Anonymous Case Summary

Factual and Procedural Background

In 1958 the Appellant (an advertising agency) wished to extend credit facilities to “Company D,” a potential client. Before doing so the Appellant asked its own bankers (“Company C”) to obtain a reference from the Respondent, “Company B,” which was Company D’s bank. Two references were supplied:

• 18 August 1958 – an oral reply noted by Company B as “confidential and without responsibility.”
• 11 November 1958 – a written reply, again headed “Confidential … without responsibility on the part of this Bank or its officials.”

Relying on those references, the Appellant continued to place advertising orders for Company D and later suffered losses exceeding £17,000 when Company D went into liquidation. The Appellant sued the Respondent in negligence, alleging that the references were carelessly composed and gave a misleading impression of Company D’s credit-worthiness.

The trial judge held that, even if the references were negligent, the Respondent owed no duty of care to the Appellant and entered judgment for the Respondent. The Court of Appeal affirmed. The Appellant appealed to the House of Lords (“the Court”).

Legal Issues Presented

1. Whether, and in what circumstances, a person who supplies information or advice can owe a duty of care in tort for an innocent but negligent misrepresentation causing purely economic loss.
2. Whether a banker giving a reference to another bank on behalf of an undisclosed customer stands in a “special relationship” that gives rise to such a duty.
3. Whether the express disclaimer “for your private use and without responsibility” negated any duty that might otherwise have arisen.

Arguments of the Parties

Appellant's Arguments

• The references were supplied in circumstances creating a “special relationship” analogous to contract; the Respondent knew the information would be passed to, and relied on by, the Appellant.
• Authorities such as Donoghue v Stevenson and Nocton v Ashburton show that a duty of care may arise from reliance even without contract or fiduciary status.
• The wording “without responsibility” was insufficient to exclude liability for negligence.

Respondent's Arguments

• English law recognises no duty of care for negligent words in the absence of contract, fiduciary duty, or physical damage; Le Lievre v Gould and other cases were said to be decisive.
• The Respondent neither knew the Appellant’s identity nor intended the reference to be communicated to it; hence no “proximity” existed.
• Even if a duty might otherwise arise, the express disclaimer extinguished any responsibility.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court unanimously accepted that modern law can impose liability for negligent misstatements where a “special relationship” equivalent to contract exists. However, it held that:

• A voluntary assumption of responsibility is essential. The Respondent’s replies were expressly qualified as “without responsibility,” indicating no undertaking of care.
• The disclaimer formed part of the very act alleged to create the duty; accordingly no duty arose at all (distinguishing situations where a duty exists and is then excluded).
• Even if negligence were proved (the Court assumed, without deciding, that it was), liability cannot attach absent a duty; therefore detailed arguments on the factual merits of negligence were unnecessary.
• Precedents that had denied any tortious liability for negligent words (e.g., Le Lievre v Gould) were criticised; the Court affirmed that such liability can exist, but only where responsibility is undertaken or is to be inferred from the relationship.

Holding and Implications

APPEAL DISMISSED.

Direct Effect: The Appellant cannot recover its loss; judgment for the Respondent stands.

Broader Implications: The decision recognises that negligent misstatements may be actionable where a special relationship and an assumption of responsibility exist, thereby laying the foundation for liability in tort for economic loss caused by careless words. It also confirms that clear disclaimers are effective to negate such duties. No new binding precedent was created on the facts, but the Court’s analysis reshaped the common law framework for negligent misstatement.