Candler v Crane Christmas and Co: CA 15 Dec 1950

Though the accounts of the company in which the plaintiff had invested had been carelessly prepared and gave a wholly misleading picture of the state of the company, the plaintiff could not recover damages. A false statement, carelessly, as contrasted with fraudulently, made by one person to another though acted on by that other to his detriment, was not actionable in the absence of any contractual or fiduciary relationship between the parties. This principle had not been qualified Donoghue v. Stevenson.
Denning LJ (dissenting) said:’Accountants, in preparing and rendering accounts and reports, owed a duty of care not only to their clients but to any third person to whom they knew that their clients were going to show the accounts and reports when, to the knowledge of the accountants, that person would consider the reports and accounts with a view to the investment of money or taking some other action to his gain or detriment. ‘Let me now be constructive and suggest the circumstance in which I say that a duty to use care in statement does exist apart from a contract in that behalf. First, what person’s are under such duty? My answer is those persons such as accountants, surveyors, valuers and analysts, whose profession and occupation it is to examine books, accounts, and other things, and to make reports on which other people – other than their clients – rely in the ordinary course of business.
Secondly to whom do these professional people owe this duty? I will take accountants but the same reasoning applies to the others. They owe the duty, of course to their employer or clients; and also I think to any third person to whom they themselves show the accounts, or to whom they know their employer is going to show the accounts, so as to induce him to invest money or take some other action on them. But I do not think the duty can be extended still further so to include strangers of whom they have heard nothing and to whom their employer without their knowledge may choose to show their accounts. Once the accountants have handed their accounts to their employer they not, as a rule, responsible for what he does with them without their knowledge or consent. The test of proximity in these cases is, did the accountants know that the accounts were required for submission to the plaintiff and use by him?
Thirdly, to what transactions does the duty of care extend? It extends, I think, only to those transactions for which the accountants knew their accounts were required.’
Asquith LJ illustrated the law excusing liability for negligent miststatement: ‘Singular consequences would follow if the principle laid down in [Donoghue v Stevenson [1932] AC 562] were applied to negligent misrepresentation in every case in which the representee were proximate to the representor. The case has been instanced by Professor Winfield and referred to by my brother Denning of a marine hydrographer who carelessly omits to indicate on his map the existence of a reef. The captain of the Queen Mary, in reliance on the map and having no opportunity to check it by reference to any other map, steers her on the unsuspected rocks, and she becomes a total loss. Is the unfortunate cartographer to be liable to her owners in negligence for some millions of pounds damages? If so, people will, in future, think twice before making maps. Cartography would become an ultra-hazardous occupation.’
Cohen, Asquith, Denning LJJ (Dissenting)
[1951] 2 KB 164, [1951] 1 All ER 426, 36 Digest (Rep 1) 17, [1951] 1 TLR 371
England and Wales
DistinguishedDonoghue (or M’Alister) v Stevenson HL 26-May-1932
Decomposed Snail in Ginger Beer Bottle – Liability
The appellant drank from a bottle of ginger beer manufactured by the defendant. She suffered injury when she found a half decomposed snail in the liquid. The glass was opaque and the snail could not be seen. The drink had been bought for her by a . .
CitedLe Lievre v Gould CA 6-Feb-1893
Mortgagees of the interest of a builder under a building agreement, advanced money to him from time to time, relying upon certificates given by a surveyor as to stages reached. The surveyor was not appointed by the mortgagees, and there was no . .
CitedDerry v Peek HL 1-Jul-1889
The House heard an action for damages for deceit or fraudulent misrepresentation.
Held: The court set out the requirements for fraud, saying that fraud is proved when it is shown that a false representation has been made knowingly or without . .

Cited by:
CitedCaparo Industries Plc v Dickman and others HL 8-Feb-1990
Limitation of Loss from Negligent Mis-statement
The plaintiffs sought damages from accountants for negligence. They had acquired shares in a target company and, relying upon the published and audited accounts which overstated the company’s earnings, they purchased further shares.
Held: The . .
CitedMutual Life And Citizens’ Assurance Co Ltd And Another v Evatt PC 16-Nov-1971
The plaintiff had been an investor with the defendant. He asked them about an associated company. He was given advice which was incorrect. He claimed damages for negligence.
Held: The company was not itself in the business of giving such . .
CitedBank of Credit and Commerce International (Overseas) Limited (In Liquidation); BCCI Holdings (Luxembourg) SA (In Liquidation); Bank of Credit and Commerce International SA (In Liquidation) v Price Waterhouse CA 13-Feb-1998
The special relationship between an auditor and a bank, meant that a duty of care could extend even to a second bank with its own auditors. In determining whether there had been an assumption of responsibility, the the relevant factors would include . .
ApprovedHedley Byrne and Co Ltd v Heller and Partners Ltd HL 28-May-1963
Banker’s Liability for Negligent Reference
The appellants were advertising agents. They were liable themselves for advertising space taken for a client, and had sought a financial reference from the defendant bankers to the client. The reference was negligent, but the bankers denied any . .
AppliedYianni v Edwin Evans and Sons ChD 1981
The respondent valuers reported to a building society that a property would be a sufficient security. The purchaser relied on that report to purchase the property, ignoring the advice in the lender’s form to obtain a full survey. The property was . .
CitedCustoms and Excise v Barclays Bank Plc CA 22-Nov-2004
The claimant had obtained judgment against customers of the defendant, and then freezing orders for the accounts. The defendants inadvertently or negligently allowed sums to be transferred from the accounts. The claimants sought repayment by the . .
CitedMidland Bank Trust Co Ltd v Hett Stubbs and Kemp (a firm) ChD 1978
A solicitor had failed to register an option as a land charge over property. The court was asked what steps should have been taken by a solicitor in the conduct of a claim: ‘Mr Harman [leading counsel for the plaintiff] sought to rely upon the fact . .
CitedPrecis (521) Plc v William M Mercer Ltd CA 15-Feb-2005
Purchasers of a company sought to claim in negligence against the respondent actuaries in respect of a valuation of the company’s pension funds.
Held: There was a paucity of authority as to when a duty of care was assumed. The words used and . .
CitedSutradhar v Natural Environment Research Council HL 5-Jul-2006
Preliminary Report of Risk – No Duty of Care
The claimant sought damages after suffering injury after the creation of water supplies which were polluted with arsenic. He said that a report had identified the risks. The defendant said that the report was preliminary only and could not found a . .
CitedMcKie v Swindon College QBD 11-Feb-2011
The claimant sought damages after having moved jobs, his former employer wrote to his new one saying that he would not be welcome back on the campus, which would be a substantial part, giving reasons.
Held: The claimant succeeded on liability. . .
CitedBanca Nazionale Del Lavoro Spa v Playboy Club London Ltd and Others SC 26-Jul-2018
The Playboy casino required a reference for a customer, but asked for this through a third party. The bank was not aware of the agency but gave a good reference for a customer who had never deposited any money with them and nor to whom it had issued . .

Lists of cited by and citing cases may be incomplete.
Updated: 11 August 2021; Ref: scu.179811