BL-2022-002117 - [2025] EWHC 2794 (Ch)

One of the established principles of the law of negligence is that there is in general no duty of care to prevent pure economic loss (i.e. financial loss which is not consequent upon physical damage to property or person). Equally established is that the Hedley Byrne principle provides an exception to this general rule. The Hedley Byrne principle, derived from the decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, and developed incrementally subsequently, is that a defendant will owe a claimant a duty of care where there has been an assumption of responsibility by the defendant toward the claimant in relation to the performance of a task, and the claimant has reasonably relied on the defendant’s proper performance of that task. There are many decisions at the highest level discussing the Hedley Byrne principle: e.g. Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830, NRAM Ltd (formerly NRAM plc) v Steel [2018] 1 WLR 1190, Playboy Club London Ltd v Banca Nazionale del Lavaoro SpA [2018] 1 WLR 4041, N v Poole BC [2019] UKSC 25, [2020] AC 780 and RBS International Ltd v JP SPC4 [2023] AC 461.

If the principle applies to a case, it is dispositive of the question of whether a duty of care is to be recognised. In Henderson at 181C, Lord Goff said that:

“the concept [of assumption of responsibility] provides its own explanation why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services. It follows that, once the case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is "fair, just and reasonable" to impose liability for economic loss…”

The principle is capable of incremental development in the manner suggested by Lord Reed in Robinson, while recognising the importance to the principle of the “legally significant feature” of an assumption of responsibility. In NRAM Lord Wilson, giving the only judgment observed of the Hedley Byrne principle and the concept of an assumption of responsibility:

“It has therefore become clear that, although it may require cautious incremental development in order to fit cases to which it does not readily apply, this concept remains the foundation of the liability.”

The same point was made in Playboy Club by Lord Sumption who started his analysis with the Hedley Byrne principle and observed:

“The principle thus established is capable of development. Indeed it has undergone considerable development since 1964, for example to cover omissions and the negligent performance of services. But these have been incremental changes within a consistent framework of principle. One area in which the courts have resisted expanding the scope of liability concerns the person or category of persons to whom the duty is owed. The defendant's voluntary assumption of responsibility remains the foundation of this area of law, as this court recently confirmed after a full review of the later authorities in NRAM Ltd (formerly NRAM plc) v Steel [2018] 1 WLR 1190 , paras 18–24 (Lord Wilson JSC).”

The approach I must take, therefore, is to apply the Hedley Byrne principle to this case and determine whether under this established principle there is a duty of care owed by the SFA to the Claimants in the circumstances of this case bearing in mind that the principle may require cautious incremental development to fit a case to which it does not readily apply. The concept of an assumption of responsibility, however, remains the foundation of any liability.