Tuesday, 19th December 1995
LORD JUSTICE HOBHOUSE:
No.61 Hartington Road Chiswick is a five bedroomed house built in the 1930s. It stands in grounds which have an overall area of 0.48 of an acre with a 90ft west-facing frontage directly on to the River Thames; there is no intervening tow-path or road. The property is divided by the house which effectively runs from one side of the plot to the other. The visitor approaching from Hartington Road crosses a relatively large front garden before coming to the house and after passing through the house comes to the rear garden which leads down to the river. The rear garden is rather less than 200 feet in length. It has the remains of an old cedar tree supported on iron posts and at the north west corner a 12 metre heated swimming pool.
In 1989 No.61 was owned by a Mr A E Bonsor who, with his wife, had lived there for a number of years. They decided that they would like to move and took preliminary steps to instruct Lane Fox and Partners Limited, the well known firm of Estate Agents, to act for them. Lane Fox are the Defendants in this action. The person with whom they dealt was Mr Andrew Scott, one of the Assistant Directors in the London office of that firm. The matter did not progress very far in 1989 because the Bonsors decided that it would be better to find a new home before they actually put No.61 on the market. However, they did not withdraw their instructions before Mr Andrew Scott had done some pre paratory work for the purposes of putting No.61 on the market. He carried out a site inspection and whilst he was doing so took the relevant measurements. Unfortunately when he returned to the office he misread his notes and recorded the overall size of the plot as being 0.92 of an acre not 0.48. He effectively counted in the front half of the site twice. This was an astonishing error for a professional man to make; it is further surprising that Mr Scott as an experienced estate agent did not appreciate that his figure of 0.92 of an acre must be wrong for a generally rectangular property which had a frontage of 90ft on to the river at one end and a frontage of no more than 75ft at the road end. Commendably, neither Lane Fox nor Mr Scott have ever sought to dispute that this error was careless and disclosed a want of proper professional skill and care.
The following March, 1990, the Bonsors had found a new home out of London. They therefore re-approached Lane Fox instructing them to act as their agents in the sale of No.61. The Bonsors wanted to sell No.61 quickly as they did not want to lose the house they had found in the country. Also, it was appreciated that the Spring is a good time to sell a house. Therefore Lane Fox had to proceed without delay. Advertising was booked for the end of April and Mr Scott prepared the draft particulars and the wording of an appropriate advertisement. Although he revisited the property he did not check his site measurements and simply re-used the figures he had noted the previous year. Consequently the advertisement which he prepared was in the following terms:
"Chiswick W4
A quite exceptional family house occupying a unique position on the River Thames offering extensive accommodation, private parking, gardens of nearly one acre and a private 90ft river frontage.
Entrance hall, drawing room, dining room, study, sitting room, play room, garden room, kitchen/breakfast room, pantry, cloakroom, five bedrooms, three bathrooms (two ensuite), single garage, off-street parking for five cars.
Front and rear gardens of nearly one acre, 90ft river frontage with potential private moorings, 12m heated swimming pool.
£850,000 Sole Agent Freehold"
This advertisement was inserted under the logo and name of Lane Fox in Country Life and a free circulation magazine called "London Portrait". The statement "front and rear gardens of nearly one acre" repeated and exaggerated the error which he had previously made in measuring the overall size of the plot and was seriously misleading.
The particulars were in a familiar format and illustrated with photographs. The first page was in very similar terms to the advertisement and included the statement "front and rear gardens of nearly one acre". The text of the particulars included a more detailed description which started:
"The property, approached by a 90ft driveway, is a detached freehold house built in 1931 and set in 0.92 of an acre of its own private gardens."
After describing in detail the accommodation in the house and various other features, it described the front and rear garden including dimensions for the rear garden which were inaccurate.
These particulars too were ready by the end of April. They included in five paragraphs at the end Lane Fox's standard disclaimer:
"1.These particulars do not constitute, nor constitute any part of, an offer or contract.
2.All statements contained in these particulars as to this property are made without responsibility on the part of Lane Fox or the vendors or lessors.
3.None of the statements contained in these particulars as to this property are to be relied on as statements of representations of fact.
4.Any intending purchasers must satisfy themselves by inspection or otherwise as to the correctness of each of the statements contained in these particulars.
5.The vendors do not make or give and neither Lane Fox nor any person in their employment has any authority to make or give any representation or warranty whatever in relation to this property."
This disclaimer was in terms which conformed closely to those commonly used by other estate agents at the time.
As soon as the advertisements appeared and the house was placed on the market, a lot of interest was shown. Within a fortnight Lane Fox had received a number of offers. None of these was as high as the asking price of £850,000. But one couple, Mr and Mrs Land, had already by 3rd May offered £775,000 and by Tuesday 8th May they had increased their offer to £810,000 saying that they wanted a definite answer, subject to contract, by Friday the 11th. On the Friday the Bonsors indicated, on a similar basis, that the offer was acceptable to them. Notwithstanding this Lane Fox were continuing to show prospective buyers round the property and on Saturday the 12th they showed three, one of which was Mr and Mrs McCul lagh.
