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Cite as: [1963] 1 Lloyd?s Rep 485, [1964] AC 465, [1963] 3 WLR 101, [1963] 2 All ER 575, [1963] UKHL 4

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    Parliamentary Archives,
    HL/PO/JU/4/3/ 1107

    HOUSE OF LORDS

    HEDLEY BYRNE & COMPANY LIMITED

    v.

    HELLER & PARTNERS LIMITED

    28th May, 1963.

    Lord Reid

    Lord Reid
    Lord Morris of Borth-y-Gest
    Lord Hodson
    Lord Devlin
    Lord Pearce

    my lords,

    This case raises the important question whether and in what circumstances
    a person can recover damages for loss suffered by reason of his having
    relied on an innocent but negligent misrepresentation. I cannot do better
    than adopt the following statement of the case from the judgment of
    McNair, J. :

    " This case raised certain interesting questions of law as to the liability
    " of bankers giving references as to the credit-worthiness of their
    " customers. The plaintiffs are a firm of advertising agents. The
    " defendants are merchant bankers. In outline, the plaintiffs' case
    " against the defendants is that, having placed on behalf of a client,
    " Easipower Limited, on credit terms substantial orders for advertising
    " time on television programmes and for advertising space in certain
    " newspapers on terms under which they, the plaintiffs, became per-
    " sonally liable to the television and newspaper companies, they
    " caused inquiries to be made through their own bank of the defendants
    " as to the credit-worthiness of Easipower Limited who were customers of
    " the defendants and were given by the defendants satisfactory
    " references. These references turned out not to be justified, and the
    " plaintiffs claim that in reliance on the references, which they had
    " no reason to question, they refrained from cancelling the orders so
    " as to relieve themselves of their current liabilities."

    The Appellants, becoming doubtful about the financial position of Easi-
    power, got their bank to communicate with the Respondents who were
    Easipower's bankers. This was done by telephone and the following is
    a contemporaneous note of the conversation which both parties agree is
    accurate: —

    " Heller & Partners, Ltd. Minute of telephone conversation. Call
    " from National Provincial Bank Ltd., 15 Bishopsgate, E.C.2. 18.8.58.
    " Person called: L. Heller, re Easipower, Ltd. They wanted to know
    " in confidence, and without responsibility on our part, the respect-
    " ability and standing of Easipower, Ltd., and whether they would be
    " good for an advertising contract for £8,000 to £9,000. I replied, the
    " company recently opened an account with us. Believed to be
    " respectably constituted and considered good for its normal business
    " engagements. The company is a subsidiary of Pena Industries, Ltd.,
    " which is in liquidation, but we understand that the managing director,
    " Mr. Williams, is endeavouring to buy the shares of Easipower, Ltd.,
    " from the liquidator. We believe that the company would not under-
    " take any commitments they are unable to fulfil."

    Some months later the Appellants sought a further reference, and on 7th
    November, 1958, the city office of the National Provincial Bank Limited
    wrote to the Respondents in the following terms: —

    " Dear Sir, We shall be obliged by your opinion in confidence as
    " to the respectability and standing of Easipower Ltd., 27, Albemarle
    " Street, London, W.1, and by stating whether you consider them
    " trustworthy, in the way of business, to the extent of £100,000 per
    " annum advertising contract. Yours faithfully,"

    2

    On 11th November, 1958, the Respondents replied as follows: —

    " CONFIDENTIAL

    " For your private use and without responsibility on the part of this

    " Bank or its officials.

    " Dear Sir, In reply to your enquiry letter of 7th instant we beg to
    " advise:--Re. E………….. Ltd. Respectably constituted Company,
    " considered good for its ordinary business engagements. Your figures
    " are larger than we are accustomed to see. Yours faithfully, Per pro
    " Heller & Partners Limited."

    The National Provincial Bank communicated these replies to their
    customers the Appellants, and it is not suggested that this was improper
    or not warranted by modern custom. The Appellants relied on these
    statements and as a result they lost over £17,000 when Easipower went into
    liquidation.

    The Appellants now seek to recover this loss from the Respondents as
    damages on the ground that these replies were given negligently and in
    breach of the Respondents' duty to exercise care in giving them. In his
    judgment McNair, J. said:

    " On the assumption stated above as to the existence of the duty,
    " I have no hesitation in holding (1) that Mr. Heller was guilty of
    " negligence in giving such a reference without making plain—as he
    " did not—that it was intended to be a very guarded reference, and
    " (2) that properly understood according to its ordinary and natural
    " meaning the reference was not justified by facts known to Mr.
    " Heller."

    Before your Lordships the Respondents were anxious to contest this
    finding, but your Lordships found it unnecessary to hear argument on this
    matter, being of opinion that the appeal must fail even if Mr. Heller was
    negligent. Accordingly I cannot and do not express any opinion on the
    question whether Mr. Heller was in fact negligent But I should make it
    plain that the Appellants' complaint is not that Mr. Heller gave his reply
    without adequate knowledge of the position, nor that he intended to create
    a false impression, but that what he said was in fact calculated to create a
    false impression and that he ought to have realised that. And the same
    applies to the Respondents' letter of 11th November.

    McNair, J. gave judgment for the Respondents on the ground that they
    owed no duty of care to the Appellants. He said:

    " I am accordingly driven to the conclusion by authority binding
    " upon me that no such action lies in the absence of contract or
    " fiduciary relationship. On the facts before me there is clearly no
    " contract, nor can I find a fiduciary relationship. It was urged on
    " behalf of the Plaintiff that the fact that Easipower Limited were
    " heavily indebted to the Defendants and that the Defendants might
    " benefit from the advertising campaign financed by the Plaintiffs,
    " were facts from which a special duty to exercise care might be
    " inferred. In my judgment, however, these facts, though clearly
    " relevant on the question of honesty if this had been in issue, are not
    " sufficient to establish any special relationship involving a duty of
    " care even if it was open to me to extend the sphere of special relation-
    " ship beyond that of contract and fiduciary relationship."

    This judgment was affirmed by the Court of Appeal both because they
    were bound by authority and because they were not satisfied that it would
    be reasonable to impose upon a banker the obligation suggested.

    Before coming to the main question of law, it may be well to dispose
    of an argument that there was no sufficiently close relationship between
    these parties to give rise to any duty. It is said that the Respondents did
    not know the precise purpose of the enquiries and did not even know
    whether the National Provincial Bank wanted the information for its own
    use or for the use of a customer: they knew nothing of the Appellants.

    3

    I would reject that argument. They knew that the enquiry was in connection
    with an advertising contract, and it was at least probable that the infor-
    mation was wanted by the advertising contractors. It seems to me quite
    immaterial that they did not know who these contractors were: there is no
    suggestion of any speciality which could have influenced them in deciding
    whether to give information or in what form to give it. I shall therefore
    treat this as if it were a case where a negligent misrepresentation is made
    directly to the person seeking information, opinion or advice, and I shall
    not attempt to decide what kind or degree of proximity is necessary before
    there can be a duty owed by the defendant to the plaintiff.

    The Appellants' first argument was based on Donoghue v. Stevenson [1932]
    A.C. 562. That is a very important decision, but I do not think that it has
    any direct bearing on this case. That decision may encourage us to develop
    existing lines of authority but it cannot entitle us to disregard them. Apart
    altogether from authority, I would think that the law must treat negligent
    words differently from negligent acts. The law ought so far as possible
    to reflect the standards of the reasonable man, and that is what Donoghue
    v. Stevenson sets out to do. The most obvious difference between negligent
    words and negligent acts is this. Quite careful people often express definite
    opinions on social or informal occasions even when they see that others
    are likely to be influenced by them ; and they often do that without taking
    that care which they would take if asked for their opinion professionally
    or in a business connection. The Appellant agrees that there can be no
    duty of care on such occasions, and we were referred to American and South
    African authorities where that is recognised although their law appears to
    have gone much further than ours has yet done. But it is at least unusual
    casually to put into circulation negligently-made articles which are dan-
    gerous. A man might give a friend a negligently-prepared bottle of home-
    made wine and his friend's guests might drink it with dire results. But
    it is by no means clear that those guests would have no action against the
    negligent manufacturer.

    Another obvious difference is that a negligently-made article will only
    cause one accident and so it is not very difficult to find the necessary degree
    of proximity or neighbourhood between the negligent manufacturer and
    the person injured. But words can be broadcast with or without the consent
    or the foresight of the speaker or writer. It would be one thing to say that
    the speaker owes a duty to a limited class, but it would be going very
    far to say that he owes a duty to every ultimate " consumer " who acts on
    those words to his detriment. It would be no use to say that a speaker
    or writer owes a duty but can disclaim responsibility if he wants to. He,
    like the manufacturer, could make it part of a contract that he is not to be
    liable for his negligence: but that contract would not protect him in a
    question with a third party, at least if the third party was unaware of it.

