson (Lord Hodson, Lord Pearce).
• Haseldine v. C. A. Daw and Son, Ltd. [1941] 2 K.B. 343: extension to repairers (Lord Hodson).
• Morrison Steamship Co. Ltd. v. Greystoke Castle (Cargo Owners) [1947] A.C. 265: financial loss recovered without physical damage (Lord Hodson, Lord Devlin, Lord Pearce).
• Shiells and Another v. Blackburne (1789) 1 H. Bl. 158, 126 E.R. 94: Lord Loughborough on gratuitous undertaking of skill (Lord Morris, Lord Hodson, Lord Devlin, Lord Pearce).
• Wilkinson v. Coverdale (1793) 1 Esp. 75: gratuitous renewal of a fire policy (Lord Morris, Lord Hodson, Lord Devlin, Lord Pearce). Lord Devlin: most apposite example.
• Gladwell v. Steggal (Steggall), 5 Bing (N.C.) 733: surgeon's duty to a child patient (Lord Hodson, Lord Pearce).
• Fish v. Kelly, 17 C.B. (N.S.) 194: casual observations not relied on (Lord Hodson, Lord Pearce).
• Woods v. Martins Bank Ltd. [1959] 1 Q.B. 55 (also cited as Wood v. Martins Bank): bank as investment adviser, liable. Approved (Lord Hodson, Lord Devlin, Lord Pearce).
• Banbury v. Bank of Montreal [1918] A.C. 626: gratuitous doctor (Lord Atkinson, p. 689); innocent misrepresentation as evidence of negligence (Lord Wrenbury, p. 713); bank advising an investing customer (Finlay, L.C., p. 654). Cited by Lord Morris, Lord Hodson and Lord Devlin.
• Parsons v. Barclay & Co. Ltd. (1910) 26 T.L.R. 628: banker asked for a reference need only answer honestly (Lord Morris, Lord Hodson).
• Low v. Bouverie [1891] 3 Ch 82: trustee answering enquiries need only give honest answers (Lord Morris, Lord Hodson).
• Heilbut, Symons & Co. v. Buckleton [1913] AC 30: no liability for innocent misrepresentation (Lord Morris, Lord Pearce).
• Rutter v. Palmer [1922] 2 K.B. 87: exemption from negligence needs adequate words (Lord Reid, Lord Morris).
• Coggs v. Bernard (1703) Smith's Leading Cases, 13th ed., vol. 1, p. 175: gratuitous bailee liable in tort (Lord Devlin).
• Skelton v. London & North Western Railway Co. [1867] L.R. 2 C.P. 631: liability for a voluntary act done improperly (Lord Devlin).
• Dartnall v. Howard (1825) B. & C. 345: annuity bought on insolvent security; judgment arrested (Lord Devlin).
• De La Bere v. Pearson Ltd. [1908] 1 KB 280: newspaper's city editor; consideration found (Lord Devlin).
• Everett v. Griffiths [1920] 3 K.B. 163: doctor's duty; submission to treatment as consideration (Lord Devlin, Lord Pearce).
• Heskell v. Continental Exporters (1950) 1 All E.R. 1033: no longer authoritative (Lord Devlin).
• Pasley and Another v. Freeman, 3 T.R. 51: duty of honesty in words (Lord Pearce).
• Perlman v. Zonkendyk [1934] C.P.D. 151 and Herschell v. Marupi [1954] 3 SALR 464: South African advance and restriction (Lord Pearce).
• Glanzer v. Shepherd 233 N.Y. 236 (Lord Reid, Lord Pearce) and Ultramares Corporation v. Touche (1931) 255 N.Y. 170 (Lord Reid, Lord Pearce): American cases on the weigher and the auditors.
• Tournier v. National Provincial & Union Bank of England [1924] 1 K.B. 461: Atkin, L.J. on banks giving information (Lord Morris).
• Scholes v. Brook, 63 L.T. (N.S.) 837: followed by Bowen, L.J. (Lord Morris).
• Peek v. Derry (37 Ch. D. 541): Court of Appeal decision reversed by the House (Lord Morris).
• Plowright v. Lambert, 52 L.T. 646: Field, J. on fiduciary relationships in every shape (Lord Hodson).
• Pollock, Contracts, 13th ed., p. 140: the cause of action lies in default in a voluntary undertaking (Lord Devlin). It is a textbook, not a case.
• Names as printed in the judgment text: Nocton v. Lord Ashburton (Lord Haldane's own title, in the quoted Robinson passage), Le Lievre and Dennes v. Gould (Lord Morris's full title), Banbury v. The Bank of Montreal and Robinson v. The National Bank of Scotland (Lord Hodson's and Lord Devlin's titles), and Cann v. Wilson (Lord Hodson's and Lord Pearce's spelling).
• Also cited in footnotes: none. The judgment text has no footnotes.