Mr McCullagh is a businessman. He is the Plaintiff in this action. He is relatively wealthy and the owner of a substantial engineering company and other companies. He had had previous experience of selling and buying houses. He had done so three times since 1972. A day or so previously he and his wife had seen the advertisement in the "London Portrait" magazine. On Friday the 11th they rang up Lane Fox and arranged to view on the Saturday. Mr McCullagh and his wife and two young children drove over to No.61 arriving there at about 11.30 on the Saturday morning. There they met Mr Andrew Scott and having passed quickly through the house went out into the garden at the rear. He said in evidence (and his evidence was substantially accepted by the Judge), Day 1 p.2:
"We carried on down the garden past the swimming pool, with a small sunken garden on the left, and we got to the terrace adjacent to the river. It is immediately adjacent to the river. There is no tow-path between the garden wall and the river which was a great advantage. I explained to Andrew that we were particularly excited because a one acre site on the River Thames was a unique property. There were not too many of them around, especially domestic ones.
I explained that my Company, Vanguard, owned a unique property on the Isle of Dogs, 1.5 acres, which we had found to be extremely valuable. Andrew then said: `This site is 0.91 of an acre'. The difference did not overly worry us. I explained that what we would like to do was to incorporate a tennis court. We had the swimming pool. We would demolish the house and build a dream home on the site for my family."
After they had been in the garden for some time they returned to the house and Mr Scott briefly showed them around the house but, as Mr McCullagh said, they were not terribly interested in the house. They intended to demolish the house. Mr McCullagh said in evidence that Mr Scott (again stretching a point) told them that "friends of the Bonsors had put almost the asking price on the table and a quick decision would have to be made". Up to this point, with a further and surprising lack of professionalism, Mr Scott had taken no steps to see that the McCullaghs had a copy of the particulars. However, fortunately for the Defendants, as the McCullaghs were leaving the house Mrs Bonsor enquired whether they had had the particulars and when they said that they had not she gave them, in the presence of Mr Scott, the Lane Fox particulars of sale. The only qualification of this account that must be made is that the Judge found that Mr McCullagh was mistaken in his belief that Mr Scott had said "0.91" of an acre and not "0.92" of an acre.
The evidence of Mrs McCullagh was that they were very excit ed with the opportunity of buying a site of nearly 1 acre on which to build a house. They decided that they would like to buy it notwithstanding that another person had already made an offer which had been accepted. That evening they rang up Mr Scott and made an offer of £850,000. Mr Scott remarked that he didn't want his clients to fall between two stools - a clear reference to the fact that another offer had been made and accepted - and said that Mr McCullagh would have to be prepared to exchange contracts very quickly. Mr McCullagh's response was that he was prepared to exchange contracts on the Monday.
The McCullaghs visited the property again on the Sunday by arrangement with Mrs Bonsor. He was concerned that the offer that he had made might not be enough and in a further telephone conversation with Mr Scott on the Sunday he increased it to £875,000 again on the basis that he would exchange contracts the next day. When the Lands were not prepared to match this figure, the Bonsors, through Mr Scott, accepted the McCullaghs' offer subject to contract. Contracts were exchanged at 2.45 pm on Monday 14th of May and Mr McCullagh paid the deposit of £87,500. Completion was to be on the 31st of August.
The house was then taken off the market and the McCullaghs started to discuss with their architect what could be done about demolishing the existing house and building their "dream house". One of the things which the McCullaghs were keen to include was a tennis court. Their architect advised them that there would be considerable difficulties about fitting a tennis court in having regard to the space already occupied by the swimming pool and the cedar tree. Furthermore the architect advised them that the site did not have an overall size of 0.92 acres but was in fact less than half an acre. On 24th May, immediately after he had received this advice, Mr McCullagh rang up Lane Fox and complained about the misdescription. Thereafter, he pursued his complaints with Lane Fox but he did not attempt to fix any liability on the Bonsors nor did he attempt to renegotiate his contract with them. He completed on 31st August.
The contracts which had been exchanged on Monday 14th May were in the usual form incorporating the National Conditions of Sale (20th Edition) with appropriate amendments. The deposit was 10% of the purchase price. Clause 13 of the contract provided:
"The purchaser hereby acknowledges that the purchaser has not entered into this contract in reliance wholly or partly upon any statement or representation whether made orally or in writing or otherwise howsoever by or on behalf of the vendor save for the written replies to the vendor's solicitors to enquiries made by the purchaser's solicitors."