    So it seems to me that there is good sense behind our present law that
    in general an innocent but negligent misrepresentation gives no cause of
    action. There must be something more than the mere misstatement. I
    therefore turn to the authorities to see what more is required. The most
    natural requirement would be that expressly or by implication from the
    circumstances the speaker or writer has undertaken some responsibility,
    and that appears to me not to conflict with any authority which is binding
    on this House. Where there is a contract there is no difficulty as regards
    the contracting parties: the question is whether there is a warranty. The
    refusal of English law to recognise any jus quaesitum tertio causes some
    difficulties, but they are not relevant here. Then there are cases where a
    person does not merely make a statement but performs a gratuitous service.
    I do not intend to examine the cases about that, but at least they show that
    in some cases that person owes a duty of care apart from any contract,
    and to that extent they pave the way to holding that there can be a duty
    of care in making a statement of fact or opinion which is independent of
    contract.

    Much of the difficulty in this field has been caused by Derry v. Peek,
    14 App. Cas. 337. The action was brought against the directors of a com-
    pany in respect of false statements in a prospectus. It was an action of

    4

    deceit based on fraud and nothing else. But it was held that the directors
    had believed that their statements were true although they had no reason-
    able grounds for their belief. The Court of Appeal held that this amounted
    to fraud in law, but naturally enough this House held that there can be no
    fraud without dishonesty and that credulity is not dishonesty. The question
    was never really considered whether the facts had imposed on the directors
    a duty to exercise care. It must be implied that on the facts of that case
    there was no such duty. But that was immediately remedied by the Directors
    Liability Act 1890 which provided that a director is liable for untrue
    statements in a prospectus unless he proves that he had reasonable ground
    to believe and did believe that they were true.

    It must now be taken that Deny v. Peek did not establish any universal
    rule that in the absence of contract an innocent but negligent misrepresenta-
    tion cannot give rise to an action. It is true Lord Bramwell said (at p. 347):
    " To found an action for damages there must be a contract and breach, or
    " fraud." And for the next twenty years it was generally assumed that
    Derry v. Peek decided that. But it was shown in this House in Nocton v.
    Ashburton [1914] A.C. 932 that that is much too widely stated. We cannot,
    therefore, now accept as accurate the numerous statements to that effect in
    cases between 1889 and 1914, and we must now determine the extent of the
    exceptions to that rule.

    In Nocton v. Ashburton a solicitor was sued for fraud. Fraud was not
    proved but he was held liable for negligence. Viscount Haldane, L.C.
    dealt with Derry v. Peek and pointed out (at p. 947) that while the relation-
    ship of the parties in that case was not enough, the case did not decide
    " that, where a different sort of relationship ought to be inferred from the
    " circumstances, the case is to be concluded by asking whether an action
    " for deceit will lie ... There are other obligations besides that of honesty
    " the breach of which may give a right to damages. These obligations
    " depend on principles which the judges have worked out in the fashion
    " that is characteristic of a system where much of the law has always been
    " judge-made and unwritten." It hardly needed Donoghue v. Stevenson
    to show that that process can still operate. Then (at p. 950) Lord Haldane
    quoted a passage from the speech of Lord Herschell in Derry v. Peek
    where he excluded from the principle of that case " those cases where a
    " person within whose special province it lay to know a particular fact
    " has given an erroneous answer to an inquiry made with regard to it by
    " a person desirous of ascertaining the fact for the purpose of determining
    " his course ". Then (at p. 954) he explained the expression " constructive
    " fraud " and said: " What it really means in this connection is, not moral
    " fraud in the ordinary sense, but breach of the sort of obligation which is
    " enforced by a court which from the beginning regarded itself as a court
    " of conscience ". He went on to refer to " breach of special duty " and
    said (at p. 955): "If such a duty can be inferred in a particular case of a
    " person issuing a prospectus, as, for instance, in the case of directors
    " issuing to the shareholders of the company which they direct a prospectus
    " inviting the subscription by them of further capital, I do not find in Derry
    " v. Peek an authority for the suggestion that an action for damages for
    " misrepresentation without an actual intention to deceive may not lie."

    I find no dissent from these views by the other noble and learned Lords.
    Lord Shaw also quoted the passage I have quoted from the speech of Lord
    Herschell, and, dealing with equitable relief, he approved (at p. 971) a
    passage in an argument of Sir Roundell Palmer which concluded—" in
    " order that a person may avail himself of relief founded on it he must
    " show that there was such a proximate relation between himself and the
    " person making the representation as to bring them virtually into the
    " position of parties contracting with each other ": an interesting anticipation
    in 1871 of the test of who is my neighbour.

    Lord Haldane gave a further statement of his view in Robinson v.
    National Bank of Scotland, 1916 S.C. (H.L.) 154, a case to which I shall
    return. Having said that in that case there was no duty excepting the duty
    of common honesty, he went on to say:

    5

    " In saying that I wish emphatically to repeat what I said in advising
    " this House in the case of Nocton v. Lord Ashburton, that it is a
    " great mistake to suppose that, because the principle in Deny v. Peek
    " clearly covers all cases of the class to which I have referred, therefore
    " the freedom of action of the courts in recognising special duties
    " arising out of other kinds of relationship which they find established
    " by the evidence is in any way affected. I think, as I said in Nocton's
    " case, that an exaggerated view was taken by a good many people
    " of the scope of the decision in Derry v. Peek. The whole of the
    " doctrine as to fiduciary relationships, as to the duty of care arising
    " from implied as well as express contracts, as to the duty of care
    " arising from other special relationships which the courts may find to
    " exist in particular cases, still remains, and I should be very sorry
    " if any word fell from me which should suggest that the courts are
    " in any way hampered in recognising that the duty of care may be
    " established when such cases really occur."

    This passage makes it clear that Lord Haldane did not think that a
    duty to take care must be limited to cases of fiduciary relationship in the
    narrow sense of relationships which had been recognised by the Court of
    Chancery as being of a fiduciary character. He speaks of other special
    relationships, and I can see no logical stopping place short of all those
    relationships where it is plain that the party seeking information or advice
    was trusting the other to exercise such a degree of care as the circumstances
    required, where it was reasonable for him to do that, and where the other
    gave the information or advice when he knew or ought to have known that
    the enquirer was relying on him. I say " ought to have known " because
    in questions of negligence we now apply the objective standard of what
    the reasonable man would have done.

    A reasonable man, knowing that he was being trusted or that his skill
    and judgment were being relied on, would, I think, have three courses open
    to him. He could keep silent or decline to give the information or advice
    sought: or he could give an answer with a clear qualification that he
    accepted no responsibility for it or that it was given without that reflection
    or enquiry which a careful answer would require: or he could simply
    answer without any such qualification. If he chooses to adopt the last
    course he must, I think, be held to have accepted some responsibility for
    his answer being given carefully, or to have accepted a relationship with
    the enquirer which requires him to exercise such care as the circumstances
    require.

    If that is right, then it must follow that Candler v. Crane, Christmas & Co.
    [1951] 2 K.B. 164 was wrongly decided. There the plaintiff wanted to see
    the accounts of a company before deciding to invest in it. The defendants
    were the company's accountants, and they were told by the company to
    complete the company's accounts as soon as possible because they were to
    be shown to the plaintiff who was a potential investor in the company.
    At the company's request the defendants showed the completed accounts
    to the plaintiff, discussed them with him, and allowed him to take a copy.
    The accounts had been carelessly prepared and gave a wholly misleading
    picture. It was obvious to the defendants that the plaintiff was relying
    on their skill and judgment and on their having exercised that care which
    by contract they owed to the company, and I think that any reasonable
    man in the plaintiff's shoes would have relied on that. This seems to me
    to be a typical case of agreeing to assume a responsibility: they knew
    why the plaintiff wanted to see the accounts and why their employers, the
    company, wanted them to be shown to him, and agreed to show them to
    lim without even a suggestion that he should not rely on them.

    The majority of the Court of Appeal held that they were bound by
    Le Lievre v. Gould [1893] 1 Q.B. 491, and that Donoghue v. Stevenson had
    no application. In so holding I think that they were right. The Court
    of Appeal have bound themselves to follow all rationes decidendi of
    previous Court of Appeal decisions, and, in face of that rule, it would have
    been very difficult to say that the ratio in Le Lievre v. Gould did not cover

    A3

    6

    Candler's case. Lord Denning, who dissented, distinguished Le Lievre v.
    Gould on its facts, but, as I understand the rule which the Court of
    Appeal have adopted, that is not sufficient if the ratio applies; and this is
    not an appropriate occasion to consider whether the Court of Appeal's
    rule is a good one. So the question which we now have to consider is
    whether the ratio in Le Lievre v. Gould can be supported. But before
    leaving Candler's case I must note that Cohen, L.J. (as he then was)
    attached considerable importance to a New York decision, Ultramares
    Corporation
    v. Touche (1931) 255 N.Y. 170, a decision of Cardozo, CJ.
    But I think that another decision of that great judge, Glanzer v. Shepherd
    233 N.Y. 236, is more in point because in the latter case there was a direct
    relationship between the weigher who gave a certificate and the pur-
    chaser of the goods weighed, who the weigher knew was relying on his
    certificate: there the weigher was held to owe a duty to the purchaser
    with whom he had no contract. The Ultramares case can be regarded
    as nearer to Le Lievre v. Gould.

    In Le Lievre v. Gould a surveyor, Gould, gave certificates to a builder
    who employed him. The plaintiffs were mortgagees of the builders' interest
    and Gould knew nothing about them or the terms of their mortgage; but
    the builder, without Gould's authority, chose to show them Gould's report.
    I have said that I do not intend to decide anything about the degree of
    proximity necessary to establish a relationship giving rise to a duty of
    care, but it would seem difficult to find such proximity in this case and
    the actual decision in Le Lievre v. Gould may therefore be correct. But
    the decision was not put on that ground: if it had been Cann v. Willson,
    39 Ch. D. 39, would not have been overruled.

