Introduction

Aside from Donoghue v Stevenson,¹ there are few twentieth-century tort cases as well known, or as often cited in commonwealth jurisdictions as Hedley Byrne & Co Ltd v Heller & Partners Ltd.² Although the case's importance is clear, determin­ing exactly what it stood for at the time—or indeed what it stands for now—is rather more difficult and remains a matter of persistent controversy.

¹ Donoghue v Stevenson [1932] AC 562 (HL).

² Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL) (ⁱHedley Byrne’).

³ This is how the case itself reads, little mention being made of the fact that the losses were economic.

⁴ P Mitchell, ‘Hedley Byrne & Co Ltd v Heller & Partners Ltd (1963)' in C Mitchell and P Mitchell (eds), Landmark Cases in Tort (Oxford, Hart Publishing, 2010) 171.It is certainly true that this is how it would have been conceived historically. Whether it makes sense to continue to think of it in these terms is much more debateable.

⁵ For recent damnation, see R Buxton, ‘How the Common Law Gets Made: Hedley Byrne & Other CautionaryTales' (2009) 125 LQR 60. See also Campbell (Chapter 5).

⁶ Campbell(Chapter5).

⁷ See, eg, SR Perry, ‘Protected Interests and Undertakings in the Law of Negligence' (1992) 42 University of Toronto Law Journat 247, 270-81; N McBride and A Hughes, ‘Hedley Byrne in the House of Lords—An Interpretation' (1995) 15 Legal Studies 376. of negligence;^[8] about the fragile role of fictions in the law;^[9] and about the rela­tionship between equitable, common law and statutory remedies for misleading and deceptive practices. In fact, in the 50 years or so since it was decided, the case has been said to be significant in pretty much every way one can conceive of as a commentator—historically, conceptually, taxonomically, constitutionally, socially, jurisprudentially and economically. This is no small thing, when one considers that the claim which formed the focus of the House of Lords' attention on that fateful day failed straightforwardly and was disposed of on a narrow point. Rarely has so much that was stricto sensu immaterial to the outcome of a case been the subject of so much critical attention, or had such lasting reverberations.

Since 1963, much has happened to cause us to reflect further on the case. Economic loss liabilities in tort generally—and in cases of misstatement in particular—have become more extensive, more uncertain and more complex. The extension of liability we have seen is not just significant for the victims of mis­leading informational practices, who obviously welcome it, but also for govern­mental and professional advisory sectors, which have been exposed to a range of new and potentially burdensome liabilities. So significant has Hedley Byrne and its legacy proven for these actors that public bodies have curbed some of their more risky advisory practices;^[10] and governments in many jurisdictions have intervened to permit the capping or redistribution of advisors' liabilities in order to reduce their legal exposure.^[11] The perception among the governments implementing these changes has been that tort liabilities have been allowed to go too far and that they are potentially deleterious to the broader social welfare by undermining the viability of insurance and information markets, unfairly burdening defendants with disproportionate or crushing liabilities, or reducing plaintiffs' incentives to protect their own financial interests, thereby encouraging hedonistic ‘compensa­tion cultures' in which plaintiffs look to others to compensate their losses ex post facto, rather than to themselves ex ante for prudential precaution in making their investment decisions.

Whether any of these perceptions about the supposed empirical effects of the new tort liabilities is justified is what Sherlock Holmes might have referred to as a ‘three pipe problem'.^[12] It seems equally unlikely as likely.^[13] Nonetheless, the idea that we live in an age when tort has gone too far is not unique to governments that have had professional advisor organisations or powerful insurance lobbies banging on their doors. It is also shared by some judges and influential academic commentators.^[14] In Australia, for example, it is now reflected in the way the High Court openly considers whether or not a plaintiff could reasonably have protected himself against a foreseeable financial loss, before determining that a defendant owed him a duty of care.^[15] This more pro-defendant attitudinal shift is key to understanding the way in which negligent misstatement liabilities and economic duties are being modelled by courts in the modern day. Many of the progressive social welfare assumptions that prevailed in the age of Hedley Byrne (what the late Tony Weir once referred to as the ‘let it all hang out' atmosphere of the 1960s)^[16]6 are being questioned in more exigent, conservative times.

The recent series of cases in Australian law referring to the importance of self­protection in economic matters^[17] prompts the interesting question of how the duty question posed in Hedley Byrne itself would now be determined by the High Court in the modern day, assuming there to be no operative disclaimer by an advi­sor. Are orthodox assumptions that a duty would exist on such facts still safe (if indeed they ever were)?^[18] Although it is certain still to be accepted by courts that no contract is needed for there to be a negligence liability for pure economic loss, it is now potentially open to a defendant to argue that the availability of contract to a plaintiff as a risk-allocation mechanism is a good reason, on some facts, to deny that any economic duty of care is owed.