This is a normal clause commonly included in contracts for the sale of land. No relevant enquiry had been made by the purchasers' solicitors of the vendors' solicitors and, specifically, there had been no enquiry relating to the area of the plot being sold. It was also the case that prior to exchanging contracts Mr McCullagh had not sought any professional advice or arranged any separate check to be carried out of the precise area of the plot. Questioned about whether this was wise and whether or not he should have had some independent check carried out before he exchanged contracts, Mr McCullagh replied:
"Why should I doubt Lane Fox's word. They are Estate Surveyors. They have boasted that they are Estate Surveyors for many years. They have a good reputation. There is no reason why I should doubt their measurements. You keep suggesting that I should doubt Lane Fox. Why should I doubt Lane Fox?" (Day 1 p.34 in cross-examination)
The Judge accepted that in deciding to buy and in exchanging contracts on the Monday, Mr McCullagh relied upon what he had been told by Mr Scott on the Saturday.
After Mr McCullagh had completed and become the owner of No.61, things went from bad to worse. He discovered that to erect his "dream house" on the land at No.61, incorporating a swimming pool, would cost him more than he could afford. He did not carry out his intention to demolish the existing house and rebuild. He did not move in.
On 28th January 1991 he issued a writ claiming damages from Lane Fox. In his Statement of Claim he pleaded that he and his wife had seen the advertisement and had met Mr Andrew Scott at the property. He said that Andrew Scott advised them that the size of the site was 0.91 acres and that Andrew Scott knew or ought to have known that he would be likely to rely upon his advice as to the size of the site in deciding whether to purchase the property. He did rely upon it in entering into the written contract to purchase for the sum of £875,000. As a result of the negligence of Mr Scott he had suffered damages in the sum of £450,000 being the difference between the £875,000 which he paid and the, as he alleged, true value of the property estimated to be £425,000. This was the only loss he alleged.
The Defendants by their defence denied the duty of care and further relied upon the disclaimer printed on the particulars. They denied that the Plaintiff was entitled to or did act in reliance upon any advice given by Andrew Scott and they denied the damages alleged. They further alleged contributory negligence in failing to carry out any independent investigation of the size of the plot before the exchange of contracts. In reply the Plain tiffs challenged the validity of the Defendants' dis claimer under the Unfair Contract Terms Act 1977.
At the trial before Mr Justice Colman in December 1993 he heard evidence from both factual and expert witnesses. The factual witnesses covered the dealings between the parties and evidence of two other prospective purchasers who had made offers for the property. One was Mrs Land to whom I have already referred; she was called by the Plaintiff. Another was Mr William Hagon who was a local Estate Agent who had wanted to buy a home for himself and his wife in the area. He, like the Lands, made an early offer of £775,000, subject to contract. He later declined to increase his offer when he was told by Mr Scott that others had offered more. The expert evidence went to the ques tion of the Plaintiff's loss and the valuation of the property as at May 1990. The Plaintiff called a Mr Copping Joyce. The Defendants called a Mr Pierson and a Mr Graham Marks.
The issues before the Judge at the trial were:
(1)What, if anything, Mr Scott had orally represented to Mr and Mrs McCullagh concerning the overall area of the plot.
(2)Whether, in deciding to purchase and in exchanging contracts on the Monday, Mr McCullagh had acted in reliance upon what Mr Scott had said. This factual point was also put in the form whether Mr McCullagh was induced to act as he did by what Mr Scott had said or as whether Mr McCullagh's loss (if any) was caused by any breach of duty of the Defendants.
(3)Whether in the circumstances the Defendants owed to the Plaintiff a duty of care in respect of what Mr Scott had said.
(4)What was the effect and relevance of the Defendants' printed disclaimer and, if relevant, whether it was valid under the Unfair Contract Terms Act 1977.
(5)What, if any, loss and damage Mr McCullagh had suffered as a result of buying the property at the price of £875,000.
(6)Whether Mr McCullagh had negligently contributed to his own loss.
The Judge decided the factual issues (1) and (2) substantially in favour of the Plaintiff. On the question of law, issue (3), he held that the Defendants did owe the Plaintiff a duty of care. On the fourth issue, with regard to the dis claimer, he held as a matter of construction that it did not extend to any oral representations that Mr Scott had made. Finally, having determined the issues of liability in favour of the Plaintiff, he found that the value of No.61 in May 1990 lay in the range £800,000 to £875,000 and concluded that the Plaintiff's purchase was not at a price in excess of its market value. Accordingly, the action being an action in the tort of negligence and the Plaintiff having proved no loss, judgment was entered for the Defendants. He did not have to deal with the Unfair Contract Terms Act nor with the allegation of contributory negligence (though it is to be inferred from the tenor of his judgment that he would not have accepted it).
The Plaintiff has appealed, submitting by an amended Notice of Appeal that the Judge's finding on damages was not in accordance with the weight of the evidence and that he should have found that the true value of the property was £800,000 and that the Plaintiff had accordingly suffered £75,000 loss. By a Respondents' Notice, the Defendants have sought to uphold the judgment in their favour on the grounds that the Judge should not as a matter of law have held that the Defendants owed to the Plaintiff any duty of care in respect of any representation made to him; that, in any event, the disclaimer provided them with an answer to any such duty and the disclaimer was reasonable and therefore valid; that the Judge should as a matter of fact have found that Mr McCullagh did not rely upon the oral representation, and finally that there was contributory negligence on the part of Mr McCullagh which would reduce any liability of the Defendants towards him.