    Lord Esher, M.R. held that there was no contract between the plaintiffs
    and the defendant and that this House in Derry v. Peek had " restated
    " the old law that, in the absence of contract, an action for negligence
    " cannot be maintained when there is no fraud " (p. 498). Bowen, L.J.
    gave a similar reason: he said: " Then Derry v. Peek decided this further
    " point—viz. that in cases like the present (of which Derry v. Peek was
    " itself an instance) there is no duty enforceable in law to be careful "
    (p. 501); and he added that the law of England " does not consider that
    " what a man writes on paper is like a gun or other dangerous instrument;
    " and, unless he intended to deceive, the law does not, in the absence of
    " contract, hold him responsible for drawing his certificate carelessly"
    (p. 502). So both he and Lord Esher held that Cann v. Willson was wrong
    in deciding that there was a duty to take care. We now know on
    the authority of Donoghue v. Stevenson that Bowen L.J. was wrong
    in limiting duty of care to guns or other dangerous instruments, and I
    think that, for reasons which I have already given, he was also wrong in
    limiting the duty of care with regard to statements to cases where there
    is a contract. On both points Bowen, L.J. was expressing what was then
    generally believed to be the law, but later statements in this House have
    gone far to remove those limitations. I would therefore hold that the ratio
    in Le Lievre v. Gould was wrong and that Cann v. Willson ought not to
    have been overruled.

    Now I must try to apply these principles to the present case. What the
    Appellants complain of is not negligence in the ordinary sense of carelessness,
    but rather misjudgment in that Mr. Heller, while honestly seeking to give a
    fair assessment, in fact made a statement which gave a false and misleading
    impression of his customer's credit. It appears that bankers now commonly
    give references with regard to their customers as part of their business. I
    do not know how far their customers generally permit them to disclose their
    affairs, but even with permission it cannot always be easy for a banker to
    reconcile his duty to his customer with his desire to give a fairly balanced
    reply to an enquiry. And enquirers can hardly expect a full and objective
    statement of opinion or accurate factual information such as skilled men
    would be expected to give in reply to other kinds of enquiry. So it seems to
    me to be unusually difficult to determine just what duty beyond a duty to be
    honest a banker would be held to have undertaken if he gave a reply without

    7

    an adequate disclaimer of responsibility or other warning. It is in light of
    such considerations that I approach an examination of the case of Robinson
    v. National Bank of Scotland.

    It is not easy to extract the facts from the report of the case in the Court of
    Session (1916 S.C. 46). Several of the witnesses were held to be unreliable
    and the principal issue in the case, fraud, is not relevant for present purposes.
    But the position appears to have been this. Harley and two brothers Inglis
    wished to raise money. They approached an insurance company on the false
    basis that Harley was to be the borrower and the Inglis brothers were to be
    guarantors. To satisfy the company as to the financial standing of the Inglis
    brothers Harley got his London bank to write to M'Arthur, a branch agent
    of the National Bank of Scotland, and M'Arthur on 28th July, 1910, sent a
    reply which was ultimately held to be culpably careless but not fraudulent.
    Robinson, the pursuer in the action, said that he had been approached by
    Harley to become a guarantor before the enquiry was made by Harley but
    he was disbelieved by the Lord Ordinary who held that he was not brought
    into the matter before September. This was accepted by the majority in
    •the Inner House and there is no indication that any of their Lordships in
    this House questioned the finding that the letter of 28th July was not obtained
    on behalf of Robinson.

    Harley and the brothers Inglis did not proceed with their scheme in July
    but they resumed negotiations in September. The company wanted an
    additional guarantor and Harley approached Robinson. A further reference
    was asked and obtained from M'Arthur on 1st October about the brothers
    Inglis but no point was made of this. The whole case turned on M'Arthur's
    letter of 28th July. After further negotiation the company made a loan to
    Harley with the brothers Inglis and Robinson as guarantors. Harley and
    the brothers Inglis all became bankrupt and Robinson had to pay the company
    under his guarantee.

    Robinson sued the National Bank and M'Arthur. He alleged that
    M'Arthur's letter was fraudulent and that he had been induced by it to
    guarantee the loan. He also alleged that M'Arthur had a duty to disclose
    certain facts about the brothers Inglis which were known to him, but this
    alternative case played a very minor part in the litigation. Long opinions
    were given in the Court of Session on the question of fraud but the alternative
    case of a duty to disclose was dealt with summarily. The Lord Justice
    Clerk said (at p. 63): " It appears to me that there was no such duty of dis-
    " closure imposed upon Mr. M'Arthur towards the pursuer as would justify
    " us in applying the principle on which Norton's case was decided." Lord
    Dundas referred (at p. 67) to cases of liability of a solicitor to his client for
    erroneous advice and of similar liability arising from a fiduciary relationship
    and said " such decisions seem to me to have no bearing on, or application to,
    " the facts of the present case." He also drew attention to the last sentence
    of the letter of 28th July which he said would become important if fraud
    were out of the case. That sentence is : " The above information is to be
    " considered strictly confidential, and is given on the express understanding
    " that we incur no responsibility whatever in furnishing it." Lord Salvesen,
    who dissented, did not deal with the point: and Lord Guthrie merely said
    (at p. 85) that here there was no fiduciary relationship.

    In this House an unusual course was taken during the argument.
    I quote from the Session Cases report—1916 S.C. (H.L.) 154: " After Counsel
    " for the respondents had been heard for a short time. Earl Loreburn informed
    " him that their Lordships, as at present advised, thought that there was no
    " special duty on M'Arthur toward the pursuer; that the respondents were
    " not liable unless M'Arthur's representations were dishonest; and that their
    " Lordships had not been satisfied as yet that the representations were dis-
    " honest . . . that under the circumstances the House was prepared to
    " dismiss the appeal, but that they considered the pursuer had been badly
    " treated though he had not any cause of action at law, and that, therefore,
    " their Lordships were disposed to direct that there should be no costs of the
    " action on either side. Earl Loreburn said that Mr. Blackburn might prefer
    " to argue the case further and endeavour to alter these views, but of course

    30781 A4

    8

    " he would run the risk of altering their Lordships' views as to the legal
    " responsibility as well as upon the subject of costs." Mr. Blackburn then
    —wisely no doubt—said no more, and judgment was given for the bank but
    with no costs here or below.

    That case is very nearly indistinguishable from the present case. Lord
    Loreburn regarded the fact that M'Arthur knew that his letter might be
    used to influence others besides the immediate enquirer as entitling Robinson
    to found on it if fraud had been proved. But it is not clear to me that he
    intended to decide that there would have been sufficient proximity between
    Robinson and M'Arthur to enable him to maintain that there was a special
    relationship involving a duty of care if the other facts had been sufficient to
    create such a relationship. I would not regard this as a binding decision on
    that question.

    With regard to the bank's duty Lord Haldane said: " There is only one
    '' other point about which I wish to say anything, and that is the question
    " which was argued by the appellant, as to there being a special duty of
    " care under the circumstances here. I think the case of Deny v. Peek in
    " this House has finally settled in Scotland, as well as in England and Ireland,
    " the conclusion that in a case like this no duty to be careful is established.
    " There is the general duty of common honesty, and that duty, of course
    " applies to the circumstances of this case as it applies to all other circum-
    " stances. But when a mere inquiry is made by one banker of another, who
    " stands in no special relation to him, then, in the absence of special circum-
    " stances from which a contract to be careful can be inferred, I think there
    " is no duty excepting the duty of common honesty to which I have
    " referred."

    I think that by " a contract to be careful " Lord Haldane must have meant
    an agreement or undertaking to be careful. This was a Scots case and by
    Scots law there can be a contract without consideration: Lord Haldane
    cannot have meant that similar cases in Scotland and England would be
    decided differently on the matter of special relationship for that reason. I
    am, I think, entitled to note that this was an extempore judgment. So
    Lord Haldane was contrasting a " mere inquiry " with a case where there
    are special circumstances from which an undertaking to be careful can be
    inferred. In Robinson's case any such undertaking was excluded by the
    sentence in M'Arthur's letter which I have quoted and in which he said
    that the information was given " on the express understanding that we incur
    " no responsibility whatever in furnishing it."

    It appears to me that the only possible distinction in the present case is
    that here there was no adequate disclaimer of responsibility. But here the
    Appellants' bank, who were their agents in making the enquiry, began by
    saying that " they wanted to know in confidence and without responsibility
    " on our part ", that is, on the part of the Respondents. So I cannot see how
    the Appellants can now be entitled to disregard that and maintain that the
    Respondents did incur a responsibility to them.

    The Appellants founded on a number of cases in contract where very
    clear words were required to exclude the duty of care which would otherwise
    have flowed from the contract. To that argument there are, I think, two
    answers. In the case of a contract it is necessary to exclude liability for
    negligence, but in this case the question is whether an undertaking to assume
    a duty to take care can be inferred: and that is a very different matter. And,
    secondly, even in cases of contract general words may be sufficient if there
    was no other kind of liability to be excluded except liability for negligence:
    the general rule is that a party is not exempted from liability for negligence
    " unless adequate words are used "—per Scrutton, L.J., in Rutter v. Palmer
    [1922] 2 K.B. 87. It being admitted that there was here a duty to give an
    honest reply, I do not see what further liability there could be to exclude
    except liability for negligence: there being no contract there was no question
    of warranty.