Judgement

1. Lord Reid: the appeal is dismissed.
2. Lord Morris of Borth-y-Gest: he would dismiss the appeal.
3. Lord Hodson: he would dismiss the appeal.
4. Lord Devlin: he would dismiss the appeal.
5. Lord Pearce: he would dismiss the appeal.
6. The judgment text records no formal order and no order on costs.

Legal Principle / Ratio

A duty of care can arise for a careless statement, without a contract or fiduciary relationship, where a special relationship exists. The maker must undertake, expressly or by implication, to take care, or be a person who knows or should know the other will rely on his skill and judgment. A clear disclaimer at the time of the statement stops any such duty from arising.

Key holding (Lord Devlin): "wherever there is a relationship equivalent to contract there is a duty of care".

Critical Analysis

Analysis based on the judgment text.

• The five Lords do not state one identical test. Lord Reid speaks of accepting responsibility by answering without qualification. Lord Morris and Lord Hodson speak of reliance the speaker knows or should know of. Lord Devlin speaks of a relationship equivalent to contract. Lord Pearce speaks of a business or professional transaction of evident gravity. Lord Devlin says he can adopt any of the other statements as showing the general rule.
• Lord Reid says he does not decide what kind or degree of proximity is needed. Lord Devlin says he is not settling a wider proposition independent of contract and will wait to see how such cases arise.
• The Lords did not decide whether Mr. Heller was negligent.
• The Lords give different weight to the disclaimer. Lord Reid, Lord Devlin and Lord Pearce treat it as stopping any undertaking of responsibility from arising. Lord Morris also says the bank effectively disclaimed any duty of care, and that the words were apt to exclude liability for negligence. Lord Hodson says the giver of a reference may protect himself this way. Lord Morris and Lord Hodson also think an honest short reference may carry no duty beyond honesty.
• Lord Devlin says that a general banker-customer relationship is enough to prove the duty. The appellants here were not the respondents' customers, so he examines the particular reference.
• Lord Hodson's summary of Plowright v. Lambert breaks off mid-sentence in the source text, so the point cannot be fully reported.

Significance

• The House held that the law of negligence can reach careless statements, not only careless acts.
• It held that Derry v. Peek did not bar such claims, correcting the view taken between 1889 and 1914.
• It held that the ratio of Le Lievre v. Gould was wrong (Lord Reid, Lord Pearce). Lord Devlin said decisions based on that reasoning, including Heskell v. Continental Exporters, are no longer authoritative.
• Lord Reid said Candler v. Crane, Christmas & Co. was wrongly decided.
• The case shows that a disclaimer given when the statement is made can prevent the duty from arising.
• Lord Devlin left open a wider future proposition independent of contract.

Exam-Important Points

• Rule: a negligent statement can found a duty of care where the speaker undertakes responsibility, or the relationship is equivalent to contract. Trap: the appellants still lost.
• Rule: liability does not depend on whether loss flows from physical damage. Lord Devlin called the contrary line nonsense.
• Rule: the disclaimer stopped any assumption of responsibility. Trap: it is not a defence bolted on after a duty exists (Lord Devlin).
• Rule: consideration is not needed for the duty, which rests on a voluntary undertaking (Lord Devlin).
• Rule: mere casual or social remarks carry no duty (Lord Reid, Lord Hodson, Lord Pearce).
• Overruled: the ratio of Le Lievre v. Gould. Candler v. Crane, Christmas & Co. was wrongly decided (Lord Reid).
• Trap: the Lords gave separate reasoning and did not decide whether Mr. Heller was negligent.
• Trap: Robinson v. National Bank of Scotland was treated as nearly indistinguishable by Lord Reid, but Lord Devlin distinguished it.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited; page references such as p. 947 are the Lords' own references to law reports.