The appeal has been argued taking first the Plaintiff's appeal, the damages point, and taking the Respondents' Notice second. It is convenient to deal with the points in the same order in this Judgment. Unless the Appellant makes good his argument on his Notice of Appeal, the appeal must fail and the other points will not arise.
DAMAGES
The Judgment
The Plaintiff's case before the Judge was that the value of No.61 in May 1990 was no more than £550,000. This case was based upon the evidence of Mr Copping Joyce. The evidence of Mr Copping Joyce was not accepted by the Judge. It was unconvincing and inconsistent with the remainder of the evidence. The Plaintiff has not argued before us that the Judge should have accepted his evidence. Accordingly no reliance has been placed upon his evidence upon this appeal.
The evidence upon which the Judge based his finding of value was the evidence of the actual offers which were made for the property and the expert evidence of the Defendants' two experts, Mr Graham Marks and Mr Pierson.
Mr and Mrs Land made offers of £775,000 and £810,000 and declined to go higher. They were under the mistaken belief that the overall size of the property was as described by Lane Fox - nearly one acre. They took into account the fact that they expected to have to spend about £100,000 on renovations. The Judge accepted Mrs Land's evidence that what led them to offer as much as £810,000 was the area of one acre alongside the Thames and that they would not have been prepared to offer so much if they had realised that it was only half an acre. He said that it was hardly a contentious issue that the house was perceived by the public to be less valuable if set in half an acre than if set in an acre.
The other factual witness was Mr Hagon. The Judge attached great weight to his evidence. He was not just an ordinary house-hunting member of the public. He was himself an estate agent and knew the property in the neighbourhood very well. When first he saw the advertisement he felt that £850,000 was very good value. He went to see it. He immediately realised that it could not possibly be as large as one acre. He nevertheless decided to make an offer. His builder told him that he would have to spend about £100,000 refurbishing and modernising the house. He offered £775,000 and declined to increase it when invited to do so. The Judge however treated his factual evidence as supporting the conclusion that the value of the property was "much more in the region of £850,000".
The Judge did not refer in detail to the evidence of the Defendants' experts. He accepted their general evidence upon the state of the market at the time and their criticism of the comparables used by Mr Copping Joyce. The Judge summarised certain general considerations including the fact that "the nearer to the top end of the market a particular house may be and the more unusual its characteristics, the more difficult it is likely to be to predict the price it will fetch". The Judge listed the various good and bad features of No.61 in a manner which has not been criticised. Having rejected Mr Copping Joyce's comparables, he placed reliance upon Staveley House Chis wick as a comparable. Staveley House was sold by the Defendants in 1993 for £835,000. It was in good condition and stood in magnificent and very secluded gardens of three quarters of an acre. He concluded that in May 1990 it would have sold for rather more than £1 million and that he would have expected No.61 to sell for very roughly 75-80% of the price of Staveley House at any given time.
The Judge concluded, taking the evidence as a whole, that "the value of No.61 in May 1990 lay in the range £800,000 to £875,000". "The precise selling price within that range would be a matter of chance depending upon who was in the market at the time and the relative importance attached by them to the attract ive [and unattractive features of the property]." The Plaintiff in paying £875,000 "paid no more than it was worth with the area that in truth it had".
The Arguments on the Appeal
The Plaintiff submitted that the Judge's finding was against the weight of the evidence, in particular, the evidence of the Defendants' own experts. The factual evidence of the offers which were in fact made for the property certainly did not support a higher value than £800,000. The expert witnesses put in their expert reports in the usual way.
The report of Mr Marks expressed his conclusions in paragraph 13 under the heading "Valuation":
"Having regard to all of the above matters referred to within this report, to my own inspection of No.61 Harting ton Road, and the various comparables, it is my opinion that the open market value of the Freehold interest with vacant possession as at May 1990 can be fairly and properly assessed in the sum of £800,000."
He then refers to various factors including comparables, plot size, accommodation, amenity, market conditions, etc. He continued with this concluding observation:
"However, I must add that with 'special' owner-occupier houses it is often difficult to precisely pinpoint the 'additional' or 'premium' value which was frequently bid for such properties prior to the end of the eighties boom market conditions. Thus albeit the transaction price of £875,000 seems to be very much at the top end, it is nevertheless within 10% of what I consider represented the true open market value at the time".
Mr Pierson similarly concluded his report with the section headed "Valuation". He said:
"Having given due consideration to all matters including the above comparables and my extensive knowledge of the area market conditions at the relevant date I am firmly of the opinion that the value of the property freehold with vacant possession as at May 1990 in the open market as between a willing buyer and a willing seller is in the sum of £800,000. However in view of the unusual and substantial nature of the house and grounds, the state of the market at that time and the presence of a competing buyer, I would not have been surprised if a purchaser would have been prepared to pay a substantial premium above what I regard to be the open market value."
