Introduction
The process via which Hedley Byrne & Co Ltd v Heller & Partners Ltd1 entered the Australian law of negligent misstatement has been described in Warren Swain's excellent historical analysis in Chapter 1 of this volume.
Since that time, Australian courts have certainly drawn upon the case regularly and with approval, but they have also forged their own paths. In the misstatement field, they now more regÂularly refer to the judgments of their own leading judicial lights (in particular Barwick CJ and Brennan CJ), than to the individual speeches in Hedley Byrne itself. They have also developed a more generous and more flexible approach to the recovery of pure economic losses generally than exists in UK law. OccasionÂally, this development has built on the ‘Hedley-Byrne concepts' of ‘assumption of responsibility' and ‘reliance', but by no means always and the High Court has in fact tended to be sceptical of the language of voluntarism for reasons we shall touch on further below. The Court's modern approach to determining the duty question in cases of pure economic loss now bears little formal resemblance to that which is taken in the United Kingdom. New cases are determined flexibly by reference to a granular and variant set of ‘ factors' or ‘salient features' emerging from particular sets of facts, rather than through broad overarching principles, hard and fast ‘exclusionary rules,' or ‘bright lines'.2 The High Court has also been1 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL) (‘Hedley Byrne’).
2 The origins of this approach lie with Stephen J in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 (HCA) 576-77, but are often most closely associated with the judgments of McHugh J in Crimmins v Stevedore Industry Financing Committee (1999) 200 CLR1 (HCA) and Perre v Apand Pty Ltd (1999) 198 CLR 180 (HCA).
The distinction between the reasoning processes in the UK and Australia is probably less pronounced than superficially appears to be the case since English courts express many of the same factors, just within a broader conceptual superstructure. reluctant to allow pure economic loss cases to be siloed into distinct, isolated catÂegories and this has recently led judges to connect well-established principles of negligent misstatement law to other fields. This is often done, we shall see, through the increasingly pervasive concept of ‘vulnerability', which is thought to straddle the categories and introduce generality into courts' consideration of the law's more discrete developments.Most significantly of all for our understanding of the misstatement field in this jurisdiction, Australia has long had its own powerful set of statutory remedies for misleading and deceptive conduct.[1527] This has undoubtedly truncated the developÂment of negligence law. As Elise Bant and Jeannie Paterson pointed out in Chapter 7, the statutory remedies are now very much a plaintiff's first port of call. Indeed, so attractive are they to litigants that negligent misstatement litigation has become a backwater, rather than the busy mainstream it might otherwise have been. The repercussions of this are more serious than one might think and they serve to set the rather sombre tone of this chapter. The common law is currently in urgent need of clarification and rationalisation, but the prospects of its finer points being litigated to High Court level for resolution any time soon seem rather slim.
None of this is to say that the law of negligent misstatement in Australia is entirely dead in the water, or unrecognisable to foreign eyes. There are still cases in which it offers hope when statutory causes of action do not;[1528] and in cases of the most basic configuration there is much commonality between the reasoning and results in Australian courts and other jurisdictions.
However, as soon as one steps outside the relative security of the core case, one currently enters an uncerÂtain wasteland. I refer to this uncertainty, perhaps a little unfairly, as the ‘legacy of Esanda’[1529] since at least one Federal Court judge has accused the High Court of havÂing failed to evince ‘any principle' in that case and of having missed an important opportunity to clarify the law.[1530] The law as it exists today has some core certainties, but its edges are fissiparous and unsettled. It is also unclear, as we shall see, how the traditional ‘tests' for the existence of a duty of care in misstatement cases now interact with the more broad-ranging ‘multifactoral' approach mandated by the High Court for use in determining the duty of care issue in new cases.This chapter reviews the approach that Australian courts have taken to the duty of care question in negligent misstatement cases involving pure economic loss, focusing on two types of case, one of which is more difficult than the other. In simpler cases of the ‘two-party' typology considered in Section III, an advisor carelessly supplies information or opinion directly to the plaintiff (or his agent), usually (but not always) at the latter's request. The principles here are reasonÂably well settled and only marginal adjustment is needed to bring the picture into rational focus. In the second type of case, relations between plaintiff and defendÂant are indirect. The defendant supplies information or advice to a third party (often under a contract), but the statement causes economic loss to the plaintiff either because it is passed on to the plaintiff and relied upon by him for his own financial purposes; or because it impacts indirectly on the plaintiff by affecting the profitability of transactions to which he is an actual or prospective party. These more problematic cases are considered in Section IV.
Although it is reflected in the law of many jurisdictions, the distinction between ‘two-' and ‘three-party' cases is not watertight and is contestable in terms of principle.
I adopt it here simply to make exposition a little easier. Indeed, I argue below that a single, common set of rules ought to be deployed in all cases of ecoÂnomic loss caused by a plaintiff's reliance on a negligent misstatement, whether they are of the two- or three-party type, even though the latter raise some compliÂcations (such as ‘indeterminacy' and ‘remoteness') that the former often do not. If there are additional problems in cases of the latter configuration stemming from residual concerns such as these, I will suggest that they are best met in other ways, not through the adoption of an artificially limited approach to the duty of care. I adumbrated the reason for this towards the end of Chapter 1—if it is the addiÂtional social effects of misstatement liabilities that are a concern in such instances, in particular, concerns regarding the undermining of information or insurance markets by ‘ indeterminate' liabilities—then it may be better for governments to step in to protect those markets legislatively, rather than to leave it to courts to try to deal with the problem.II.