Hedley Byrne v. Heller: Judicial Creativity and Doctrinal Possibility
| DOI | http://doi.org/10.1111/j.1468-2230.1964.tb01019.x |
| Author | Robert Stevens |
| Published date | 01 March 1964 |
| Date | 01 March 1964 |
THE
MODERN LAW REVIEW
Volume
27
March
1964
No.
2
HEDLEY BYRNE
V.
HELLER:
JUDICIAL
CEEATIVITY AND DOCTRINAL
POSSIBILITY
MARK
TWAIN doubted whether lawyers had ever been children.
Despite his doubts there is evidence that once upon a time all
lawyers, and hence even judges, were young.
It
is even possible
that the typical judge was seriously influenced by his childhood.
Looking at the state of English law relating to negligent behaviour
at
the beginning
of
1963,
it
is perhaps legitimate to suspect that
the judges were influenced by the nursery rhymes learnt at their
mothers’
(or
more likely their nannies’) knees.
For
the common
law appeared to embody the policy that
“
sticks and stones may
break my bones, but words will never harm me.”
With the decision of the House of Lords in
Hedley Byrne
4
Co.,
Ltd.
v.
Heller
c?j-
Partners, Ltd.,l
a
serious inroad has been made
into the existence of this principle. Words have by no means
been put
on
a
par with sticks and stones, but
a
concession
has
been made to the possibility that some words may be at least
as harmful as physical injury. The omnipotence in this area of
Derry
v.
Peek,2
embodying into English law the strongest form
of nineteenth-century
laissez-faire
individualism, has been declared
to be apparent rather than real. Until the recent decision,
a
remedy for financial loss resulting from
a
negligent statement was
thought to exist only in exceptional circumstances.
It
was assumed
that no remedy would exist unless fraud were proved
so
that an
action in tort for deceit might lie,
or
consideration could be shown
to exist
so
that an action in contract might be brought,
or
the
facts were found to come within one of the categories of fiduciary
relationship where equity offered a special protection.
1
[1963]
2
All
E.R.
575;
[1963]
3
W.L.R. 101 (Lords Reid,
Morris,
Hodson,
2
(1889) 14 App.Cas.
337.
3
Where the false statement leads to physical
injury,
it
remedy is available:
e.g.,
Sharpe
V.
Avery
[1938]
4
All
E.R.
85
(C.A.);
CZayton
v.
Woodman
&
Son
[1961]
3
All
E.R. 249, revd.
on
facts [1962]
1
W.L.R. 920
(C.A.).
121
Devlin, Pearce).
VOL.
27
6
122
THE
MODERN
LAW
REVIEW
VOL.
27
A
more general remedy has long been thought necessary by
commentators. The development of a complex commercial system,
and in this century a more general participation in that system
by the population at large, has made the absence of a general
remedy for statements leading to financial loss appear increasingly
anachronistic. While nineteenth-century concepts, particularly a
reluctance to impose liability and an assumption that every man
was capable of lookhg after
his
own
affairs, combined to dominate
the common law, the situation appeared tolerable. But since the
establishment, some thirty years ago, of a generalised remedy for
physical damage caused by negligence,‘ the emergence of a parallel
remedy for financial
loss
not caused by physical harm has been
heralded but has never appeared. The difficulties were obvious.
If
every false
or
negligent statement were to give rise to a cause
of action, the work of the courts might well come to a standstill.
More immediately, the lack of political appeal of such a new
imposition of liability made
it
virtually certain that
it
would not
be achieved by parliamentary legislation in the foreseeable future.
The increasing reluctance of the English judges to indulge in judicial
legislation also made
it
seem unlikely that a solution would come
from the judiciary, except possibly by very slow accretion.
Hedley Byrne
has belied this latter prophecy. The liability
for false statements has taken a major step forward.
It
is
still
far from universal; but few would advocate liability for all
false statements.
A
duty of care to make
non-negligent statements is imposed whenever
a
special relationship
exists and responsibility
is
not expressly disclaimed. Future
development then will presumably be through
a
use of this special
relationship, although its sphere of operation remains clouded.
Its impact will depend largely
on
how far the judges of the next
decade are prepared to take
it.
The possibilities
are,
however,
immense. The decision has shifted the emphasis from fraud,
consideration and fiduciary relations to a more generalised remedy
as far as false
or
negligent statements are concerned.
It
is not
yet clear whether this remedy lies within the traditional ambit
of tort,
or
somewhere between tort and contract.
If
the latter,
a
whole new area of the law may be opened up for development.
Whichever line is ultimately taken vital changes appear to have
been effected indirectly in contract. Not
only
will there be the
possibility of major changes of importance in different doctrines,
but, by offering
a
remedy where special relationships but
no
con-
tracts exist, those basic concepts in the English law
of
contract,
a strict concept
of
privity and a narrow view of consideration,
have been made less important. But whatever
Hedley Byrne
may
ultimately be held to have decided doctrinally,
it
represents the
It
is however general.
4
Donoghue
v.
Stevenson
[1932]
A.C.
562
(Scot.).
MARCH
1964
HEDLEY BYRNE
'0.
HELLER
123
most interesting exercise in the judicial development of the common
law since
Donoghue
v.
Stevenson.
I.
THE DECISION
AND
THE
JUDICIAL
PROCESS
(a)
Situation and Decision
In the summer of
1958,
Hedley' Byrne
&
Co., Ltd., advertising
agents, received instructions from Easipower, Ltd. to book sub-
stantial advertising time
on
television and advertising space
in
newspapers. This made Hedley Byrne personally liable on the
contracts since the Television Companies, at least, insist
on
such
agents becoming
del
credere
agents. Hedley Byrne were therefore
anxious to discover the creditworthiness of Easipower. They
chose what is the traditional method of discovering this informa-
tion and asked the branch of the National Provincial Bank at which
they banked to discover what Easipower's financial position was.
That branch of the bank passed the request
to
the National
Provincial city office.
On
August
18,
the city office phoned Heller
&
Partners, Ltd., a
frrm
of merchant bankers, who were not only
bankers to Easipower, but had recently taken over the financing
of that company mainly through a process
of
sales and stock
financing. The survival of Easipower was dependent on the con-
tinuance of such financing. There was a conversation between the
city office of the National Provincial Bank and one of the partners
of Hellers. The defendants' record
of
the conversation, which was
accepted as accurate, showed
:
"
They wanted to know in confidence, and without responsi-
bility
on
our part, the respectability and standing
of
Easipower,
Ltd., and whether they would be good
for
an advertising
contract
for
28,000
to
29,000.
I
replied the company recently
opened an account with us. Believed to be respectably consti-
tuted 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 undertake any commitments they are
unable to fulfil."
Three months later the process was repeated, but this time
the inquiry was whether Easipower was
''
trustworthy, in the
way
of
business, to the extent
of
2100,000
per annum advertising
contract."
On
November
11,
1958,
Hellers wrote a letter to the
city ofice of the National Provincial Bank headed
"
Confidential
"
and marked
''
For
your private use and without responsibility
on
5
The facts are not
fully
reported in the House of Lords decision. In this
section they have been taken from the unreported judgment of McNqir
J.
74
first instsnce, which appears as Document
14
in the Appendix to the
before the House of Lords. Case
To continue reading
Request your trial