The evidence regarding Staveley House was introduced in a supplementary report by Mr Marks. His evidence was that "the May 1993 price achieved of £835,000 being uplifted to £1,045,000 to represent May 1990 value". He stressed that such an approach was an approximation and intended only to indicate the likely level of difference. He concluded:
"It is my opinion that the sale of Staveley House, ex changed in May 1993 at a price of £835,000, such sum having been obtained on the open market, properly reflects a level of value which may be paid by a willing purchaser for a house of this style, type and size in the Grove Park area. In my view this sale is fully consistent with and lends further support to my original valuation of 61 Hartington Road prepared in February 1993."
The Defendants' expert evidence was therefore that the open market value of No. 61 was in May 1990 £800,000. It was further the evidence of Mr Marks that the sale of Staveley House in 1993 confirmed that valuation.
It is surprising that the Judge did not refer to any of this evidence in his judgment. It was inconsistent with his conclusion. It did not support an inability to make a valuation. It did not support an open market valuation, which is after all the best price at which the property might reasonably be expected to be sold after being freely exposed for a reasonable period in the open market, of over £800,000.
Before us the Defendants submitted that the concluding senten ces of the respective reports justified a dif fer ent conclusion. This was not correct. Each of the experts had been informed of the subject matter of the action and that there were issues on misrepresentation and reliance. They were aware that the inference might be drawn from their valuation that Mr McCullagh must have been misled as otherwise he could not have offered a figure as high as £875,000. It was this point which they were meeting. They were explaining how their valuation was consistent with Mr McCullagh's higher offer. They are each at pains to confirm that this does not contradict their valuation: "it is nevertheless within 10% of what I consider represented the open market value at the time"; "a substantial premium above what I regard as the open market value". (emphasis supplied)
The oral evidence did not materially alter this picture. Mr Hagon said that he might have been prepared to go up to £800,000. (Day 7, Page 7). Mr Pierson (at Day 6, page 11) said, when asked about what he meant by a "substantial premium":
"In my opinion I would not have been surprised for a purchaser to pay a significant premium of, say, at least £50,000 because of the unusual nature of this property, and the premium element it would command."
In cross-examination (at page 20) he said:
"My report states a figure of £800,000 but, as indicated, I would not be surprised if someone were prepared to pay an additional premium."
In his evidence in-chief Mr Marks was asked about the final part of his report and the reference to "premium" value. He answered:
"... it is indefinable. For that reason I feel particularly at this end of the market where you are in this bracket of 750 to one million, I really think that a 10% margin is a sensible margin. I would not like to be so dogmatic about the value." (Page 43)
In cross-examination he said:
"I was referring in fact, in that instance this morning, to the level of premium which in my opinion a buyer might pay for a particularly special property, a particularly outstanding property, and I think this would include Staveley House, over and above a figure at which a valuer would otherwise reasonably calculate the value." (Pages 64-65).
These answers, whilst they disclose an attempt by the Defendants' Counsel and their experts to add a gloss to their written evidence, do not suffice to alter its substance or the overall effect of the evidence. No.61 was marketed and, on a true basis, did not yield offers above £800,000. The factual evidence did not justify any higher value. The comparable, Staveley House, likewise did not justify a higher value although viewing it on its most favourable basis to the Defendants, it was not inconsistent with a marginally higher value for No.61. Final ly, the specific and clear expert evidence of the Defendants' valuers was that the open market value of No.61 was £800,000. Their oral evidence provided no rational basis for departing from that valuation and did not, in any event, alter the weight of the evidence. In my judgment the Judge's finding was not in accordance with the evidence. The evidence was that it was possible to put a value on this property and that that value was £800,000. That was the finding which the Judge should have made. It follows that the Plaintiff proved damages in the sum of £75,000 and, subject to liability, he was entitled to a judgment for that sum. On the appeal, therefore, the Plaintiff is entitled to succeed. It is necessary now to consider the points raised by the Respondents' Notice.
THE RESPONDENTS' NOTICE
DUTY OF CARE
The Judgment
At pages 11 and following of the transcript of his judgment, Colman J carefully considered the legal submissions and the authorities cited to him. These included Hedley Byrne v Heller [1964] AC 465, Smith v Bush [1990] 1 AC 831, Caparo Indus t ries v Dickman [1990] 2 AC 605, James McNaughton v Hicks Anderson [1991] 2 QB 113, and Computa staff v Ingledew Brown (1983) 268 EG 906 (Mc Niell J). He also referred to certain Commonwealth authorities.
