Banca Nazionale del Lavoro SPA v Playboy Club London Limited and others  UKSC 43 concerns a claim for pure economic loss due to a negligent misrepresentation. It sets a precedent for cases that concern a duty of care between a statement-maker and third party undisclosed principal. At first glance, the instant case appears consistent to Hedley Byrne & Co Ltd v Heller & Partners Ltd1. Yet, on closer examination, it contains several distinctive material facts.
Hassan Barakat, a Lebanese national, wished to gamble at Playboy Club London (“the Club”). He applied for a cheque cashing facility for up to £800,000, allowing him to present a cheque and obtain chips to an equivalent value before that cheque was to be cashed. Following the Club’s protocol for welcoming new players, Bakarat was required to obtain a credit reference from his bankers for twice the amount of the cheque cashing facility (£1.6 million). To preserve customer confidentiality at the Club, the Club hired Burlington Street Services (“Burlington”), an associated company, to obtain the credit reference on their behalf. Soon after, Barakat returned to Lebanon, taking his winnings with him. Both cheques Bakarat had cashed were returned unpaid, and the Club suffered a net loss of £802,940. The Club began proceedings against the Bank for the loss they had incurred, arguing the Bank owed them a duty of care to exercise reasonable skill in preparing the credit reference. However, the Court of Appeal held that a duty of care was only owed by the Bank to Burlington as they were the addressee of the reference. The Club appealed the decision, but its appeal was unanimously dismissed by the Supreme Court. Notably, the fact the Club had remained Burlington’s undisclosed principal carried the most weight in determining why the Court reached the decision it did. This material fact established that a party cannot voluntarily assume responsibility towards someone they are not aware is privy to their agreement. Moreover, it helped inform the two main arguments the Court adopted in dismissing the appeal, one centered around the voluntary assumption of responsibility and the other concerning relationships equivalent to contract.
Voluntary Assumption of Responsibility
In dismissing the claim that the Bank had voluntarily assumed responsibility to the Club and thus owed a duty of care, the Court turned to examine the most influential precedent on pure economic loss: Hedley Byrne. The Hedley Byrne principle establishes that a duty of care arises where there is a ‘special’ relationship between A and B. This special relationship must satisfy two tests: A assumes responsibility for a negligent misrepresentation in knowing that B will rely on their statement, and B must proceed to rely on that statement. Only once B’s reasonable reliance upon A’s statement can be established does a duty of care exist. Furthermore, a party cannot assume responsibility to the world at large. In Hedley Byrne, Heller understood that their statement was to be relied upon by ‘an unidentified but readily identifiable’ client on whose behalf the National Provincial Bank was known to be making an inquiry. Yet, in Banca Nazionale, there was no evidence that the Bank knew its credit reference would be communicated to anyone other than Burlington. In Hedley Byrne, the reference in question was relied upon by the party to whom it was addressed. However, in Banca Nazionale, the reference was relied upon by Burlington’s undisclosed principal, the Club. Since the Bank had in no way assumed responsibility towards the Club, the Court dismissed the claim that the Bank owed it a duty of care. This decision is sound insofar as it prevents holding a statement-maker ‘liable in an indeterminate amount for an indeterminate time to an indeterminate class’2 for breach of an alleged duty of care regarding the accuracy of their statement. This reasoning will be favourably welcomed by banks and others frequently called upon to provide references.
On a broader scale however, it is useful to analyse where limitations of the assumption of responsibility principle lie. As Hartshorne argues, a review of contemporary judicial decisions such as HM Customs and Excise Commissioners v Barclays Bank Plc3 and Jain v Trent Strategic Health Authority4 suggests that the concept should no longer be regarded as the touchstone of liability in pure economic loss claims5. This is because there has been a movement away from applying the assumption of responsibility principle as a determinant of whether a duty of care exists. The Caparo tripartite test has been one stepping stone towards this direction, and Robinson will likely be the other (which suggests there is in fact no definitive test for identifying a duty of care). Favoured by judges, both of these developments effectively render the assumption of responsibility principle theoretically obsolete. This speaks to the status quo that the assumption of responsibility principle no longer plays the same dominant role it once did, and calls into question how the law of negligent misstatements may be shaped (if at all) by cases such as Banca Nazionale. This is particularly significant when it can be argued that the Supreme Court’s decision to dismiss the Club’s appeal works in favour of trying to maintain a limit on the class of persons to whom a duty can be owed, preserving the function of what the assumption of responsibility principle seeks to achieve.
Relationships Equivalent to Contract
The Court also dismissed the claim that the Club’s relationship with the Bank was equivalent to a contract. The Club’s counsel sought to rely on Lord Devlin’s argument in Hedley Byrne, arguing that because the relationship between the Bank and the Club was equivalent to contract, the Club was therefore entitled to declare itself and assume the benefit of the contract. This submission was rejected by the Court because it relied on the assumption that because a relationship akin to contract is generally sufficient in finding a duty of care, it follows that the legal elements of a contractual relationship are automatically imposed in the relationship. Extending privity of contract to an undisclosed principal not party to a contract between an agent and third party would open the floodgates of liability to the extent that any party issuing a statement may be at risk of having a claim brought against them for inaccuracy. Is this claim’s dismissal an indication that the law on undisclosed principals may soon be reformed? The Court’s actions certainly make reform seem plausible, with Lord Sumption asserting that the law relating to undisclosed principals is one that survives ‘on account of its antiquity rather than its coherence’. However, as Reynolds argues, ‘clear cases of the law’s application are comparatively few, and judgments that are less than 100 years old even fewer’6.
Following dismissal of both the arguments made for the voluntary assumption of responsibility principle and relationships equivalent to contract, Lord Sumption made the following clear: where A has passed a statement onto B that has been passed onto C, A owes C no duty of care unless he knew that the statement was likely to be communicated to C and it was part of the statement’s known purpose to be communicated to and relied upon by C. Evident here is the Court’s desire to limit exposure to liability. While Hedley Byrne establishes the principle that a party can be liable for a negligent misstatement to a third party to whom they had not directly provided a reference to, Banca Nazionale further clarifies that a reference is fruitless if obtained for an unidentifiable third party. This shows the Court actively distinguishing between the facts of the two cases to clarify the limits of liability, which helps to illustrate the parameters the court will stick to in allowing a claim for damages.
The arguments presented in Banca Nazionale do a good job of microcosmically illustrating the law on pure economic loss. They highlight that the boundaries of the voluntary assumption of responsibility principle remain narrow to avoid excessive liability. They also help to reiterate the Court’s opinion that the Hedley Byrne principle is the only exception to the rule that pure economic loss is not recoverable, plain from Lord Mance’s conclusion in his concurring judgment that had Burlington been the operator of the gaming club and suffered the loss, the claim would have succeeded. This bears the impression that the courts are keen on remaining with the principle established in Hedley Byrne, and that they are content with not allowing unknown third parties (or undisclosed principals)to recover for pure economic loss.
  AC 465.
 Ultramares Corporation. v Touche  174 New York Court of Appeals 441, 444.
  UKHL 28.
  UKHL 4.
 J Hartshorne, ‘Contemporary Approaches Towards Pure Economic Loss in the Law of Negligence’ (2014) Journal of Business Law 425-442.
 FMB Reynolds, ‘Practical Problems of the Undisclosed Principal Doctrine’ (1983) 36 Current Legal Problems 119–140.