Glasgow City Council previously agreed to pay compensation for a number of damages claims made by the families of the six people killed and 15 injured when the bin lorry hit shoppers in the city centre.
A fatal accident inquiry found lorry driver Harry Clarke lost consciousness at the wheel before the crash on December 22, 2014.
The local authority launched the court action against driver Mr Clarke's former employers First Glasgow, claiming that as the bus company had offered a reference when he moved to the council it had a duty of care to the casualties, which the bus firm disputed.
Now, in a written judgment, Judge Lord Ericht said the court action on these grounds has failed.
The case centres on a settlement the family of victim Stephenie Tait reached with the council for £903,714.44 following the death of the 29-year-old from Glasgow.
The council launched action at the Court of Session in Edinburgh for First Glasgow to reimburse it for the full amount, claiming if the family had sued the bus company it would have been liable.
The council argued the bus firm had a duty of care for Ms Tait, as an employment reference - now lost - failed to disclose Mr Clarke had previously lost consciousness behind the wheel when working for First Glasgow.
If this information had been disclosed, the council said it would not have employed him as a driver due to the "danger" posed.
The bus company said the claim was irrelevant, arguing when an employer gave a reference it did not mean the company had a duty of care to anyone with whom the employee might interact with while working for the new employer.in the judgment, Lord Ericht wrote: "It is reasonably foreseeable that if a reference omits reference to a risk of the employee causing harm in the course of employment, then that harm may occur in the course of his work with the new employer.
"However ... foreseeability is not enough for the imposition of a duty of care.
"There requires to be a relationship of proximity. In my opinion in the current case there is no such proximity as would give rise to a duty of care."
He added: "The injured person has not relied on the reference in any way. The injured person has not taken the reference into account in deciding to be in central Glasgow that day."
Lord Ericht found it would not be "just, fair and reasonable" to impose this duty of care, as it could have led to employers being no longer prepared to give references, as they could be put at risk of being liable to "a great number of unknown persons".
The judgment adds the council is now pursuing a claim for negligence against First Glasgow.
Gillian Ewing, 52, from Edinburgh; Jacqueline Morton, 51, from Glasgow; Erin McQuade, 18, her grandparents Jack Sweeney, 68, and his 69-year-old wife Lorraine, all from Dumbarton, also died in the crash