Esso Petroleum Company Ltd v Mardon
| Jurisdiction | England & Wales |
| Year | 1975 |
| Date | 1975 |
| Court | Queen's Bench Division |
Negligence - Duty of care to whom? - Careless misrepresentation - Pre-contractual situation - Negotiations f or tenancy of petrol station - Petroleum company making statement concerning potential through put of station - Company aware that prospective tenant relying on accuracy of statement in taking tenancy - Whether company owing duty of care to tenant - Whether special relationship between parties - Whether breach of duty
Contract - Condition or warranty - Statement of potential - Negotiations for tenancy of petrol station - Statement by petrol company as to potential throughput - Tenancy taken in reliance on statement - Whether statement constituting warranty
In 1963 the defendant was interested in taking a tenancy of a petrol filling station owned by the plaintiffs. An experienced representative of the plaintiffs told him that the plaintiffs estimated that the throughput of the station in its third year would be 200,000 gallons. The defendant's own
[Reported by A. G. B. HELM, ESQ., Barrister-at-Law]
estimate, which he indicated to the plaintiffs' representative, was of a potential throughput of 100,000 to 150,000 gallons a year, but, relying on the expertise of the plaintiffs' representative, he accepted their estimate of 200,000 gallons and took a tenancy of the site. The plaintiffs had failed to reappraise their original forecast in the light of the physical characteristics of the site after development was completed. Owing to those characteristics only about half the throughput estimated by the plaintiffs was ever achieved. The defendant's tenancy was unprofitable, and he was eventually unable to pay for petrol supplied. The plaintiffs issued a writ claiming possession, moneys due and mesne profits. The defendant gave up possession, and counterclaimed damages for, inter alia, breach of warranty and negligence.
On the counterclaim:-
Held, (1) that a statement could not constitute a warranty unless the maker of the statement intended it to be a promise or guarantee and it was of such a nature as to be capable of subjecting him to a clear contractual obligation; that the accuracy of the plaintiffs' statement had depended on factors outside their control and had not been intended to constitute a promise, nor was it susceptible of constituting a clear contractual obligation; and that accordingly it did not constitute a warranty (post, pp.
Heilbut, Symons & Co. v. Buckleton [1913] A.C. 30 H.L.(E.) applied.
(2) That, however, where the maker of a statement held out his skill and knowledge to reinforce the acceptability of the statement a special relationship was created from which a duty of care in making the statement arose (post, p.
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465, H.L.(E.); dicta of Lord Reid and Lord Morris of Borth-y-Gest in Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt [1971] A.C. 793, 812, P.C. and Dillingham Constructions Pty. v. Downs [1972] 2 N.S.W.L.R. 49 applied.
The following cases are referred to in the judgment:
Anderson (W. B.) & Sons Ltd. v. Rhodes (Liverpool) Ltd. [1967] 2 All E.R. 850.
Andrews v. Hopkinson [1957] 1 Q.B. 229; [1956] 3 W.L.R. 732; [1956] 3 All E.R. 422.
Bentley (Dick) Productions Ltd. v. Harold Smith (Motors) Ltd. [1965] 1 W.L.R. 623; [1965] 2 All E.R. 65, C.A.
Bisset v. Wilkinson [1927] A.C. 177, P.C.
Brown v. Sheen and Richmond Car Sales Ltd. [1950] 1 All E.R. 1102.
Candler v. Crane, Christmas & Co. [1951] 2 K.B. 164; [1951] 1 All E.R. 426, C.A.
Coats Patons (Retail) Ltd. v. Birmingham Corporation (1971) 69 L.G.R. 356.
De Lassalle v. Guildford [1901] 2 K.B. 215, C.A.
Dillingham Constructions Pty. Ltd. v. Downs [1972] 2 N.S.W.L.R. 49.
Erskine v. Adeane (1873) 8 Ch.App. 756.
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963] 3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.).
Heilbut, Symons & Co. v. Buckleton [1913] A.C. 30, H.L.(E.).
Hill v. Harris [1965] 2 Q.B. 601; [1965] 2 W.L.R. 1331; [1965] 2 All E.R. 358, C.A.
Le Lievre v. Gould [1893] 1 Q.B. 491, C.A.
Morgan v. Griffith (1871) L.R. 6 Exch. 70.
Mutual Life and Citizens' Assurance Co. Ltd. v. Evatt [1971] A.C. 793; [1971] 2 W.L.R. 23; [1971] 1 All E.R. 150, P.C.
Nocton v. Lord Ashburton [1914] A.C. 932, H.L.(E.).
