Playboy Got Played: Supreme Court Confirms The Limits Of Hedley Byrne

The Supreme Court's recent judgment in Banca Nazionale del Lavoro SPA v. Playboy Club London Limited1 revisited the landmark judgment in Hedley Byrne v. Heller2 . The Court's judgment related to a party's voluntary assumption of responsibility when making a statement or providing information that is later relied upon and ultimately results in economic loss. Hedley Byrne allows the recovery of such loss where a special relationship exists between the parties. Such a relationship arises where A makes a statement or provides information, which is reasonably relied upon by B, and A has an appreciation that the statement/information would be reasonably relied upon by B. The question before the Court was whether the person or category of persons to whom the Hedley Byrne duty is owed should be widened to include an undisclosed and unknown principal.

Lord Sumption, who gave the leading judgment, resisted the invitation to extend Hedley Byrne. His Lordship pointed out that it is fundamental to the analysis of a Hedley Byrne duty that the responsibility being assumed by a defendant is to "an identifiable (although not necessarily identified) person or group of persons, and not to the world at large or to a wholly indeterminable group".

Background

The London Playboy Club required a credit reference from a customer's bank in order for the customer to cash cheques to gamble in its casino. Given the purpose of the reference, the Club did not contact customers' banks in its own name, but did so via an associated company (Burlington).

In October 2010, a Mr Barakat gave details of Banca Nazionale del Lavoro (BNL). Burlington made a status request to BNL in relation to Mr Barakat's creditworthiness. BNL replied confirming that Mr Barakat held an account with them and that he was trustworthy up to £1.6m in any one week, adding: "This information is given in strict confidential [sic]."

Relying on the reference, the Club granted Mr Barakat a cheque-cashing facility and over four days he drew two cheques totalling £1.25m and the Club paid him net winnings of £427,400. Mr Barakat left with these, not to be seen again at the Club. Both cheques were returned unpaid, and it emerged that BNL did not hold an account for Mr Barakat when the reference was sent. When an account for Mr Barakat was opened with BNL, two days later, it had a nil balance, and did so until it was closed two months later.

It was held at first instance3 that BNL owed a duty of care to the Club...