    I am therefore of opinion that it is clear that the Respondents never under-
    took any duty to exercise care in giving their replies. The Appellants cannot
    succeed unless there was such a duty, and therefore in my judgment this
    appeal must be dismissed.

    Lord Morris of Borth-y-Gest

    MY LORDS,

    The important question of law which has concerned your Lordships in
    this appeal is whether in the circumstances of the case there was a duty of
    care owed by the Respondents, whom I will call " the bank", to the
    Appellants, whom I will call " Hedleys ". In order to recover the damages
    which they claim Hedleys must establish that the bank owed them a duty,
    that the bank failed to discharge such duty, and that as a consequence
    Hedleys suffered loss.

    An allegation of fraud was originally made but was abandoned. The
    learned Judge held that the bank had been negligent but that they owed
    no duty to Hedleys to exercise care. The Court of Appeal agreed with the
    learned Judge that no such duty was owed and it was therefore not necessary
    for them to consider whether the finding of negligence ought or ought not
    be upheld. In your Lordships' House the legal issues were debated and
    again it did not become necessary to consider whether the finding of negli-
    gence ought or ought not be upheld. It is but fair to the bank to state that
    they firmly contend that they were not in any way negligent and that they
    were prepared to make submissions by way of challenge of the conclusions
    of the learned Judge.

    Hedleys were doing business with a company called Easipower Ltd. In
    August, 1958, Hedleys wanted a banker's report concerning that company
    who then had an account with the bank. [In November, 1957, Hedleys had
    received a report about the company which had been given by another bank
    though not by direct communication.] Hedleys banked at a Piccadilly
    branch of the National Provincial Bank Limited. Hedleys asked that a
    report concerning Easipower Ltd. should be obtained. The Piccadilly
    branch communicated with the City office of their bank, the National
    Provincial. The National Provincial City office telephoned the bank on the
    18th August, 1958, and it is common ground that the representative of the
    National Provincial said that " they wanted to know in confidence " and
    " without responsibility " on the part of the bank as to the respectability
    and standing of Easipower Ltd. and whether Easipower Ltd. " would be
    " good for an advertising contract for £8/9,000." To that oral inquiry the
    bank then gave an oral answer. In due course the answer then given was
    communicated by the Piccadilly branch of the National Provincial to Hedleys.
    It was communicated orally and a letter of confirmation from that branch
    (dated the 21st August, 1958) was sent to Hedleys. The letter had the
    headings " Confidential" and " For your private use and without responsi-
    " bility on the part of this Bank or the Manager." The oral answer which
    the bank had given to the City office of the National Provincial was passed
    on with the prefatory words—" In reply to your telephoned enquiry of
    " 18th August, Bankers say:—".

    There was a later enquiry. On the 4th November, 1958, in a letter to the
    Piccadilly branch of the National Provincial Hedleys wrote: " I have been
    " requested by the Directors to again ask you to check the financial structure
    " and status of Easipower Limited ": Hedleys made some particular refer-
    ences and concluded their letter with the words: " I would be appreciative
    " if you could make your check as exhaustive as you reasonably can." In
    a letter dated the 7th November and headed "Private and Confidential"
    the City office of the National Provincial asked the bank for their " opinion
    " in confidence as to the respectability and standing of Easipower Ltd."
    and asked the bank to state whether they considered Easipower Ltd. " trust-
    " worthy, in the way of business, to the extent of £100,000 per annum
    " advertising contract." The bank replied in a letter dated the 11th
    November and sent to the City office of the National Provincial. The letter
    had the headings "Confidential" and "For your private use and without
    " responsibility on the part of this Bank or its officials." On the 14th
    November the Piccadilly branch of the National Provincial wrote to Hedleys
    (heading their letter " Confidential. For your private use and without
    " responsibility on the part of this Bank or the Manager") and, with the

    10

    prefatory words: " In reply to your enquiry letter of 4th November, Bankers
    " say ", passed on what the bank had stated in their letter to the City
    office of the National Provincial.

    It is, I think, a reasonable and proper inference that the bank must have
    known that the National Provincial were making their enquiry because some
    customer of theirs was or might be entering into some advertising contract
    in respect of which Easipower Ltd. might become under a liability to such
    customer to the extent of the figures mentioned. The enquiries were from
    one bank to another. The name of the customer (Hedleys) was not men-
    tioned by the enquiring bank (National Provincial) to the answering bank
    (the bank): nor did the enquiring bank (National Provincial) give to the
    customer (Hedleys) the name of the answering bank (the bank). These
    circumstances do not seem to me to be material. The bank must have
    known that the enquiry was being made by someone who was contemplating
    doing business with Easipower Ltd. and that their answer or the substance
    of it would in fact be passed on to such person. The conditions subject
    to which the bank gave their answers are important but the fact that the
    person to whom the answers would in all probability be passed on was
    unnamed and unknown to the bank is not important for the purposes of a
    consideration of the legal issue which now arises. It is inherently unlikely
    that the bank would have entertained a direct application from Hedleys
    asking for a report or would have answered an enquiry made by Hedleys
    themselves: even if they had they would certainly have stipulated that their
    answer was without responsibility. The present appeal does not raise any
    question as to the circumstances under which a banker is entitled (apart
    from direct authorisation) to answer an enquiry. I leave that question as
    it was left by Atkin, L.J. in Tournier v. National Provincial & Union Bank
    of England
    [1924] 1 K.B. 461, when (at p. 486) he said: " I do not desire to
    " express any final opinion on the practice of bankers to give one another
    " information as to the affairs of their respective customers, except to say
    " it appears to me that if it is justified it must be upon the basis of an
    " implied consent of the customer."

    The legal issue which arises is, therefore, whether the bank would have
    been under a liability to Hedleys if they had failed to exercise care. This
    involves the questions whether the circumstances were such that the bank
    owed a duty of care to Hedleys, or would have owed such a duty but for
    the words " Without Responsibility ", or whether they owed such a duty
    but were given a defence by the words " Without Responsibility " which
    would protect them if they had failed to exercise due care.

    My Lords, it seems to me that if A assumes a responsibility to B to
    tender him deliberate advice there could be a liability if the advice is
    negligently given. I say " could be " because the ordinary courtesies and
    exchanges of life would become impossible if it were sought to attach
    legal obligation to every kindly and friendly act. But the principle of the
    matter would not appear to be in doubt. If A employs B (who might
    for example be a professional man such as an accountant or a solicitor
    or a doctor) for reward to give advice and if the advice is negligently given
    there could be a liability in B to pay damages. The fact that the advice
    is given in words would not, in my view, prevent liability from arising.
    Quite apart, however, from employment or contract there may be circum-
    stances in which a duty to exercise care will arise if a service is voluntarily
    undertaken. A medical man may unexpectedly come across an unconscious
    man, who is a complete stranger to him, and who is in urgent need of
    skilled attention: if the medical man, following the fine traditions of his
    profession, proceeds to treat the unconscious man he must exercise reason-
    able skill and care in doing so. In his speech in Banbury v. Bank of
    Montreal
    [1918] A.C. 626 Lord Atkinson (at p. 689) said: "It is well
    " established that if a doctor proceeded to treat a patient gratuitously, even
    " in a case where the patient was insensible at the time and incapable of
    " employing him, the doctor would be bound to exercise all the professional
    " skill and knowledge he possessed, or professed to possess, and would
    " be guilty of gross negligence if he omitted to do so". To a similar

    11

    effect were the words of Lord Loughborough in the much earlier case
    of Shiells v. Blackburne (1789) 1 H.B1. 158 when at p. 162 he said: "If
    " a man gratuitously undertakes to do a thing to the best of his skill,
    " where his situation or profession is such as to imply skill, an omission
    " of that skill is imputable to him as gross negligence." Compare also
    Wilkinson v. Coverdale (1793) 1 Esp. 75. I can see no difference of principle
    in the case of a banker. If someone who was not a customer of a bank
    made a formal approach to the bank with a definite request that the
    bank would give him deliberate advice as to certain financial matters of
    a nature with which the bank ordinarily dealt the bank would be under
    no obligation to accede to the request: if however they undertook, though
    gratuitously, to give deliberate advice (I exclude what I might call casual
    and perfunctory conversations) they would be under a duty to exercise
    reasonable care in giving it. They would be liable if they were negligent
    although, there being no consideration, no enforceable contractual relation-
    ship was created.