Oleificio Zucchi S.p.A. v. Northern Sales Ltd. [1965] 2 Lloyd's Rep. 496.
Oscar Chess Ltd. v. Williams [1957] 1 W.L.R. 370; [1957] 1 All E.R. 325, C.A.
Shanklin Pier Ltd. v. Detel Products Ltd. [1951] 2 K.B. 854; [1951] 2 All E.R. 471.
The following additional case was cited in argument:
City and Westminster Properties (1934) Ltd. v. Mudd [1959] Ch. 129; [1958] 3 W.L.R. 312; [1958] 2 All E.R. 733.
ACTION
The following statement of facts is summarised from the judgment of Lawson J. In 1962 the plaintiffs, Esso Petroleum Co. Ltd., acquired a site at Eastbank Street, Southport, Lancashire, and developed it as a petrol station, saleroom and other premises. The development was completed early in 1963. The defendant, Philip Lionel Mardon, who had been concerned with the motor trade since 1947, had managed and owned petrol filling stations and had lived in Southport, except for one year, from 1947 to 1959, became interested in taking a tenancy of the site. Mr. Leitch, a dealer sales representative of the plaintiffs with nearly 40 years' experience, drove the defendant to the site, and in the course of the drive, in general conversation, told the defendant of his very long experience in the petrol trade. At a subsequent meeting, at which Mr. Allen, the plaintiffs' area dealer sales manager, and Mr. Leitch were present, the defendant was told that the plaintiffs estimated that the throughput of the site in its third year of operation would amount to 200,000 gallons a year. The defendant indicated that he thought that 100,000 to 150,000 gallons would be a more realistic estimate, but he was convinced by the far greater expertise of, particularly, Mr. Leitch. He proceeded to negotiate for and obtain the grant of a three-year tenancy at the rent of £2,500 a year for the first two years, rising to £3,000 in the last year. The tenancy agreement was dated April 10, 1963. In September 1964 a new agreement dated September 1, 1964, was substituted. It created a term of one year and was to continue thereafter terminable by three months' notice to expire at the end of the first year or on the last day of any month thereafter. The rent was to be £1,000 a year, plus a rent in respect of a lubrication bay and a surcharge in respect of petrol
sales. Due to various factors, including the layout of the site, its limited visibility from the adjacent streets, access to it and egress from it, sales of petrol at the site were considerably less than 200,000 gallons a year. The evidence indicated throughput of petrol as follows: April 11, 1963, to April 10, 1964, 58,375 gallons; April 11, 1964, to April 10, 1965, 83,306 gallons; April 11, 1965, to April 10, 1966, 86,502 gallons; April 11, 1966, to August 27, 1966, 26,347 gallons; (under the succeeding tenant) 1968, 82,117 gallons; 1969, 96,318 gallons; 1970, 110,418 gallons; 1971, 101,821 gallons; 1972, 94,240 gallons; 1973, 96,265 gallons. The defendant made a net operating loss throughout the period of his tenancy, and eventually found himself unable to pay for the petrol supplied by the plaintiffs. On August 28, 1966, his supplies were cut off. He remained at the site doing such business as he could. On December 1, 1966, the plaintiffs issued the writ in the action. On March 7, 1967, the defendant gave up possession of the site.
By their writ, the plaintiffs claimed against the defendant possession, payment of moneys due and mesne profits from December 28, 1966, until possession was given. By way of counterclaim, the defendant claimed damages for misrepresentation, breach of warranty and negligence.
John Hall Q.C. and Alan Rawley for the defendant. The representation made by the plaintiffs regarding the potential throughput of the filling station was a statement of fact, not of opinion, and is therefore distinguishable from the statement examined in Bisset v. Wilkinson[1927] A.C. 177. The parties intended the statement to constitute a promise binding on the plaintiffs. This is demonstrated by, inter alia, the fact that the amount of rent payable for the filling station was based on the potential throughput. The statement was a binding collateral warranty which the plaintiffs broke and the defendant is entitled to damages for the breach: see Morgan v. Griffith (1871) L.R. 6 Exch. 70;Erskine v. Adeane (1873) 8 Ch.App. 756 and De Lassalle v. Guildford[1901] 2 K.B. 215, which lays down the decisive test of whether a statement such as the one under review constitutes a warranty. If a vendor assumes to assert a fact of which the buyer is ignorant, the statement is a warranty. If a vendor merely states an opinion or judgment on a matter of which he has no special knowledge, and on which the buyer may be expected also to have an opinion and to exercise his judgment, the statement is not a...
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