Hedley Byrne: Abandoned by the Supreme Court of Canada

Abstract

This article identifies and criticizes the manner in which the famous HL decision in Hedley Byrne v Heller has been employed by the Supreme Court of Canada to influence the recovery of economic loss in negligence. Although Hedley Byrne has been cited with approval in virtually every Canadian negligent misrepresentation decision rendered in the last 50 years, the SCC has never really understood it, and it no longer actually follows Hedley Byrne. The SCC has been indifferent to the theoretical justifications for allowing recovery for negligent information or advice leading to pure economic loss. Liability for misrepresentation in Hedley Byrne was based on the defendant's intending the plaintiff to rely on its information or advice, well-described as a voluntary assumption of responsibility. In contrast, in Hercules Management v Ernst & Young the Supreme Court based liability on the defendant's foreseeable reasonable reliance. By allowing the plaintiff to unilaterally claim the right to rely on another, the Supreme Court violates the autonomy rights of the defendant. It also creates an impractically wide ambit of liability at the prima facie duty stage which in turn requires a narrowing of that ambit of liability at the policy stage. None of this would be necessary with a proper proximity analysis that takes the intentions of the defendant into account. The article concludes by examining the indirect influence of Hedley Byrne in developing the law governing recovery for other types of economic loss in Canada, notably the defective structure/product cases, and relational economic loss.