    In the absence of any direct dealings between one person and another,
    there are many and varied situations in which a duty is owed by one
    person to another. A road user owes a duty of care towards other road
    users. They are his " neighbours ". A duty was owed by the dock owner
    in Heaven v. Pender, L.R. 11 Q.B.D. 503. Under a contract with a ship-
    owner he had put up a staging outside a ship in his dock. The plaintiff
    used the staging because he was employed by a ship painter who had
    contracted with the shipowner to paint the outside of the ship. The
    presence of the plaintiff was for business in which the dock owner was
    interested and the plaintiff was to be considered as having been invited
    by the dock owner to use the staging. The dock owner was therefore
    under an obligation to take reasonable care that at the time when the
    staging was provided by him for immediate use it was in a fit state to be
    used. For an injury which the plaintiff suffered because the staging had
    been carelessly put up he was entitled to succeed in a claim against the
    defendant. The chemist in George v. Skivington, L.R. 5 Ex. 1 sold
    the bottle of hair wash to the husband knowing that it was to be used
    by the wife. It was held on demurrer that the chemist owed a duty towards
    the wife to use ordinary care in compounding the hair wash. In Donoghue
    v Stevenson [19321 A.C. 562 it was held that the manufacturer of an article
    of food, medicine, or the like, is under a duty to the ultimate consumer
    to take reasonable care that the article is free from defect likely to cause
    injury to health.

    My Lords, these are but familiar and well known illustrations, which
    could be multiplied, which show that irrespective of any contractual or
    fiduciary relationship and irrespective of any direct dealing, a duty may be
    owed by one person to another. It is said, however, that where careless
    (but not fraudulent) misstatements are in question there can be no liability
    in the maker of them unless there is either some contractual or fiduciary
    relationship with a person adversely affected by the making of them or
    unless through the making of them something is created or circulated or some
    situation is created which is dangerous to life, limb or property. In logic
    I can see no essential reason for distinguishing injury which is caused by a
    reliance upon words from injury which is caused by a reliance upon the
    safety of the staging to a ship or by a reliance upon the safety for use of
    the contents of a bottle of hair wash or a bottle of some consumable liquid.
    It seems to me, therefore, that if A claims that he has suffered injury or
    loss as a result of acting upon some misstatement made by B who is not
    in any contractual or fiduciary relationship with him the enquiry that is
    first raised is whether B owed any duty to A: if he did the further enquiry
    is raised as to the nature of the duty. There may be circumstances under
    which the only duty owed by B to A is the duty of being honest: there
    may be circumstances under which B owes to A the duty not only of being
    honest but also a duty of taking reasonable care. The issue in the present
    case is whether the bank owed any duty to Hedleys and if so what the
    duty was.


    A6

    12

    Leaving aside cases where there is some contractual or fiduciary relation-
    ship, there may be many situations in which one person voluntarily or
    gratuitously undertakes to do something for another person and becomes
    under a duty to exercise reasonable care. I have given illustrations. But
    apart from cases where there is some direct dealing there may be cases
    where one person issues a document which should be the result of an
    exercise of the skill and judgment required by him in his calling and where
    he knows and intends that its accuracy will be relied upon by another. In
    this connection it will be helpful to consider the case of Cann v. Willson
    L.R. 39 Ch.D. 39. The owner of some property wished to obtain an
    advance of money on mortgage of the property and applied to a firm of
    solicitors for the purpose of their finding a mortgagee. Being informed
    by the solicitors that for the purpose of finding a mortgagee he should
    have a valuation made of the property he consulted the defendants and
    asked them to make a valuation. They surveyed and inspected the property
    and then made a valuation which they sent to the solicitors. The solicitors
    then particularly called the defendants' attention to the purpose for which
    the valuation was wanted and to the responsibility they were undertaking.
    The defendants staled that their valuation was a moderate one and certainly
    was not made in favour of the borrower. The valuation and representations
    so made by the defendants to the solicitors were communicated to the
    plaintiff (and a co-trustee of his) by the solicitors. The plaintiff (and his
    co-trustee, who died before the commencement of the action) then advanced
    money to the owner upon the security of a mortgage of his property.
    Chitty, J., held on the evidence (1) that the defendants were aware of
    the purpose for which the valuation was made, and (2) that the " valuation
    " was sent by the Defendants direct to the agents of the Plaintiff for the
    " purpose of inducing the Plaintiff and his co-trustee to lay out the trust
    " money on mortgage". The owner made default in payment and the
    property proved insufficient to answer the mortgage. The plaintiff alleged
    that the value of the property was not anything like the value given by
    the defendants in their valuation. Chitty, J., held that " the valuation as
    " made was, in fact, no valuation at all." In those circumstances the claim
    made was on the basis that the plaintiff has sustained loss through the
    negligence, want of skill, breach of duty and misrepresentation of the
    defendants. Chilly, J., held the defendants liable. His decision was
    principally based upon his finding that the defendants owed a duty of
    care to the plaintiff. It had been argued that there was also liability in
    the defendants in contract (referred to in the judgment as the first ground)
    and on the ground of fraud (referred to as the third ground). At the end
    of his judgment Chitty, J., said: "I have entirely passed by the question
    " of contract. It is unnecessary to decide that point. I consider on these
    " two last grounds—and if I were to prefer one to the other it would be
    " the second ground—that the Defendant is liable for the negligence." In
    the course of his judgment he said: " It is not necessary, in my opinion,
    " to decide the case with reference to the third point, but even on the third
    " point I think the Defendants are liable—and that is what may be termed
    " fraudulent misrepresentation." He then (that is, on the 7th June, 1888) re-
    ferred to the judgment in the Court of Appeal in Peek v. Derry (37 Ch. D.
    541). That judgment was reversed in the House of Lords on the 1st July,
    1889. Chitty, J., compared the situation with that which arose in Heaven v.
    Pender (supra). He pointed out that in that case there was " no contractual
    " relation between the Plaintiff and the dock owner, and there was no
    " personal direct invitation to the Plaintiff to come and do the work on
    " that ship, yet it was held that the dock owner had undertaken an obliga-
    " tion towards the Plaintiff, who was one of the persons likely to come
    " and do the work to the vessel, and that he was liable to him and was
    " under an obligation to him to use due diligence in the construction of
    " the staging." Chitty, J., went on, therefore, to hold that as the defendants
    had "knowingly placed themselves" in the position of sending their
    valuation " direct to the agents of the Plaintiff for the purpose of inducing
    " the Plaintiff " then they " in point of law incurred a duty towards him
    " to use reasonable care in the preparation of the document." He likened

    13

    the case to George v. Skivington (supra) and continued: "In this case
    " the document supplied appears to me to stand upon a similar footing
    " and not to be distinguished from that case, as if it had been an actual
    " article that had been handed over for the particular purpose of being so
    " used. I think, therefore, that the Defendants stood with regard to the
    " Plaintiff—quite apart from any question of there being a contract or not
    " in the peculiar circumstances of this case—in the position of being under
    " an obligation or duty towards him." My Lords, I can see no fault or
    flaw in his reasoning and I am prepared to uphold it. If it is correct, then
    it is submitted that in the present case the bank knew that some existing
    (though to them by name unknown) person was going to place reliance upon
    what they said and that accordingly they owed a duty of care to such
    person. I will examine this submission. Before doing so I must, however,
    further consider Cann v. Willson. It was overruled by the Court of Appeal
    in Le Lievre and Dennes v. Gould [1893] 1 Q.B. 491. The latter
    case, binding on the Court of Appeal, in turn led to the decision in
    Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164. It is necessary,
    therefore, to consider the reasons which governed the Court of Appeal in
    Le Lievre v. Gould in overruling Cann v. Willson. I do not propose to
    examine the facts in Le Lievre v. Gould: nor need I consider whether
    the result would have been no different had Cann v. Willson not been
    overruled. Lord Esher, M.R. (at p. 497) said: "But I do not hesitate
    " to say that Cann v Willson is not now law. Chitty, J., in deciding that
    " case, acted upon an erroneous proposition of law, which has been since
    " overruled by the House of Lords in Deny v. Peek when they restated
    " the old law that, in the absence of contract, an action for negligence cannot
    " be maintained when there is no fraud." Bowen, L.J., said (at p. 499)
    that he considered that Derry v. Peek had overruled Cann v. Willson. He
    considered that Heaven v. Pender gave no support for that decision because
    it was no more than an instance of the class of cases where one who,
    having the conduct and control of premises which may injure those whom
    he knows will have a right to and will use them, owes a duty to protect
    them. He said (at p. 501): " Then Derry v. Peek decided this further point—
    " viz., that in cases like the present (of which Derry v. Peek was itself
    " an instance) there is no duty enforceable in law to be careful." He
    followed the view expressed by Romer, J., in Scholes v. Brook, 63 L.T.
    (N.S.) 837, that the decision of the House of Lords in Derry v. Peek by
    implication negatived the existence of any such general rule as laid down
    in Cann v. Willson. The reasoning of A. L Smith, L.J., in overruling
    Cann v. Willson was on similar lines.

