Analysis of Hedley Byrne & Co Ltd v Heller & Partners Ltd Case Study

This case study provides an in-depth analysis of Hedley Byrne & Co Ltd v Heller & Partners Ltd, a landmark case in business law concerning the tort of negligence. The case revolves around a negligent statement made by Heller & Partners regarding the financial stability of Easipower Ltd, which resulted in financial losses for Hedley Byrne & Co. The plaintiff, Hedley Byrne, argued that Heller & Partners had a duty of care and their negligent misrepresentation led to their losses. The defendant, Heller & Partners, contended that there was no direct contractual relationship and they had issued a disclaimer absolving them of responsibility. The House of Lords ultimately ruled in favor of Heller & Partners due to the disclaimer, highlighting the importance of disclaimers in protecting against liability for negligent statements. The study critically analyzes the arguments presented by both parties and the court's reasoning, emphasizing the significance of 'special relationships' and the duty of care in professional advice.

Business Law
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Table of Contents
Introduction......................................................................................................................................3
Case Introduction.........................................................................................................................4
Facts of the case...........................................................................................................................5
Issues raised by the Plaintiff........................................................................................................6
Issues Raised by the Defendant...................................................................................................6
Arguments presented by both the parties.....................................................................................7
The judgment of the court............................................................................................................7
Critical analysis of why the court decided in favor of or against the party you chose (i.e.
plaintiff or defendant)..................................................................................................................8
Conclusion.....................................................................................................................................10
Reference:......................................................................................................................................11
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Introduction
Law holds an integral part in the legal system of Australia as these are the set of rules and norms
which are essential for managing and controlling the activities of the economy. These activities
may have a detrimental impact on the national economy, therefore, law regulates the illicit or
unlawful activities of the economy. Common law and statutory law are the main sources of the
legal system of Australia and all the proceedings and decisions are made considering the
provisions or the guidelines provided under above-mentioned laws. Under this assignment, the
significance of tort law and negligence is discussed based on the case of Hedley Byrne & Co Ltd
v Heller & Partners Ltd [1964]. This discussion will provide an overview of the applicable laws
and its impact on the parties involved in the case. This assignment includes all the facts of the
case, claim made by both the parties, arguments, and decision made by the legislative authority.
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Case Introduction
There are various cases which fall under the Tort Laws of Australia, however, the case of Hedley
Byrne & Co Ltd v Heller & Partners Ltd [1964] is a case in which the statement made by one
party resulted in a pecuniary loss to another party. This gave rise to the law of negligence and the
obligation of the one party towards another party. As per interpretation of the laws of tort and
negligence, it is analysed that party is under an obligation towards another party as it is the duty
of the party to take care of another party in relation to the statement made as a professional
advice. It must also be noted under such circumstances, the remedies are available as per the
provisions of contract law (Webstroke, 2018). Under this case, it is overruled by the House of
Lords in relation with the previous position of the law in recognizing the liability of the party
under pecuniary losses which is not even related with the contractual relationships of the parties.
This case helps in assuming the situation which involves the obligation of parties towards each
other. As per the provided scenario, one party has sustained monetary loss due to the negligent
statement made by another party. As per this case, it is analysed that when one party seeks
professional advice or opinion from the person having specified or required skills, then such
specialised person have an obligation of taking care and responding to the query of the party in
adequate manners.
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Facts of the case
Under this case, this involves the query raised by Hedley Bryne & Co which is an advertising
agency. The query was related to the financial position and credit terms of a company named,
Easipower Ltd so that it can get into the contract with it. The query was raised with the Bank of
Easipower Ltd. On behalf of bank statement regarding the query of the Hedley Bryne & Co was
answered by Heller & Partners Ltd considering the company to be fitted to enter into a contract
of general nature (Wiley Higher Education, 2018). However, it was also stated by the advisory
firm that such advice is made without taking the responsibility on the part of the bank. After the
contract with Easipower Ltd, the company got into liquidation due to which another party to
contract sustained monetary loss. A suit was filed by Hedley Bryne & Co. against Heller &
Partners Ltd for negligence.
This brings into the light that:
 Whether “negligent misrepresentation” is similar to the duty or the obligation of one
party to take care of another party.
 Whether the claim, for getting compensation for the losses or the damages sustained,
made by Plaintiff i.e. Hedley Bryne & Co. in relation to the enforcement of the contract
with Easipower Ltd.
