NOTES OF CASES
| Date | 01 July 1976 |
| DOI | http://doi.org/10.1111/j.1468-2230.1976.tb01467.x |
| Published date | 01 July 1976 |
NOTES
OF
CASES
NEGLIGENT MISREPRESENTATION-A WASTED OPPORTUNITY
FOR
CLARIFICATION
CRITICISM of judgments which seek to propound principles beyond the
strict requiremcnts of the question in issue is common: less common
is criticism where the courts restrict their judgments unnecessarily,
but it is submitted that such comment is justified when litigation on a
particular controversy has been scarce.
It
is on that basis that criticism may reasonably be levelled against
the decision of the Court of Appeal in
Esso
Petroleum
v.
Mardon.’
The relcvant facts of that case were these: the defendant was interested
in taking a tenancy of a petrol filling station owned by the plaintiffs.
and in reliance
on
the estimate of petrol throughput made by an
experienced representative of the plaintiffs he entered into a tenancy
agreement. In consequence of factors which the plaintiffs failed to take
into consideration, the actual throughput achieved was rather less than
half the estimated figure. Eventually the defendant was unable to pay
for petrol supplies, and the plaintiffs issued a writ claiming possession
of the premises, moneys owed and mesne profits. The defendant gave
up possession and counterclaimed for damages for breach of the
warranty as to the potentiaI throughput, and alternatively for negligent
misrepresentation.
On the first point Lawson
5.3
held that the statement as to the
potential throughput was not a warranty such
as
to give the defendant
a cause of action in contract; but his decision was reversed by the
Court of Appeal which held that the statement was indeed a con-
tractual warranty, being a factual statement on a crucial matter made
by
a party who had or professed
to
have special knowledge and skill
with the intention of inducing the other party to enter into the contract.
This note, however, is not concerned with that aspect of the case.
On the second point both Lawson
J.
and the Court
of
Appeal agreed
that the plaintiffs were liable under the principle of
Hedley Byrne
&
Co.
Lid.
v.
Heller
&
Partners Ltd.’
:
that the statement was a negligcnt
misrepresentation made in circumstances which gave rise to
a
“
special
relationship”J between the parties and
to
a duty on the part of the
party making the statement to take reasonable care to see that the
representation was correct.
It is not suggested that the decision itself is open to question;
but rather that the Court of Appeal failed either to endorse or to
disapprovc the attempt of Lawson
J.
to settle the controversy
as
to
the precise scope of the
Hedley Byrne
principle. Such a failure
is
all
the more unfortunate in the light of the uncertainty which has persisted
2
[1975]
Q.B.
819.
Ibid.
at
pp.
486, 503, 511, 528, 539.
1
[1976]
2
W.L.R.
583.
119761
2
W.L.R.
583.
4
[1964]
A.C.
465.
462
July
19761
NOTES
OF
CASES
463
since the decision of the Judicial Committee of the Privy Council in
Mutual Life and Citizens’ Assurance
Co.
Ltd.
V.
Evatt.@
In
Hedley Byrne
&
Co.
Ltd.
v.
Heller
&
Partners Ltd.?
liability for
negligent misrepresentations causing economic loss was confincd to
those situations where there exists a special relationship between the
party making the statement and the party relying on the statement and
consequently acting to his detriment. The formulation of that relation-
ship was cxpounded by Lord Morris
:
“. .
. it should now be regarded as settled that
if
someone possessed
of a special skill undertakes. quite irrespective of contract, to
apply that skill for the assistance of another person who relies on
such skill, a duty of care will arise. . .
.
Furthermore, if, in a sphere
in which a person is so placed that others could reasonably rely
on his judgment or his skill or on his ability to make careful
inquiry, a person takes it on himself to give information or advice
to, or allows
his
information or advice to be passed
on
to, another
person who, as he knows
or
should know, will place reliance on
it.
then a duty of care will arise.”a
The House of Lords did not, however, pursue the question of the
proper context of such
a
relationship except in
so
far as the above
formulation would exclude statements made informally on purely
social occasions.
The first decision in which the question
of
context arose for
determination was
Mutual
Life and Citizens’ Assurance Co. Ltd.
V.
Evatt.B
Lord Diplock. delivering the majority judgment of the Judicial
Committee, confined the application of the
Hedley Byrne
principle to
three situations: first, where the statement
was
made in the ordinary
course of carrying on a business or profession which involves the
giving of advice
of
a kind which
calls
for special skill and com-
petence
lo;
secondly, where the adviser, although not carrying on the
business or profession generally, has, at or before the time at which
his advice is sought, let it be known
in
some other way that he claims
to possess skill and competence in the subjcct-matter of the particular
inquiry comparable to those who do carry on the business or profession
of advising on that subject-matter and is prepared to exercise a
comparable skill and competence in giving the advice
ll;
and thirdly,
where the adviser has a financial interest in the transaction upon which
he gives
his
advice.12
Lord Reid and Lord Morris delivered a dissenting judgment, their
disagreement turning on this question of the scope of the application
of the
Hedley Byrne
principle; and, although the point has frequently
been stressed, it should be reiterated that both the dissenting Law
0
(19711
A.C. 793.
8
Ibid.
nt
pp.
502-503.
9
I19711
A.C.
793.
7
(19641
A.C.
465.
Io-Ibid;
at
p.
805.
11
IMd.
nt
p.
806.
12
Ibid.
nt
p.
809;
see
for
example
Aldersort
v.
Rhodes
(Liverpool)
Lid.
[I9671
2 All
E.R.
850.
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