The Place of Hedley Byrne within Negligence

The foregoing explanation of misstatements causative of financial loss is consistent with the view that the law of negligence, since the time of Donoghue v Stevenson,^[1226] has been a unified whole.

The test for reasonable foreseeability is objective in nature; it is concerned with what the reasonable person in the position of the defendant reasonably could have foreseen prior to the injurious interaction between the parties. The threshold of foreseeability is not particularly high, envisaging real possibilities rather than probabilities. In Grieves v FT Everard & Sons, Lord Hoffmann stated that the ‘answers to a test of foreseeability will vary according to, first, the precise descrip­tion of what should have been foreseen and, secondly, the degree of probabil­ity which makes it foreseeable’. ^[1228] Being about future possible consequences of failures in care, foreseeability is dependent upon the ‘closeness’ of the parties to each other.^[1229] Thus, while foreseeability of directly caused injury is often quite straightforward to establish, foreseeability of indirectly caused injury might be more difficult to establish.

Proximity is a concept that is concerned with the factual relationship between the parties. Logically, it is concerned with the existence of factual links between the parties prior to the failure in care.^[1230] These factual links signify the potential for the defendant to cause harm to the claimant (and to persons similarly placed). These factual links operate, then, as pathways to harm. It is these pathways that ground the obligation to take care.^[1231] In cases of proximity based on physical propinquity, duties of care materialise and dissolve as persons ‘pass each other by’. In misstate­ment cases, financial loss typically arises by way of the receipt of statements and actions taken pursuant to them (that is, by way of ‘reactions’ to the generation of advice or information) rather than through more direct causal mechanisms.^[1232] Proximity between advisors and recipients exists at least as long as the underlying professional relationships do.

The policy limb of the duty of care inquiry is a necessary part of the inquiry, but (applied correctly) it does not give rise to especial theoretical concerns. The judicial function has a normative aspect to it; it is concerned with the imposi­tion of norms of conduct for the solution, inter alia, of coordination problems.^[1233] The court, being more than a mere fact-finding tribunal, must apply itself to the question whether to impose a duty of care. This is not to say that the discretion inherent within it should overwhelm the process of determining the duty of care. The fair, just and reasonable inquiry should have its main impact upon the develop­ment of the duty concept—taking it into new areas or withdrawing it from its current area of operation. Policy should not be used to re-make the law on duty in every single case.

The present writer’s general conception of the duty of care having been explained, the question arises as to what might be considered genuine proximity factors in cases of negligent misstatements causative of financial loss.

A very strong factor is the presence of a ‘special relationship’ between the parties, especially that arising between advisor and client. Such a relationship creates judicially recognised expectations that minimum standards of conduct will be observed. A related factor is some special skill or competence in the state­ment maker, greater than any possessed by the claimant, which again creates an expectation in the recipient of the statement (not necessarily a client) that minimum standards will apply in the creation and dissemination of advice or information.^[1235] In the absence of such special skill or competence, a holding-out of skill or competence^[1236] would have the same effect of creating an expectation in the recipient that minimum standards will be adhered to—even though the defendant might not be capable of reaching those standards.^[1237] However, the holding-out of skill or competence might be sufficient to create a duty of care between the parties on the basis that it would be unfair for the defendant now to deny the ability to reach minimum standards of conduct.

In the absence of defendant skill or competence, or a holding-out of such, proximity might arise in a number of ways. The first would be where the defend­ant induces the claimant to act in reliance upon a statement. An inducement is designed strongly to influence the choice of the statement recipient, usually to enter into a transaction with the statement maker or with some specified third party.^[1238] The second way in which proximity might arise is through a request by the claimant for advice or information.^[1239] The request joins the parties together in a purposive way, alerting the statement maker to the requirements of the recipient.

In three-party cases, requests for advice or information are less prominent. Instead, the courts have insisted that a statement be supplied for specified purposes and that the recipient rely upon the statement for those specified purposes.^[1244] Especially where advice or information is available to a wide range of third parties, the purposes for which it is drawn up and supplied assume crucial importance.^[1245] The purposes for which a recipient uses advice or information need not be exactly the same as those intended by the statement maker, but must be sufficiently congruent.^[1246] The reasons for concluding that supply for known purposes is a proximity factor were well stated in Caparo Industries plc v Dickman by Lord Bridge. His Lordship noted that where there is a clear purpose known to the parties:

[T]he defendant could clearly be expected... specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So the plaintiff. would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it.^[1247]

Other factors sometimes described as proximity factors would not qualify under the conception of proximity adopted here.

Finally, vulnerability taken in isolation is not a proximity factor.^[1250] Thus, the mere fact that the claimant is exceptionally gullible, for example, cannot ground a duty of care. The claimant's vulnerability is relevant to the recognition of a duty of care o nly in so far as it results from recognised pathways to harm between the parties. As is implicit in the foregoing, the relevant kind of vulnerability arises from an interaction with the statement maker or others who have adopted and used the misstatement. On a related matter, the mere fact of reliance cannot be considered to create the necessary proximity. In accordance with this view, Lord Steyn in Williams v Natural Life Health Foods Ltd treated reliance as going not to the establishment of a duty but to causation of loss: ‘ If reliance is not proved, it is not established that the assumption of responsibility had causative effect'. ^[1251] Reliance is relevant only once pathways to harm have arisen between the parties— and when the law recognises (by their presence) a duty of care. Logically, duty precedes reliance.

VI.