    The enquiry is thus raised as to whether it was correct to say that Derry
    v. Peek had either directly or at least by implication overruled that part
    of the reasoning in Cann v. Willson which led Chitty, J. to say that quite
    apart from contract and quite apart from fraud there was a duty of care
    owed by the defendants to the plaintiffs. My Lords, whatever views may
    have been held at one time as to the effect of Derry v. Peek, authoritative
    guidance as to this matter was given in your Lordships' House in 1914 in
    the case of Nocton v. Ashburton [19141 A.C. 932. In his speech in that case
    Viscount Haldane, L.C. (at p. 947) said: " My Lords, the discussion of the
    " case by the noble and learned Lords who took part in the decision appears
    " to me to exclude the hypothesis that they considered any other question
    " to be before them than what was the necessary foundation of an ordinary
    " action for deceit. They must indeed be taken to have thought that the
    " facts proved as to the relationship of the parties in Derry v. Peek were
    " not enough to establish any special duty arising out of that relationship
    " other than the general duty of honesty. But they do not say that where
    " a different sort of relationship ought to be inferred from the circumstances
    " the case is to be concluded by asking whether an action for deceit will
    " lie. I think that the authorities subsequent to the decision of the House
    " of Lords shew a tendency to assume that it was intended to mean more
    " than it did. In reality the judgment covered only a part of the field in
    " which liabilities may arise. There are other obligations besides that of

    14

    " honesty the breach of which may give a right to damages. These obliga-
    " tions depend on principles which the judges have worked out in the
    " fashion that is characteristic of a system where much of the law has always
    " been judge-made and unwritten." After a review of many authorities
    Lord Haldane said (at p. 955): "But side by side with the enforcement
    " of the duty of universal obligation to be honest and the principle which
    " gave the right to rescission, the Courts, and especially the Court of Chan-
    " cery, had to deal with the other cases to which I have referred, cases
    " raising claims of an essentially different character, which have often been
    " mistaken for actions of deceit. Such claims raise the question whether
    " the circumstances and relations of the parties are such as to give rise to
    " duties of particular obligation which have not been fulfilled." Lord
    Haldane pointed out that from the circumstances and relations of the parties
    a special duty may arise: there may be an implied contract at law or a
    fiduciary obligation in equity. What Deny v. Peek decided was that the
    directors were under no fiduciary duty to the public to whom they had
    addressed the invitation to subscribe. (I need not here refer to statutory
    enactments since Deny v. Peek.)

    In his speech in the same case Lord Dunedin pointed out that there can
    be no negligence unless there is a duty but that a duty may arise in many
    ways. There may be duties owing to the world at large: alterum non
    laedere.
    There may be duties arising from contract. There may be duties
    which arise from a relationship without the intervention of contract in the
    ordinary sense of the term, such as the duties of a trustee to his cestui que
    trust or of a guardian to his ward.

    Lord Shaw in his speech pointed out (at p. 970) that Deny v. Peek " was
    " an action wholly and solely of deceit, founded wholly and solely on fraud,
    " was treated by this House on that footing alone and that—this being so—
    " what was decided was that fraud must ex necessitate contain the element
    " of moral delinquency. Certain expressions by learned Lords may seem
    " to have made incursions into the region of negligence but Deny v. Peek
    "as a decision was directed to the single and specific point just set out."
    Lord Shaw (at p. 972) formulated the following principle: " That once the
    " relations of parties have been ascertained to be those in which a duty is
    " laid upon one person of giving information or advice to another upon
    " which that other is entitled to rely as the basis of a transaction, responsi-
    " bility for error amounting to misrepresentation in any statement made will
    " attach to the adviser or informer although the information and advice
    " have been given not fraudulently but in good faith."

    Lord Parmoor in his speech said (at p. 978) in reference to Deny v. Peek :
    "
    That case decides that in an action founded on deceit, and in which deceit
    " is a necessary factor, actual dishonesty, involving mens rea, must be
    " proved. The case, in my opinion, has no bearing whatever on actions
    " founded on a breach of duty in which dishonesty is not a necessary factor."

    My Lords, guided by the assistance given in Nocton v. Ashburton I con-
    sider that it ought not to have been held in Le Lievre v. Gould that Cann
    v. Willson was wrongly decided. Independently of contract there may be
    circumstances where information is given or where advice is given which
    establishes a relationship which creates a duty not only to be honest but
    also to be careful.

    In his speech in Heilbut, Symons & Co. v. Buckleton [1913] A.C. 30 Lord
    Moulton (at p. 51) said that it was of the greatest importance to " maintain
    " in its full integrity the principle that a person is not liable in damages
    " for ar: innocent misrepresentation, no matter in what way or under what
    " form the attack is made." That principle is, however, in no way impeached
    by recognition of the fact that if a duty exists there is a remedy for the
    breach of it. As Lord Bowen said in Low v. Bouverie [1891] 3 Ch. 82:
    " the doctrine that negligent misrepresentation affords no cause of action
    " is confined to cases in which there is no duty, such as the law recognises,
    " to be careful."

    The enquiry in the present case, and in similar cases, becomes, therefore,
    an enquiry as to whether there was a relationship between the parties which
    created a duty and if so whether such duty included a duty of care.

    15

    The guidance which Lord Haldane gave in Nocton v. Ashburton was
    repeated by him in his speech in Robinson v. National Bank of Scotland,
    1916 S.C. (H.L.) 154. He clearly pointed out that Deny v. Peek did not
    affect (1) the whole doctrine as to fiduciary relationship, (2) the duty of care
    arising from implied as well as express contracts, and (3) the duty of care
    arising from other special relationships which the courts may find to exist
    in particular cases.

    My Lords, I consider that it follows and that it should now be regarded
    as settled that if someone possessed of a special skill undertakes, quite
    irrespective of contract, to apply that skill for the assistance of another
    person who relies upon such skill, a duty of care will arise. The fact that
    the service is to be given by means of or by the instrumentality of words
    can make no difference. Furthermore, if in a sphere in which a person
    is so placed that others could reasonably rely upon his judgment or his
    skill or upon his ability to make careful inquiry, a person takes it upon
    himself to give information or advice to, or allows his information or advice
    to be passed on to, another person who, as he knows or should know, will
    place reliance upon it, then a duty of care will arise.

    I do not propose to examine the facts of particular situations or the facts
    of recently decided cases in the light of this analysis, but I proceed to apply
    it to the facts of the case now under review. As I have stated, I approach
    the case on the footing that the bank knew that what they said would in
    fact be passed on to some unnamed person who was a customer of the
    National Provincial Bank. The fact that it was said that " they ", that is,
    the National Provincial Bank, " wanted to know " does not prevent this
    conclusion. In these circumstances I think some duty towards the unnamed
    person, whoever it was, was owed by the bank. There was a duty of honesty.
    The great question, however, is whether there was a duty of care. The
    bank need not have answered the enquiry from the National Provincial
    Bank. It appears, however, that it is a matter of banking convenience
    or courtesy and presumably of mutual business advantage that enquiries
    as between banks will be answered. The fact that it is most unlikely that
    the bank would have answered a direct enquiry from Hedleys does not
    affect the question as to what the bank must have known as to the use that
    would be made of any answer that they gave but it cannot be left out
    of account in considering what it was that the bank undertook to do. It
    does not seem to me that they undertook before answering an enquiry to
    expend time or trouble " in searching records, studying documents, weighing
    " and comparing the favourable and unfavourable features and producing
    " a well-balanced and well-worded report." (I quote the words of Pearson,
    L.J.). Nor does it seem to me that the enquiring bank (nor therefore
    their customer) would expect such a process. This was, I think, what was
    denoted by Lord Haldane in his speech in Robinson v. National Bank of
    Scotland
    when he spoke of a " mere inquiry " being made by one banker
    of another. In Parsons v. Barclay & Co. Ltd. [1910] 26 T.L.R. 628, 103 L.T.
    196 C.A., Cozens-Hardy, M.R. expressed the view that it was no part of a
    banker's duty, when asked for a reference, to make inquiries outside as to
    the solvency or otherwise of the person asked about or to do more than
    answer the question put to him honestly from what he knew from the books
    and accounts before him. There was in the present case no contemplation
    of receiving anything like a formal and detailed report such as might be
    given by some concern charged with the duty (probably for reward) of
    making all proper and relevant enquiries concerning the nature, scope and
    extent of a company's activities and of obtaining and marshalling all avail-
    able evidence as to its credit, efficiency, standing and business reputation.
    There is much to be said, therefore, for the view that if a banker gives a
    reference in the form of a brief expression of opinion in regard to credit-
    worthiness he does not accept, and there is not expected from him, any
    higher duty than that of giving an honest answer. I need not, however, seek
    to deal further with this aspect of the matter, which perhaps cannot be
    covered by any statement of general application, because in my judgment the
    bank in the present case, by the words which they employed, effectively
    disclaimed any assumption of a duty of care. They stated that they only

    16

    responded to the inquiry on the basis that their reply was without responsi-
    bility. If the enquirers chose to receive and act upon the reply they cannot
    disregard the definite terms upon which it was given. They cannot accept
    a reply given with a stipulation and then reject the stipulation. Further-
    more, within accepted principles (as illustrated in Rutter v. Palmer [1922]
    2 K.B. 87) the words employed were apt to exclude any liability for
    negligence.
    I would therefore dismiss the appeal.

    Lord Hodson

    MY LORDS,

    The Appellants, who are advertising agents, claim damages for loss which
    they allege they have suffered through the negligence of the Respondents,

    who are merchant bankers.


    The negligence attributed to the Respondents consists of their failure to
    act with reasonable skill and care in giving references as to the credit-
    worthiness of a company called Easipower Limited which went into liquida-
    tion after the references had been given so that the Appellants were unable
    to recover the bulk of the costs of advertising orders which Easipower
    Limited had placed with them.

    The learned Judge at the trial found that the Respondent bankers had
    been negligent in the advice which they gave in the form of bankers
    references, the Appellants being a company which acted in reliance on the
    references and suffered financial loss accordingly but that he must enter
    judgment for the Respondents since there was no duty imposed by law to
    exercise care in giving these references, the duty being only to act honestly
    in so doing.

