Your Study Method

Tort

England & Wales

Negligent misstatement (pure economic loss)

The rule

A defendant who makes a statement may owe a duty of care in respect of pure economic loss caused by reliance on it where there is an assumption of responsibility, foreseeable reliance, and reliance was reasonable in the circumstances.

Mandatory cases

Curated chronological

1. 01

   Hedley Byrne & Co Ltd v Heller & Partners Ltd · 1964

   [1964] AC 465 · House of Lords Procedural posture

   Appeal from the Court of Appeal dismissed; the duty was recognised in principle but the disclaimer defeated the claim on the facts.

   Created the special-relationship category that allows recovery for pure economic loss caused by negligent words.

   What cuts the other way

   Hedley Byrne itself was decided for the defendant on the disclaimer; well-drafted disclaimers continue to negate the assumption of responsibility.

2. 02

   Smith v Eric S Bush · 1990

   [1990] 1 AC 831 · House of Lords Procedural posture

   Joined appeals from the Court of Appeal; both surveyors' appeals were dismissed and liability to the purchaser was upheld.

   Extended Hedley Byrne to surveyors instructed by a lender but relied on by a purchaser, required reading on third-party reliance.

   What cuts the other way

   Smith depended on a modest residential purchase; defendants argue commercial purchasers of more valuable property cannot reasonably rely on a lender's valuation.

3. 03

   Caparo Industries plc v Dickman · 1990

   [1990] 2 AC 605 · House of Lords Procedural posture

   Appeal from the Court of Appeal allowed; the auditor's appeal succeeded and no duty was owed to bidders or shareholders making investment decisions.

   Refined the assumption-of-responsibility test in the auditor context and tied negligent-misstatement liability back to the three-stage duty test.

   What cuts the other way

   Caparo denies a duty to the public at large reading audited accounts; claimants must show the statement was directed at them for a known purpose on which they actually relied.

4. 04

   Spring v Guardian Assurance plc · 1995

   [1995] 2 AC 296 · House of Lords Procedural posture

   Appeal from the Court of Appeal allowed by a 4 to 1 majority (Lord Keith dissenting).

   Applied the assumption of responsibility to negligent references, establishes that the doctrine reaches beyond commercial advice.

   What cuts the other way

   Spring is a contested extension; commentators read it narrowly as confined to the employment-reference context and resist its application to gratuitous social references.

Run a real argument through LexCases

An investment bank gave an over-optimistic valuation in a transaction memo seen by the buyer. Build the case that a duty of care was owed in respect of the buyer's resulting loss.

LexCases will run the argument against current case law and rank the cases, including these foundations and any later cases that have built on or pulled away from them.

Curated for England & Wales. Always verify each case before relying on it in formal work. Citations are accurate at the time of publication, but the law moves.