 Whether Heller & Partners will be held responsible for the statement made by them on
the financial position and the credit term of the company. i.e. negligent statement.
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Issues raised by the Plaintiff
A contract was enforced between two companies i.e. Easipower Ltd and Hedley Bryne & Co.
based on the statement made by a advisory firm i.e. Heller & Partners Ltd. Before getting
contract with the Easipower Ltd, Hedley Byrne & Co asked the National Provincial Bank i.e. the
Bank of Easipower Ltd, about the credit position of the company and the statement, was made by
the Heller & Partners on behalf of above-mentioned Bank. However, the also made a disclaimer
i.e. it doesn’t take any responsibility for the statement made by it on Bank’s behalf. As a result,
Hedley Bryne & Co sustained the loss of $17,000 (Law Teacher, 2018). It was claimed by the
plaintiff that the loss was the result of the negligent statement made by the firm. It was also
stated by the Plaintiff that such firm must have made the statement regarding the information
inquired by the Plaintiff with proper care.
The Plaintiff also claimed, before the authorities, that act of Heller & Partners Ltd is equal to the
negligent misrepresentation. In accordance with the Australian Tort Law, Negligence
misrepresentation can be defined as falsification which is the result of the carelessness of one
party and the impact of which can be seen on the other party who sustain pecuniary or monetary
damages. This is considered as an unlawful act as per the provisions of Tort Law. As per the law
mentioned above, it is the obligation of the party towards another party to take care of another
party relies on the advice or opinion for the person having required skills. Non-compliance with
the provisions of the tort law and not fulfilling the duties towards another party, it will be
considered as a violation of the duty to take care and attracts legal consequences on the party by
default.
Issues Raised by the Defendant
The company Easipower Ltd. Went into liquidation after the statement was made by Heller &
Partners Ltd due to which plaintiff incurred loss. However, the defendant claimed that there was
no direct contact between the Plaintiff and the Defendant which makes it clear that the defendant
is not under liable to the damages of the Plaintiff (Barker, 2015). It was claimed by the defendant
that it was not under an obligation towards Hedley Bryne & Co.
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Arguments presented by both the parties
As per this case, the argument was made between the plaintiff i.e. Hedley Bryne & Co and the
defendant i.e. Heller & Partners Ltd. The plaintiff made an argument that the loss sustained
amounting $17,000 is due to the statement made by the defendant. As the query was related to
the credit position of the company, Easipower Ltd which got into liquidation after the contract
was entered based on the careless statement made by the firm (Campbell, 2016). It was also
mentioned by the plaintiff that the firm must have made the statement carefully as it is the duty
of the professionals to take care of the parties seeking its advice or help and such duty is
breached by the defendant to the case. In accordance with the provisions of the law of tort and its
interpretation that statement of Heller & Partners will be treated as the negligent act as Hedley
Bryne & Co have incurred damages as it got into a contract with Easipower Ltd on the opinion of
the defendant.
Whereas it was argued by the defendant, Heller & Partners Ltd, that there was no liability of the
firm towards the company. Moreover, it was stated by the defendant that disclaimer was made by
it that the firm will not be responsible for providing a statement on behalf of the bank. It was the
decision of the plaintiff itself whether to rely on the statement and act upon it or not. Therefore,
the claims made by the plaintiff are not consistent with the facts of the scenario and there is no
liability of the firm towards the damages sustained by the plaintiff.
The judgment of the court
The House of Lords stated that the legal relationship between the parties is enough for
developing or creating liability of the parties to the contractual relationship to take care of each
other. It is required that for obtaining information regarding the credit position of the one party,
the party seeking such information must enter into a contract with the party from whom
professional advice is demanded (Stickley, 2016). Once the contract is made between the parties,
this gives rise to the obligation of the parties to take care. This relationship is considered as
“Special Relationship” of the parties and it is stated that the defendant is liable for the statement
or the advice made by it to the plaintiff and such statement was made by the defendant by
ignoring the law of negligence and liabilities related it. In accordance with the facts of the case
between the company, Hedley Bryne & Co. and the firm Heller & Partners Ltd, an disclaimer
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was issued by the firm stating the it will not be a responsibility of the firm in regards to the
statement made on behalf of National Provincial Bank, which is the Bank of Easipower Ltd. It
was stated by the House that such disclaimer stated by the firm is enough for getting the
defendant free from any liability towards the other party. After the disclaimer is issued by the
defendant, it is the obligation of the plaintiff whether to rely on the statement of the firm as it
was clearly mentioned that firm will not be responsible for the statement (Swarb.co.uk, 2018).
