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Chapter 3

Professional advice and negligent

misstatement

In practice there is no difference between liability arising from negligent misstatement
and liability arising from negligent acts. A party can suffer damage by reliance on
incorrect advice just as he can be injured by any other negligent conduct.

With respect to a negligent statement however, the consequences of this could be
far-reaching and affect countless people. Because of this the law had been reluctant
to impose a duty of care in the making of statements.

This situation changed in1963 when the landmark case set out below marked a new
approach to the law of negligent misstatement.

Illustration 7 – Professional advice

and negligent misstatement

HEDLEY BYRNE & CO LTD v HELLER & PARTNERS LTD 1963 Facts:

The claimant, an advertising agency, acted for E Ltd. The claimant requested
information from E Ltd’s bank on the creditworthiness of E Ltd. The bank gave
favourable references but included a disclaimer (exclusion clause) saying the
information was given without responsibility.

The claimant extended credit to E Ltd and lost money when the company went
into liquidation. The claimants sued the bank for negligence.

Held:

The bank’s disclaimer was adequate to exclude a duty of care.

The House of Lords went on to consider whether there could ever be a duty of
care to avoid causing loss by negligent misstatement where there was no
contractual or fiduciary relationship.

They decided that the bank was guilty of negligence, having breached the duty
of care, because a ‘special relationship’ existed. Had it not been for the
exclusion clause they would have been held liable (it is likely that the clause
would nowadays have fallen foul of the UCTA 1977).

Continued

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