He applied the triple test spelled out by Lord Bridge in Caparo at p.617, foreseeability, proximity and "whether it is fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other". He said:
"The ingredient of proximity and the ingredient of imposition of the duty being just and reasonable must rest primar i ly, if not exclusively, on the purpose for which the representation was made, the fact that it was made in a professional capacity to a particular potential purchaser in relation to a particular and identifiable transaction and the fact that to the knowledge of the representor it was highly probable that it would be relied upon by that representee in entering into that transaction without making his own investigation." (p.19)
Having referred to the statement of Neill LJ in the Hicks Anderson case (at p.126) -
"It is also necessary to consider whether he did in fact rely on the statement, whether he did use or should have used his own judgment and whether he did or should have sought independent advice." -
Colman J continued (p.21):
"Whereas Mr Scott certainly knew prior to exchange of contracts that there would be no independent survey, it is, in my judgment, material to what is just and reasonable that it was the Plaintiff's decision to adopt this unusual course which invested the representation by Mr Scott with a causal effect which it would not normally have had.
Although the decision of the plaintiff to dispense with a survey prior to exchanging contracts was unusual, it was a course known to Mr Scott. His statement confirming the area of the plot then became a matter which it would be obvious to anybody would be one of the facts which, without further investigation, a purchaser would have in mind so that it influenced his decision when he entered into the contract. It is at the time when Mr Scott appreciated that there was to be no independent survey that the question of duty and, in particular proximity and what is just and reasonable, has to be tested. Having full regard to the approach of Neill LJ in the passage from his judgment which I have cited above, I have come to the conclusion that at that time there did exist a neighbour or proximity relationship between Mr Scott and the plaintiff which is a necessary ingredient of duty of care. Here was a professional estate agent knowing that what he had said about an important characteristic of the property was material to its value and to a decision to purchase and then knowing that the purchase was to be without independent investi gation. In my judgment, that in the circumstances of this case was sufficient to create proximity."
Colman J was therefore deciding that Mr Scott did not owe Mr Mc Cullagh a duty of care on the Saturday morning when Mr Scott made the relevant statement because Mr Scott would at that time have been entitled to take the view that his statement would be independently checked and would not be relied upon. The Judge considered that the duty did however come into existence when, on the Saturday evening or the Sunday, Mr McCullagh told Mr Scott that he would be exchanging contracts without a survey. This is a difficult concept which the Plaintiff has sought to support before us on the basis of a continuing representation.
Colman J also considered Gran Gelato v Richcliff [1992] Ch 560 and the argument of the Defendants that there was no need for a remedy against the estate agent as well as against his principal, the vendor. He did not accept this argument. He said (at p.25):
"For these reasons, with great respect to the more general remarks of Sir Donald Nicholls VC relating to negligent mis-statement and without wishing in any way to question the conclusion reached by him in relation to a solicitor acting for his client in a conveyancing matter, I am not persuaded that even if there normally would exist or did exist in the present case an alternative remedy against the vendors, the availability of that remedy would make it any less just and reasonable that a duty of care should be imposed on the defendant estate agents."
Accordingly he concluded that "the Defendants did owe a duty of care to the Plaintiff to avoid making the negligent [sic] mis-state ment which Mr Scott did indeed make and that they were therefore in breach of that duty by his making it". (p.26)
The Arguments on the Appeal
The Defendants attacked the Judge's reasoning and conclusion on a number of levels. Most radically, they submitted that an agent owes no duty of care to a third party with whom his principal is dealing: the duty is the principal's alone. In oral argument, this submission was modified to a narrower argument that since this transaction involved the sale of land the decision and reasoning of Nicholls VC in Gran Gelato should be applied to the case of an estate agent as well. Then they submitted that the Bridge criteria should be applied strictly and fully and that the present case did not satisfy the tests of foreseeability, proximity or fairness and justice. In developing these arguments they made submissions about the structure of the transaction and about the reasonable expectation of intervening advice and absence of reliance. They also criticised the Judge's acceptance of a concept of a springing duty of care and its imposition after the event on the person who had made the representation. They also relied upon the fact that the Plaintiff had received a copy of the particulars with the Defendants' disclaimer.
The Plaintiff founded his case upon Hedley Byrne. He submitted further that the Bridge criteria were satisfied. He submitted that Gran Gelato should be distinguished and that, if it could not be distinguished, it should not be followed. He argued that the duty of care existed (and was broken) at the time the oral statement was made and, if not then, that the Judge's conclusion that there was a duty to correct the misstatement when Mr Scott was told that there would be an immediate exchange was correct. The Judge had been right to treat the disclaimer as irrelevant to the oral statement.
In evaluating these arguments and discussing the relevant principles and authorities, which have been added to since this case was before the Judge, it is desirable to break the subject down into topics.
Hedley Byrne
This was the decision of the House of Lords which overruled the majority decision in Candler v Crane Christmas [1951] 2 KB 164 and held that a careless misrepresentation causing financial loss can be actionable as a tort apart from any contract or fiduciary relationship. The plaintiffs in Hedley Byrne were a firm of advertising agents who were placing advertising for a company called Easipower. Through their own bankers they asked for a banker's reference from the defendants, who were Easi power's bankers. The defendants wrote to the plaintiffs' bankers a letter which gave a reference which did not reveal Easipower's lack of creditworthiness. The defendants headed their letter with words which stated that the reference was given "without responsibility on the part of this bank or its officials". The Plaintiffs suffered financial loss as a result of relying upon the reference. At [1964] AC 486 Lord Reid said:
"A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or enquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer being given carefully, or to have accepted a relationship with the enquirer which requires him to exercise such care as the circumstances require".
