Bank of SA v Ferguson

The High Court of Australia considered an appeal by the Bank of South Australia (the Bank) against a judgment of the Full Court of the Supreme Court of South Australia, which had upheld a finding of negligence against the Bank in favour of Mr. Ferguson. Mr. Ferguson had alleged that the Bank, through its employee, had negligently misrepresented the financial standing of a company, thereby inducing him to invest in that company. The dispute centred on whether the Bank owed a duty of care to Mr. Ferguson in providing information about the company's financial position.

The central legal issue before the High Court was whether the Bank owed a duty of care to Mr. Ferguson, a third party, in circumstances where its employee provided information about a company's financial position to Mr. Ferguson, who was contemplating investing in that company. This involved determining the scope of the duty of care owed by a bank in providing such information, particularly when the information was not sought for a specific transaction between the bank and the third party, but rather to facilitate an investment by the third party in another entity.

The High Court, by majority, held that the Bank did not owe a duty of care to Mr. Ferguson. The majority reasoned that the Bank's employee had not assumed responsibility for the accuracy of the information provided to Mr. Ferguson, nor had the Bank sought to induce Mr. Ferguson to invest. The information was provided in a casual context, and the Bank had no direct interest in Mr. Ferguson's investment decision. The principles applied emphasised that for a duty of care to arise in negligent misstatement, there must be a sufficient relationship of proximity between the representor and the representee, and the representor must have assumed responsibility for the accuracy of the statement. The Court found that these elements were not present in the relationship between the Bank and Mr. Ferguson.