Based on the facts of the case, no order was passed against the defendant for the losses sustained
by Hedley Bryne & Co. due to the disclosure made in the disclaimer. It can be said that there
could have been the mistake on the part of the firm which gives rise to the liability of negligence
in relation with the credit position of the company with which the defendant was getting into
contract with. But such mistake of carelessness will be considered as the case of an honest
mistake.
As per the statement of Lord Morris, it is the obligation of the professional person having skills,
or specified set of knowledge, irrespective of any arrangement between the parties, who make
the use of such knowledge and skills for providing opinion to another party to contract who will
rely on the advice of such professional person. This brings into focus on the obligation of the
professional person (Thomson Reuters, 2018). If it is clear that the person seeking advice will
rely on the report of the professional, then the obligation of taking care lies on the professional
itself. However, in this case, Heller & Partners Ltd will not be the party at default as it has
already issued in the disclaimer that it will not be held responsible on behalf of the bank about
the statement made and the disclaimer is enough for excluding the defendant from responsible
for the damages of Hedley Bryne & Co.
Critical analysis of why the court decided in favor of or against the party you chose (i.e.
plaintiff or defendant).
Some points to consider for your analysis:
i. If your chosen party won the case, why was its case stronger or more compelling than
the other party’s case? Why did the court agree with its arguments?
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As per the facts of the case, it is noted that the decision passed by the House of Lords is adequate
and appropriate. It was clearly stated by the defendant that the firm will not be held liable for the
statement made by it on Bank’s behalf in regards with the question of the Hedley Bryne & Co.
asking about the financial position of the company Easipower Ltd. As per the facts, it is on the
plaintiff that whether to rely on the statement made by the firm, after the disclaimer clearly stated
that it is not liable (Steele, 2010). The arrangement entered into by the plaintiff Hedley Bryne &
Co. and the Easipower Ltd which went into the process of liquidation and due to which plaintiff
incurred loss of $17,000. It was on the plaintiff that whether such contract must be enforced or
not.
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Conclusion
It is concluded from the analysis made above that law is a significant factor which controls and
regulate the illicit activities which impact the nation’s economy. The case discussed above is
solved through the provision of common law. From considering the applicable laws and the facts
of the case i.e., the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, it is
stated by the House of Lords that in general sense, the action of Heller & Partners Ltd would
have been considered as a breach of duty of taking care but in this case, the disclaimer made by
the defendant prevented the firm from the breach of duty.
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Reference:
1. Barker, K. (2015). Hedley Byrne v Heller: Issues at the Beginning of the Twenty-First
Century. Law of Misstatements: 50 Years On From Hedley Byrne V Heller, 3-26.
2. Campbell, D. (2016). The Absence of Negligence in Hedley Byrne V Heller. Pp. 1 -18.
3. Law Teacher. (2018). Hedley Byrne v Heller. Available at:
https://www.lawteacher.net/cases/hedley-byrne-v-heller.php. [Accessed: 20.05.2018]
4. Steele, J. (2010). Tort Law: Text, cases, and materials. Oxford University Press.
5. Stickley, A. P. (2016). Australian torts law. LexisNexis Butterworths.
6. Swarb.co.uk. (2018). Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4.
Available at: http://swarb.co.uk/hedley-byrne-and-co-ltd-v-heller-and-partners-ltd-hl-28-
may-1963/. [Accessed: 20.05.2018]
7. Thomson reuters. (2018). Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL
4. Available at: https://uk.practicallaw.thomsonreuters.com/D-000-4022?
transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1. [Accessed:
20.05.2018]
8. Webstroke. (2018). Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]. Available at:
https://webstroke.co.uk/law/cases/hedley-byrne-v-heller-partners-ltd-1964. [Accessed:
20.05.2018]
9. Wiley Higher Education. (2018). Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]
AC 465. Available at:
http://www.johnwiley.com.au/highered/blaw/content110/case_summaries/
hedley_vs_heller.pdf. [Accessed: 20.05.2018]
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