    The Respondents have at all times maintained that they were in no sense
    negligent and further that no damage flowed from the giving of references
    but first they took the point that whether or no they were careless and
    whether or no the Appellants suffered damage as a result of their carelessness
    they must succeed on the footing that no duty was owed by them. This
    point has been taken throughout as being, if the Respondents are right,
    decisive of the whole matter. I will deal with it first although the under-
    lying question is whether the Respondent bankers who at all times disclaimed
    responsibility ever assumed any duty at all.

    The Appellants depend on the existence of a duty said to be assumed by
    or imposed on the Respondents when they gave a reference as to the credit-
    worthiness of Easipower Limited knowing that it would or might be relied
    upon by the Appellants or some other third party in like situation.

    The case has been argued first on the footing that the duty was imposed
    by the relationship between the parties recognised by law as being a special
    relationship derived either from the notion of proximity introduced by Lord
    Esher in Heaven v. Pender, 11 Q.B. D. 503, 509, or from those cases firmly
    established in our law which show that those who hold themselves out as
    possessing a special skill are under a duty to exercise it with reasonable
    care.

    The important case of Donoghue v. Stevenson [1932] A.C. 562 shows that
    the area of negligence is extensive, for as Lord Macmillan said at page 619:
    " The grounds of action may be as various and manifold as human errancy ;
    " and the conception of legal responsibility may develop in adaptation to
    " altering social conditions and standards. The criterion of judgment must
    " adjust and adapt itself to the changing circumstances of life. The categories
    " of negligence are never closed. . . . Where there is room for diversity
    " of view, it is in determining what circumstances will establish such a
    " relationship between the parties as to give rise, on the one side, to a duty
    " to take care, and on the other side to a right to have care taken."

    17

    In that case the necessary relationship was held to have been established
    where the manufacturer of an article, ginger beer in a bottle, sold it
    to a distributor in circumstances which prevented the distributor or the
    ultimate purchaser or consumer from discovering by inspection any defect.
    He is under a legal duty to the ultimate purchaser or consumer to take
    reasonable care that the article is free from injurious defect. No doubt that
    was the actual decision in that case, and indeed it was thought by Wrottesley,
    J. in Old Gates Estates, Ltd. v. Toplis & Harding & Russell [11939] 3 All E.R.
    209 that he was precluded from awarding damages in tort for a negligent
    valuation made by a firm of valuers which knew it was to be used by the
    plaintiffs since the doctrine of Donoghue v. Stevenson was confined to
    negligence which results in danger to life, limb or health. I do not think
    that this is the true view of Donoghue v. Stevenson, but the decision itself,
    although its effect has been extended to cases where there was no expectation
    as contrasted with opportunity of inspection, see Grant v. Australian Knitting
    Mills
    [1936] A.C. 85, and to liability of repairers, see Haseldine v. C. A.
    Daw and Son, Ltd.
    [1941] 2 K.B. 343, has never been applied to cases where
    damages are claimed in tort for negligent statements producing damage.
    The attempt so to apply it failed as recently as 1951, when in Candler v.
    Crane, Christmas & Co.
    [1951] 2 K.B. 164, the Court of Appeal by a
    majority held that a false statement made carelessly as contrasted with
    fraudulently by one person to another, though acted on by that other to
    his detriment, was not actionable in the absence of any contractual or
    fiduciary relationship between the parties and that this principle had in no
    way been modified by the decision in Donoghue v. Stevenson. Cohen, L.J.
    one of the majority of the Court, referred to the language of Lord Esher,
    M.R. [1893] 1 Q.B. 491 in Le Lievre v. Gould who, repeating the substance
    of what he had said in Heaven v. Pender [1883] 11 Q.B. 503, 509, said: " If
    " one man is near to another, or is near to the property of another, a duty
    " lies upon him not to do that which may cause a personal injury to that
    " other, or may injure his property." Asquith, L.J. the other member of
    the majority of the Court held that the " neighbour " doctrine had not been
    applied where the damage complained of was not physical in its incidence
    to either person or property. The majority thus went no further than
    Wrottesley, J. in the Old Gate Estates case save that injury to property was
    said to be contemplated by the doctrine expounded in Donoghue v.
    Stevenson. It is desirable to consider the reasons given by the majority
    for their decision in the Candler case, for the Appellants rely upon the dis-
    senting judgment of Denning, L.J. in the same case. The majority, as also
    the learned trial Judge, held that they were bound by the decision of the
    Court of Appeal in Le Lievre v. Gould [1893] 1 Q.B. 491, in which the
    leading judgment was given by Lord Esher, M.R. and referred to as authori-
    tative by Lord Atkin in Donoghue v. Stevenson.

    It is true that Lord Esher refused to extend the proximity doctrine so as
    to cover the relationship between the parties in that case and the majority in
    Candler's case were unable to draw a valid distinction between the facts of
    that case and the case of Le Lievre v. Gould. Denning, L.J., however,
    accepted the argument for the Appellant which has been repeated before
    your Lordships, that the facts in Le Lievre v. Gould were not such as to
    impose a liability, for the plaintiff mortgagees who alleged that the owner's
    surveyor owed a duty to them not only had the opportunity but had
    stipulated for inspection by their own surveyor. The defendant's employee
    who prepared the accounts in Candler's case knew that the plaintiff was
    a potential investor in the company of which the accounts were negligently
    prepared and that the accounts were required in order that they might be
    shown to the plaintiff. In these circumstances I agree with Denning, L.J.
    that there is a valid distinction between the two cases. In Le Lievre v.
    Gould it was held that an older case of Cann v. Wilson was overruled. That
    is a case where the facts were in pari materia with those in Candler's case
    and Chitty, J. held the defendants liable because (1) they independently of
    contract owed a duty to the plaintiff which they failed to discharge, (2) that
    they had made reckless statements on which the plaintiff had acted This

    18

    case was decided before this House in Deny v. Peek, 14 App. Cas. 337, over-
    ruled the Court of Appeal on the second proposition, but the first proposition
    was untouched by Deny v. Peek and in so far as it depended on the authority
    of George v. Skivington [1869] L.R. 5 Ex 1 the latter case was expressly
    affirmed in Donoghue v. Stevenson although it had often previously been
    impugned. It is true that, as Asquith, L.J. pointed out in referring to
    George v. Skivington, the hair wash put into circulation knowing it was
    intended to be used by the purchaser's wife was a negligently compounded
    hair wash so that the case was so far on all fours with Donoghue v. Stevenson
    but the declaration also averred that the defendant had said that the hair
    wash was safe. I cannot see that there is any valid distinction in this field
    between a negligent statement, for example, an incorrect label on a bottle
    which leads to injury and a negligent compounding of ingredients which
    leads to the same result. It may well be that at the time when Le Lievre and
    Gould
    was decided the decision of this House in Deny v. Peek was thought
    to go further than it did. It certainly decided that careless statements reck-
    lessly but honestly made by directors in a prospectus issued to the public were
    not actionable on the basis of fraud, and inferentially that such statements
    would not be actionable in negligence (which had not in fact been pleaded)
    but it was pointed out by this House in Nocton v. Ashburton [1914] A.C.
    932 that an action does lie from negligent mistatement where the circum-
    stances disclose a duty to be careful. It is necessary in this connection to
    quote the actual language of Lord Haldane at pages 955-956:—

    " Such a special duty may arise from the circumstances and relations
    " of the parties. These may give rise to an implied contract at law or
    " to a fiduciary obligation in equity. If such a duty can be inferred in
    " a particular case of a person issuing a prospectus, as, for instance, in
    " the case of directors issuing to the shareholders of the company which
    " they direct a prospectus inviting the subscription by them of further
    " capital, I do not find in Deny v. Peek an authority for the suggestion
    " that an action for damages for misrepresentation without an actual
    " intention to deceive may not lie. What was decided there was that
    " from the facts proved in that case no such special duty to be careful
    " in statement could be inferred, and that mere want of care therefore
    " gave rise to no cause of action. In other words, it was decided that
    " the directors stood in no fiduciary relation and therefore were under
    " no fiduciary duty to the public to whom they had addressed the
    " invitation to subscribe. I have only to add that the special relation-
    " ship must, whenever it is alleged, be clearly shewn to exist."

    So far I have done no more than summarise the argument addressed to
    the Court of Appeal in Candler's case to which effect was given in the
    dissenting judgment of Denning, L.J., with which I respectfully agree in so
    far as it dealt with the facts of that case. I am therefore of opinion that
    his judgment is to be preferred to that of the majority, although the opinion
    of the majority is undoubtedly supported by the ratio decidendi of Le
    Lievre
    v. Gould which they cannot be criticised for following.

    This, however, does not carry the Appellants further than this, that
    provided they can establish a special duty they are entitled to succeed in
    an action based on breach of that duty.

    I shall later refer to certain cases which support the view that apart from
    what are usually called fiduciary relationships such as those between trustee
    and cestui que trust, solicitor and client, parent and child or guardian and
    ward, there are other circumstances in which the law imposes a duty to be
    careful, which is not limited to a duty to be careful to avoid personal injury
    or injury to property but covers a duty to avoid inflicting pecuniary loss
    provided always that there is a sufficiently close relationship to give rise
    to a duty of care.