There have therefore been significant ideological shifts within and around negligence law as a whole in the last few decades, driven by the different social conditions of the modern day. The new ideology is conservative with a small ‘ c' and essential to understanding the potential reach and role of advisor liability in future years. The new conservatism sits well with the agenda of modern ‘rights' theorists such as Professor Robert Stevens,^[21] who has suggested at one conference I have attended (perhaps only half tongue-in-cheek) that the law of negligence needs to take a ‘giant step forwards to the nineteenth century'. Humour aside, he is making a serious point about both the bounds of liability, which he regards as overextended, and the abstruse reasoning upon which it is too often based. As we shall see, some contributors to this volume quietly rue the attitudinal change that has taken place and the shift away from welfarism back to the mechanisms of market voluntarism.

The fragility and uncertainty of the ideological and social changes occurring in common law jurisdictions make general predictions about likely direction difficult. They also explain the doctrinal tensions that are evident in the case law of all the jurisdictions we touch on in this work; and indeed the varying posi­tions that are taken by jurisdictions more generally regarding the scope of advi­sors' economic duties in cases involving remoter relationships.^[24] On the one hand, the realisation that the recent global financial crisis has been driven at least in part by under-regulation of private financial orderings suggests that advisors such as accountants, auditors and lawyers ought to be playing a more attentive and active role in policing market failures. On this approach, stringent tort rules are needed to incentivise efficient practices of detection and disclosure and the restriction of liabilities to contractual or ‘near-contractual' relationships is counter-intuitive. On the other hand, the true social cost of these cataclysmic failures is clearly well beyond the capacity of individual actors within the information economy to bear, and imposing crushing liabilities upon them in a way that disregards the practi­calities could itself have unforeseen and undesirable social effects.

Another complicating feature for those seeking to understand the contours of misstatement liability as a whole in the modern day is the fact that the tort liabilities of advisors under negligence doctrine now intersect in several common law jurisdictions with (relatively) new‘strict' liability‘consumer protection' provi­sions, which provide generous remedies to the victims of misleading and deceptive trade practices;^[25] with statutory remedies for pre-contractual misrepresentation;^[26] and with equitable remedies and doctrines in cases involving estoppel, breach of fiduciary duty and other types of equitable fraud.^[27] Even ignoring the laws of defa­mation, malicious falsehood and passing off (all of which involve remedies for mistruths of one sort or another), misstatements now potentially give rise to lia­bilities under multiple analytical heads and the various categories of liability can give rise to quite different remedies, governed by distinct principles.

A final hazard faced by the law of misstatements in the twenty-first century is the high degree of complexity and uncertainty that currently attends its norms. The uncertainty stems in part from the overlap between contractual, tortious, equitable and statutory principles—from what one might call ‘source prolif­eration' or ‘source co-ordination' problems—but it also flows from more basic conceptual and doctrinal confusions within the discrete fields of law themselves. Perhaps the most obvious of these relates to the role of the concepts that are com­monly regarded as most central to the judgments in Hedley Byrne—the idea that duties of economic protection in the tort of negligence are (or should be) based on ‘assumptions of responsibility' and/or ‘reliance'.^[31] In the jurisdictions in which these concepts have taken off, they have proven unruly; and their role and utility both within and beyond misstatement law is the subject of several important con­tributions to this work. The costs of the confusion are high, not simply in terms of wasted litigation, but also in preventing defendant advisors and their insurers arranging appropriate levels of cover and setting their prices in such a way as to make prospective liabilities sustainable. The irony is that while courts often insist that indeterminate (uncertain) amounts of liability are a normative problem for defendants in misstatement cases, indeterminate liability rules are currently woe­fully prevalent in many jurisdictions.

The upshot is that the debates that Hedley Byrne originally inspired about the respective roles of tort, contract, equity and statute in protecting economic interests; and about the proper balance between contractarian, free-market ideology on the one hand, and interventionist regulatory welfarism, on the other, have grown in intensity, significance and difficulty over the last 50 years. We have witnessed how these debates panned out in favour of plaintiffs in the relatively good times of the 1960s and 1970s and are now confronted with the awkward question of how they should be answered (and whether indeed they should in principle be answered any differently) when markets fail and money is short. It is naive to think that judges are completely unaffected in the way they develop the law by the broader social conditions within which it operates, even accepting that there are limits to their authority and competence to set social policy in the way that government does.

II.