Hedley Byrne v Heller: The Immediate Aftermath of the Decision in Australia
The decades following the Second World War, saw the growth of Australian law schools,[119] the emergence of a home-grown academic literature and a greater willingness to challenge preconceived ideas.[120] Negligent misstatements were no exception.[121] The English tort lawyer, RVF Heuston, writing just before Hedley Byrne, even went so far as to predict that the High Court of Australia might folÂlow Denning LJ’s dissent in Candler v Crane, Christmas & Co.[122] With the advent of Hedley Byrne, his prediction did not have to be tested.
In the first edition of his textbook to be published after Hedley Byrne, John Fleming, under the heading of economic loss, welcomed the change of direction:This calamitous trend was at last reversed in 1963 when in Hedley Byrne v Heller the House of Lords, taking a leaf from the Restatement, introduced a limited duty of care for persons who take it upon themselves to give requested information or advice, directly or through an intermediary, to someone who, as they know or should know, will place reliÂance on it to his financial detriment.[123]
While welcoming the change, Fleming still noted that this was a ‘cautious formulaÂtion of the duty’.[124]
Hedley Byrne began to attract attention in the Australian courts almost immeÂdiately. Windeyer J described it as ‘ important’.[125] In Uren v John Fairfax & Sons Pty Ltd, the same judge used Lord Devlin’s speech in order to argue that it was ‘general conceptions that count in the development of the common law’. [126] Hedley Byrne was first specifically pleaded in Australia in early 1966.[127] The courts proceeded cautiously to begin with. In one early decision, Dominion Freeholders Ltd v Aird, Spargo, Wallace P suggested that there was no special relationship between the company's auditor and the company's accountant when the latter supplied incorÂrect information.[128]
Mutual Life & Citizens’ Assurance Co Ltd v Evatt,[129] was the first Australian decision to consider Hedley Byrne in any detail.
The plaintiff, a policyholder with the defenÂdant, had sought advice from the defendant about the financial position of another company, which was a subsidiary of the defendant. The defendant informed the plaintiff that it was financially stable on the strength of which the plaintiff retained his investments in the company and made further investments. The advice was incorÂrect and the plaintiff lost money. Barwick CJ explained that in Australia this matter was ‘free of any binding authority'[130] but Hedley Byrne was of ‘great assistance'.[131] A majority of the High Court held that a duty was owed.[132] Barwick CJ accepted that ‘the relationship of proximity' was adequate for physical acts or omissions, but that where the injury was caused by words then the necessary relationship ‘needs be more specific'.[133] To distinguish between physical injury and economic loss was described as ‘odd'.[134] Where a relationship was ‘special' then a duty of care arose.[135] It was not ‘necessary or desirable' to categorise the relationships which give rise to a duty of care but there were certain ‘essential elements'. [136] In Barwick CJ's view this came down to whether advice was given voluntarily in circumstances where the defendant realises or ought to realise the plaintiff will rely and the plaintiff does reasonably rely on the statement.[137] Crucially, a special relationship did ‘not require either the actual possession of skill or judgment on the part of the speaker or any profession by him to possess the same'. [138] The decision was appealed to the Privy Council. A majority held that there was no duty of care. The appeal succeeded because the defendant did not have, nor profess to have, a special skill in giving investment advice.[139] Of the three Privy Council judges who had also sat in Hedley Byrne, only Lord HodÂson sided with the majority. Lord Reid and Lord Morris dissented. Mutual Life & Citizens’ Assurance Co Ltd v Evatt placed a limit on the application of Hedley Byrne which was not necessarily justified by the decision itself[140] and it would eventually be overturned. In the meantime Hedley Byrne would become central in developing liability for pure economic loss in Australia.III.