Lord Reid and Lord Morris, both of whom had been parties to the decision in Hedley Byrne Co. Ltd. v. Heller 1964 Appeal Cases 465, however, dissented and re-stated the principle in these words: “It appears to us to be well within the principles established by the Hedley Byrne case .to regard his action in giving such advice as creating a special relationship between him and the inquirer and to translate his moral obligation into a legal obligation to take such care as is reasonable in the whole circumstances”. a gallon, according to the amount sold. He carried on as best he could with odd jobs for customers, like washing cars. Applying this principle, it is plain that Esso professed to have – and did in fact have – special knowledge or skill in estimating the throughput of a filling station. The award rests on three basic conclusions, all of which have been challenged by Mr. Hall, Q.C., on behalf of the appellant in an able and most helpful argument. On 1st December, 1966 they issued a writ against him claiming possession and £1,139.33 for petrol supplied. Esso Petroleum v Mardon QB 801 (Case summary) A statement of opinion may amount to an actionable misrep where the representor was in a position to know the … Concurrent liability The business of this filling station was undoubtedly the personal business of Mr. Mardon. The remedies are rescission (subject to exceptions discussed later) and damages in the tort of negligence (see later). and At the decisive interview Mr. Leitch was accompanied by the new area manager, Mr. Allen. The rent was reduced to £1,000 a year, and a surcharge of 1d.to 2d. It laid a heavy hand on all that followed. Future predictions can be warranties if they are given with the intent to induce another party to enter into a contract, and they are relied upon in the decision to enter into the contract (these are called collateral warranties). After paying all outgoings, such as rent, wages and so forth, there was a net loss of £5,800. Just as there is a breach of warranty when a forecast is made “expected to load” by a certain date if the maker has no reasonable grounds for it, see Sunday v. Keighley (1922) 27 Commonwealth Cases 296 or bunkers “expected 600/700 tons”, The Pantanassa (1958) 2 Lloyd 449 at pages 455-7 by Mr. Justice Diplock. But Esso did nothing to help. Denning MR and Ormrod and Shaw LJJ Esso’s experts had estimated that the petrol station would sell 200,000 gallons of petrol. That warranty was broken. (A) Had it been an estimated throughput of 100,000 gallons, they (Esso) would not have bought it in the first place”. ____________________. The question then was what could be done about it. To the Judge’s summary, I would only add a few questions and answers by Mr. Allen in evidence: (Q) Now we know that the person who originally put forward this estimated 200,000 gallons forecast was Mr. Leitch? Esso's experts had approximated that the station would be able sell 200,000 petrol gallons. : 10 Law School Mooting Tips - … How must the respective parties have regarded the representation when it was made? was completely invalidated by this change of plan. Whereas they should have made a reappraisal in the light of the building being now “back to front”. Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 WLR Intention to create legal relations and consideration for a contract of sale in the formation of contracts. (Transcript of the Shorthand Notes of the Association of Official He had lost all his capital and had incurred a large overdraft. Esso bought a new site for a service station. Eventually Esso cut off his petrol supply when he stopped paying. It is to be measured in a similar way as the loss due to a personal injury. Conclusion: I would like to express my appreciation of the full and careful way in which the learned Judge found the facts and analysed the law. They made it negligently. This would accrue to their benefit by sales of petrol. For this misrepresentation they are liable in damages. A professional man may give advice under a contract for reward; or without a contract, in pursuance of a voluntary assumption of responsibility, gratuitously without reward. As foreshadowed by this pleading there was little that was material in controversy between the parties as to the factual course of the negotiations which had led up to Mr. Mardon taking the tenancy of the Eastbank filling station. This defeated him. On this footing, the loss which he has suffered would seem to be as follows (subject to further argument by the parties): Capital loss: cash put into the business and lost £6,270; overdraft incurred in running the business, £7,774. This is, I think, a difficult point for it is an attractive argument that, when a contract results, the rights of the parties should be governed by the terms agreed, subject, of course, to the right to sue for damages for fraud or under the Misrepresentation Act,1967. 3 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20 at [28]. Nevertheless, in their negotiations with Mr. Mardon, Esso adhered to their original estimate. Mr. Ross-Munro might also have cited Bagot v. Stevens Scanlan & Co.(1966) 1 Queen’s Bench 197, about an archtect, and other cases too. by which they measured the worth of a filling station. The defendant claims to have suffered damage far in excess of this sum. Was this an unreasonable decision? It was in these circumstances that Mr. Mardon attempted to carry on with the business. It was on Eastbank Street, one of the busiest streets of the town. What had happened was that he had been brought to the brink of bankruptcy in consequence of Esso’s false assertion as to the potential of the filling station. On 17th July, 1964, he wrote to Mr. Allen: “I reluctantly give notice to quit forthwith. Before considering how those damages are to be computed, it is necessary to consider the “cut off” of the incidence of damage at 1st September, 1964 as found by the Judge. There can be no doubt that an estimate of this kind, made under such circumstances, by a company with the vast experience of Esso, would reasonably have a great influence on the mind of a man like Mr. Mardon who was negotiating for a tenancy of a newly developed service station. THE MASTER OF THE ROLLS: Very well; then we will not make any final order today. Esso bought a new site for a service station. It is no concern of Esso where it came from, c.f. He said “Where there is a contract there is no difficulty as regards the contracting parties: the question is whether there is a warranty”. It never got anywhere near the 200,000 gallons. 