At page 502, Lord Morris said:
"My Lords, I consider that it follows that 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 upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in any sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful enquiry, a person takes it upon 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 upon it, then a duty of care will arise."
At page 528, Lord Devlin said:
"I think therefore that there is ample authority to justify your Lordships in saying now that the categories of special relationships which may give rise to a duty to take care in word as well as in deed are not limited to contractual relationships or to relationships of fiduciary duty, but include also relationships which in the words of Lord Shaw in Nocton v Lord Ashburton, [1914] AC 932 at 972, are 'equivalent to contact' that is where there is an assumption of responsibility and circumstances in which, but for the absence of consideration, there would be a contract. Where there is an express undertaking, an express warranty as distinct from mere representation, there can be little difficulty. The difficulty arises in discerning those cases in which the undertaking is to be implied. In this respect the absence of consideration is not irrelevant. Payment for information or advice is very good evidence that it is being relied upon and that the informer or adviser knows that it is. Where there is no consideration, it will be necessary to exercise greater care in distinguishing between social and professional relationships and between those which are of a contractual character and those which are not. It may often be material to consider whether the adviser is acting purely out of good nature or whether he is getting his reward in some indirect form. The service that a bank performs in giving a reference is not done simply out of a desire to assist commerce. It would discourage the customers of the bank if their deals fell through because the bank had refused to testify to their credit when it was good."
Their Lordships were therefore of the opinion that the critical considerations were an (objective) appreciation that the representation would be relied upon and the assumption of a responsibility for the representation. It was no answer to the plaintiffs' contention that there was a duty of care that there was no contract between the plaintiffs and the defendants or that the representation was only made indirectly, through an intermediary bank.
The reason why the plaintiffs failed in Hedley Byrne was because of the defendants' disclaimer of responsibility. It was argued that the words of disclaimer were inadequate to negative a liability in negligence. Lord Reid, at page 492, pointed out that this argument was misconceived:
"In the case of a contract it is necessary to exclude liability for negligence, but in this case the question is whether an undertaking to assume a duty to take care can be inferred: and that is a very different matter."
"I am therefore of opinion that it is clear that the respondents never undertook any duty to exercise care in giving their replies. The appellants cannot succeed unless there was such a duty and therefore in my judgment this appeal must be dismissed."
Similarly, at page 504, Lord Morris said:
"In my judgment, the bank in the present case, by the words which they employed, effectively disclaimed any assumption of a duty of care. They stated that they only responded to the enquiry on the basis that their reply was without responsibility. If the enquirers chose to receive and act upon the reply they cannot disregard the definite terms upon which it was given. They cannot accept a reply given with a stipulation and then reject the stipulation."
At p.533, Lord Devlin said:
"A man cannot be said voluntarily to be undertaking a responsibility if at the very moment he is said to be accepting it he declares that in fact he is not. The problem of reconciling words of exemption with the existence of a duty arises only when a party is claiming exemption from a responsibility which he has already undertaken or which he contracting to undertake."
Thus the relevance of the disclaimer is to negative one of the essential elements for the existence of the duty of care. It negatives the assumption of responsibility for the statement. It implicity tells the recipient of the representation that if he chooses to rely upon it he must realise that the maker is not accepting responsibility for the accuracy of the representation. The disclaimer is part of the factual situation which the court has to take into account in deciding whether or not the defendant owed a duty of care to the plaintiff. Put another way, the question is whether the plaintiff was entitled to treat the representation as one for which the defendant was accepting responsibility. This is primarily a factual question.
The decision in Hedley Byrne has inevitably formed the starting point for the examination of the law in many subsequent authorities. In Caparo, where the House of Lords was primarily concerned with whether there was a sufficient connection between the maker of the statement and the person who said he had relied on it, Lord Oliver said, at p.638:
"What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice ('the adviser') and the recipient who acts in reliance upon it ('the advisee') may typically be held to exist where -
(1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially to the adviser at the time when the advice is given;
(2) the adviser knows either actually or inferentially that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose;
(3) it is known either actually or inferentially that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent enquiry, and
(4) it is so acted upon by the advisee to his detriment. That is not, of course, to suggest that these conditions are either conclusive or exclusive but merely that the actual decision in the case does not warrant any broader propositions."
In the same case Lord Bridge said, pp 620-1:
"The salient feature in all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circum stances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it. The situation is entirely different where a statement is put into more or less general circulation and may foreseeably be relied upon by strangers to the maker of the statement for any one of a variety of different purposes which the maker of the statement has no specific reason to anticipate."