    The Courts of Equity recognised that a fiduciary relationship exists " in
    " almost every shape ", to quote from Field, J. in Plowright v. Lambert,
    52
    L.T. 646 at page 652. He went on to refer to a case which had said that
    the relationship could be created voluntarily, as it were, by a person coming
    into a state of confidential relationship with another by offering to give
    advice in a matter, and so being disabled thereafter from purchasing

    19

    It is difficult to see why liability as such should depend on the nature
    of the damage. Lord Roche in Morrison Steamship Company, Ltd. v.
    Greystoke Castle (Cargo Owners) [1947] A.C. 265 at page 280 instanced
    damage to a lorry by the negligence of the driver of another lorry which
    while it does no damage to the goods in the second lorry causes the goods
    owner to be put to expense which is recoverable by direct action against the
    negligent driver.

    It is not to be supposed that the majority of the Court of Appeal who
    decided as they did in Candler's case were unmindful of the decision in
    Nocton v. Ashburton to which their attention was drawn, but they seem to
    have been impressed with the view that in the passage I have quoted Lord
    Haldane had in mind only fiduciary relationships in the strict sense, but in
    my opinion the words need not be so limited. I am fortified in this opinion
    by examples to be found in the old authorities such as Shiells and Another
    v. Blackburne, 126 E.R. 94, Wilkinson v. Coverdale, 1 Esp. 75, 170 E.R.
    283, and Gladwell v. Steggal, 132 E.R. 1282, which are illustrations of cases
    where the law has held that a duty to exercise reasonable care (breach of
    which is remediable in damages) has been imposed in the absence of a
    fiduciary relationship where persons hold themselves out as possessing special
    skill and are thus under a duty to exercise it with reasonable care. The
    statement of Lord Loughborough in Shiells and another v. Blackburne
    (supra)
    is always accepted as authoritative and ought not to be dismissed
    as dictum, although the plaintiff failed to establish facts which satisfied the
    standard he set. He said: " If a man gratuitously undertakes to do a thing
    " to the best of his skill, where his situation or profession is such as to imply
    " skill, an omission of that skill is imputable to him as gross negligence."
    True that proximity is more difficult to establish where words are concerned
    than in the case of other activities and mere casual observations are not to
    be relied upon, see Fish v. Kelly, 17 C.B. (N.S.) 194, but these matters go
    to difficulty of proof rather than principle.

    A modern instance is to be found in the case of Woods v. Martins Bank,
    Ltd. and Another
    [1959] 1 Q.B. 55, where Salmon, J. held that on the facts of
    the case the defendant bank which had held itself out as being advisers on
    investments (which was within the scope of their business) and had not given
    the plaintiff reasonably careful or skilful advice so that he suffered loss were
    held in breach of duty and so liable in damages even though the plaintiff
    may not have been a customer of the bank at the material time.

    True that the learned Judge based this part of his conclusion on a fiduciary
    relationship which he held to exist between the plaintiff and the bank and
    thus brought himself within the scope of the decision in Candler's case by
    which he was bound. For my part I should have thought that even if the
    learned Judge put a strained interpretation on the word " fiduciary " which
    is based on the idea of trust, the decision can be properly sustained as an
    example involving a special relationship.

    I do not overlook the point forcefully made by Harman, L.J. in his judg-
    ment ([1961] 3 W.L.R. 1239) and elaborated by counsel for the Respondent
    before your Lordships that it may in certain cases appear to be strange that
    whereas innocent misrepresentation does not sound in damages, yet in the
    special cases under consideration an injured party may sue in tort a third
    party whose negligent misrepresentation has induced him to enter into the
    contract. As was pointed out by Lord Wrenbury, however, in Banbury v.
    The Bank of Montreal [1918] A.C. 626 at p. 713, innocent misrepresentation
    is not the cause of action but evidence of the negligence which is the cause
    of action.

    Was there, then, a special relationship here? I cannot exclude from
    consideration the actual terms in which the reference was given and I cannot
    see how the Appellants can get over the difficulty which these words put in
    their way. They cannot say that the Respondents are seeking, as it were,
    contract out of their duty by the use of language which is insufficient for
    the purpose if the truth of the matter is that the Respondents never assumed
    a duty of care nor was such a duty imposed upon them.

    20

    The first question is whether a duty was ever imposed, and the language
    used must be considered before the question can be answered. In the case
    of a person giving a reference I see no objection in law or morals to the
    giver of the reference protecting himself by giving it without taking responsi-
    bility for anything more than the honesty of his opinion which must involve
    without taking responsibility for negligence in giving that opinion. I cannot
    accept the contention of the Appellant that the responsibility disclaimed was
    limited to the bank to which the reference was given nor can I agree that
    it referred only to responsibility for accuracy of detail.

    Similar words were present in the case of Robinson v. National Bank of
    Scotland,
    1916, S.C. (H.L.) 154 at page 159, a case in which the facts cannot,
    I think, be distinguished in any material respect from this. Moreover, in
    the Inner House the words of disclaimer were, I think, treated as not
    without significance.

    In this House the opinion was clearly expressed that the representations
    made were careless, inaccurate and misleading but that the pursuer had no
    remedy since there was no special duty on the bank's representative towards
    the pursuer. This conclusion was reached quite apart from the disclaimer
    of responsibility contained in the defender bank's letters.

    Viscount Haldane recalled the case of Nocton v. Ashburton in the
    following passage at page 157: —

    " In saying that I wish emphatically to repeat what I said in advising
    " this House in the case of Nocton v. Lord Ashburton that it is a
    " great mistake to suppose that, because the principle in Deny v. Peek
    " clearly covers all cases of the class to which I have referred, therefore
    " the freedom of action of the Courts in recognising special duties arising
    " out of other kinds of relationship which they find established by the
    " evidence is in any way affected. I think, as I said in Nocton's case,
    " that an exaggerated view was taken by a good many people of the
    " scope of the decision in Deny v. Peek. The whole of the doctrine as
    " to fiduciary relationships, as to the duty of care arising from implied
    " as well as express contracts, as to the duty of care arising from other
    " special relationships which the Courts may find to exist in particular
    " cases, still remains, and I should be very sorry if any word fell from
    " me which should suggest that the Courts are in any way hampered
    " in recognising that the duty of care may be established when such
    " cases really occur."

    This authority is, I think, conclusive against the Appellants and is not
    effectively weakened by the fact that the case came to an end before the
    matter had been fully argued upon the House intimating that it was prepared
    to dismiss the appeal without costs on either side since the pursuer had in
    its opinion been badly treated. Since no detailed reasons were given by the
    House for the view that a banker's reference given honestly does not in the
    ordinary course carry with it a duty to take reasonable care, that duty being
    based on a special relationship, it will not, I hope, be out of place if I express
    my concurrence with the observations of Pearson, L.J. who delivered the
    leading judgment in the Court of Appeal and said—see [1961] 3 W.L.R. at
    p. 1239:

    " Apart from authority, I am not satisfied that it would be reasonable
    " to impose upon a banker the obligation suggested, if that obligation
    " really adds anything to the duty of giving an honest answer. It is con-
    " ceded by Mr. Cooke that the banker is not expected to make outside
    " inquiries to supplement the information which he already has. Is he
    " then expected, in business hours in the bank's time, to expend time and
    " trouble in searching records, studying documents, weighing and com-
    " paring the favourable and unfavourable features and producing a
    " well-balanced and well-worded report? That seems wholly unreason-
    " able. Then, if he is not expected to do any of those things, and if he
    " is permitted to give an impromptu answer in the words that immedi-
    " ately come to his mind on the basis of the facts which he happens to
    " remember or is able to ascertain from a quick glance at the file
    " or one of the files, the duty of care seems to add little, if anything,

    21

    " to the duty of honesty. If the answer given is seriously wrong, that
    " is some evidence—of course, only some evidence—of this honesty.
    " Therefore, apart from authority, it is far from clear, to my mind, that
    " fore, apart from authority, it is far from clear, to my mind, that
    " the banker, hi answering such an inquiry, could reasonably be supposed
    " to be assuming any duty higher than that of giving an honest answer."

    This is to the same effect as the opinion of Lord Cozens-Hardy, M.R. in
    Parsons v. Barclays Bank Ltd. (1910) 26 T.L.R. at page 628 cited as
    follows :—

    " His Lordship said he wished emphatically to repudiate the sug-
    gestion that, when a banker was asked for a reference of this
    " kind, it was any part of his duty to make inquiries outside as to the
    " solvency or otherwise of the person asked about, or to do anything
    " more than answer the question put to him honestly from what he
    " knew from the books and accounts before him. To hold otherwise
    " would be a very dangerous thing to do and would put an end to a very
    " wholesome and useful practice and long established custom which was
    " now largely followed by bankers."

    It would, I think, be unreasonable to impose an additional burden on
    persons such as bankers who are asked to give references and might if
    more than honesty were required be put to great trouble before all available
    material had been explored and considered.

    It was held in Low v. Bouverie [1891] 3 Ch. 82 that if a trustee takes upon
    himself to answer the enquiries of a stranger about to deal with the cestui
    que
    trust, he is not under a legal obligation to do more than to give honest
    answers to the best of his actual knowledge and belief, he is not bound to
    make enquiries himself.

    I do not think