1976 The income losses present greater difficulties. During the course of the negotiation of the agreement, ‘expert’ advisers employed by In fact, as the plaintiffs’ internal memoranda make perfectly plain, they were more than anxious to retain him as a tenant of this service station because they foresaw great difficulty in finding anyone – to take it over. MR J. They, for their part, wanted to preserve the Eastbank site as a going concern with no break in the continuity of the business there. You should look into the future so as to forecast what would have been likely to happen if he had never entered into this contract: and contrast it with his position as it is now as a result of entering into it. misrepresentation false statement bisset wilkinson [1927] ac 177 privy council the claimant purchased piece of farm land to use as sheep farm. If the forecast turned out to be an unsound forecast, such as no person of skill or experience should have made, there is a breach of warranty. (MR. JUSTICE LAWSON), THE MASTER OF THE ROLLS It was on his calculations and recommendations that Esso had bought this site and developed it. It is difficult to see why, in principle, a right to claim damages for negligent misrepresentation which has arisen in favour of a party to a negotiation should not survive the event of the making of a contract as the outcome of that negotiation. However, it is not limited to non-contractual situations of this kind – see Esso v Mardon as an example of its use where there is a contractual link between statement maker and Accordingly, he is entitled to recover his capital losses up to the time when the business finally closed. This representation was, unquestionably, made in good faith but, as Mr. Justice Lawson rightly found, negligently. The assessment of damages cannot be finally decided now. No one could have done more to make it a success. He, therefore, took September, 1964 as the “cut-off point”. As the matters of which Mr. Mardon complained occurred in 1963 his only available means to redress would be such as his contract with Esso afforded; so that if there was no warranty he would have no remedy at all. Any laxity on these points would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them and more especially would have the effect of lessening the authority of written contracts by making it possible to vary them by suggesting the existence of verbal collateral agreements relating to the same subject-matter”. submitted on behalf of Esso that Mr. Leitch and Mr. Allen did no more than to proffer a forecast of the potential of the filling station. It was under the influence of this “fatal error” that Esso sought to find a tenant for the service station. Lord Denning distinguished it … In September 1964 the plaintiffs appreciated that Mr. Mardon was in an extremely difficult position. When they purchased it they estimated that it could sell 200,000 gallons of petrol a year. It was very much in their interest to keep this service station open and selling their petrol. He lost more and more money over it. A few answers by Mr. Allen will show this: “(Q) Would you agree that the potential throughput of a station is an important factor in assessing what rent to charge a tenant? It was a financial disaster. of this site at Eastbank Street was a vital factor in the calculations of both parties. The answers to these questions will provide the touchstone for answering the ultimate and critical question, did the representation made found a warranty by the party making it? They did not revise their original estimate which they had made in 1961. It was precisely equivalent to saying that Esso rated this service station as one of their “Grade A” or “Four star” sites. Respondent A representation of fact is much more likely to be intended to have contractual effect than a statement of opinion; so it is much easier to infer that in the former case it was so intended, and more difficult in the latter. By September 1964, the breach of contract or of duty was clear to all concerned. But the throughput was most disappointing. On this basis, no question of a guaranteed throughput arises; had it failed to reach the estimate owing to a cause or causes outside the plaintiffs’ control, for example, an unforeseen traffic diversion scheme, greatly reducing the traffic flow in Eastbank Street, or the appearance across the street of a rival filling station, there would have been no breach of warranty on the part of the plaintiffs. Esso had no choice but to comply with these planning requirements. Secondly, to constitute a warranty a statement must be of such nature that it is susceptible in relation to its content of constituting a clear contractual obligation on the part of the maker of the statement”. They made the representation – they forecast a throughput of 200,000 gallons – intending to induce Mr. Mardon to enter into a tenancy on the faith of it. He also suffered in health by reason of all the worry over this disaster, and was off work. The judge held that the losses after this date were irrecoverable because Mr. Mardon was not induced by the plaintiffs’ breach of duty to enter into the new agreement in September 1964, the Rental Surcharge arrangement. He goes on to say that the Hedley Byrne principle also applies, and that damages can be awarded on that basis. Besides that experience, there have been many cases since I have sat in this Court where we have readily held a representation – which induces a person to enter into a contract – to be a warranty sounding in damages. Escalus Properties v Dennis [1996] Esso Petroleum Co Ltd v Mardon [1976] Esso Petroleum v Customs and Excise Commissioners [1976] Esso Petroleum v Mardon [1967] EU Law Competition law Effect of European Union law They leased it to Mardon, and assured him contrary to his skepticism that the site could sell 200,000 gallons a year. On 25th May, 1961, the Esso local representatives recommended the go ahead. Esso could hardly have expected that they could procure any man with a modicum of business sense to put all his capital as well as his future at risk for a nebulous prospect based on a mere opinion which is casually given and for the Tightness of which all responsibility is disclaimed. Mardon relied on this information which was made negligently, and he suffered loss. At page 182 of the report in the course of the judgment Lord Merrivale refers to Smith v. Land and House Property Corporation (1884) 28 Chancery Division 7, where a vendor’s description of the tenant of the property sold as “a most desirable tenant” was called in question. If a restrictive view is taken there will be room for this cause of action, but, if not, most, if not all, mis-statements which fall within the Hedley Byrne principle are likely to be regarded as warranties. 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