After some criticisms in Smith v Bush and Caparo, the importance of the concept of assumption of responsibility in cases of negligent misrepresentation was again recognised in Henderson v Merrett Syndicates [1995] 2 AC 145. At page 181, Lord Goff said:
"In addition, the concept provides its own explanation why there is no problem in cases of this kind about liability for pure economic loss; for if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services. It follows that, once the case is identified as falling within the Hedley Byrne principle, there should be no need to embark upon any further enquiry whether it is 'fair, just and reasonable' to impose liability for economic loss - a point which is, I consider, of some importance in the present case. The concept indicates too that in some circumstances, for example where the undertaking to furnish the relevant service is given on an informal occasion, there may be no assumption of responsibility and likewise that an assumption of responsibility may be negatived by an appropriate disclaimer."
The other members of the House agreed with the speech of Lord Goff.
In White v Jones [1995] 2 AC 207 at 270, Lord Browne-Wil kin son also emphasised the importance of the concept, assumption of responsibility. He expressed himself in similar terms to those used by Lord Goff in the Henderson case. At pages 272-275 he said, inter alia:
"... the crucial element [in Hedley Byrne] was that, by choosing to answer the enquiry, the bank had assumed to act and thereby created the special relationship on which the necessary duty of care was founded."
"Just as in the case of fiduciary duties, the assumption of responsibility referred to is the defendant's assumption of responsibility for the task not the assumption of legal liability. Even in cases of ad hoc relationships it is the undertaking to answer the question posed which creates the relationship. If the responsibility for the task is as sumed by the defendant, he thereby creates a special relationship between himself and the plaintiff in relation to which the law (not the defendant) attaches a duty to carry out carefully the task so assumed."
"The Law of England does not impose any general duty of care to avoid negligent mis-statements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable. However, such a duty of care will arise if there is a special relationship between the parties. Although the categories of cases in which such special relationship can be held to exist are not closed, as yet only two categories have been identified, viz -
(1) where there is a fiduciary relationship, and
(2) where the defendant has voluntary answered a question or tendered skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice.
In both these categories a special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff's affairs or by choosing to speak. If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon. In the words of Lord Reid in Hedley Byrne he has 'accepted a relationship ... which requires him to exercise such care as the circumstances require', i.e. although the extent of the duty will vary from category to category, some duty of care arises from the special relationship. Such relationship can arise even though the defendant has acted in the plaintiff's affairs pursuant to a contract with a third party."
It is thus clear from the more recent authorities that Hedley Byrne is still the governing authority in cases such as the present. The elements of reasonable foreseeability and reliance are fundamental, as is the element of assumption of responsibility. The existence of a disclaimer is relevant to answering the relevant questions and thus to the question whether there was a duty of care.
Agency
Before turning to the facts of the present case, there is another fundamental point which needs to be considered. An agent or an employee, owes a duty of care to his principal in relation to the transaction on which he is employed, which can be both contractual and tortious (Midland Bank v Hett Stubbs [1979] Ch 384). But, in performing his agency, he may put himself in a position where he owes a duty of care to the person with whom he is dealing on behalf of his principal and be liable to him as well if he makes a careless misrepresentation or does a careless act which causes loss, damage or injury to the third party. Where personal injury is involved, no problem arises. An agent or employee who drives his employer's vehicle on his employer's business carelessly is liable to someone who is injured as a result. The same applies to careless acts causing property damage and can in principle apply to acts causing financial loss. (It might be thought that Marc Rich v Bishop Rock Marine [1995] 3 WLR 227 throws doubt upon this proposition but this is probably not correct and no argument to that effect has been advanced before us.)
The established law is stated in Hals bury's Laws vol.1(2) §176:
"Any agent, including a public agent, who commits a wrongful act in the course of his employment is personally liable to any third party who suffers loss or damage thereby, notwithstanding that the act was expressly authorised or rati fied by the principal unless it was thereby deprived of its wrongful character."
Indeed, in the absence of a contract, the tortious liability of the principal to the third party is normally a vicarious liability for the tort of his agent. The tortious liabilities of the principal and the agent are joint and several. The liability of the principal presupposes and is founded upon the tortious liability of the agent to the third party; if the agent has not committed a tort, the principal will not without more be liable in tort. If a person is in a relationship to a third party which gives rise in law to a duty of care owed to the third party, it is no answer for that person to say that he was acting as the agent of another. If the Hedley Byrne criteria are satisfied, the agent is liable in tort.
The point is usually identified only in cases when, exceptionally, the principal is unable, or unlikely to be able, to meet a judgment for the third party's loss and the agent will be able to do so. The agent, by reason of the fact that he is acting as an agent, does not have a contract with the third party; the only contract is between the third party and the principal. Since there has, ex hypothesi, been a breach by the agent of his duty to his principal, it would be possible, solvency apart, for the third party to recover from the principal and the principal to recover from the actual person at fault, the agent. Where the principal is insolvent, if the third party could not recover from the agent, the third party would be left without a remedy and the actual wrongdoer would be likely to escape liability unless some special arrangement were adopted which enabled the principal's right against the agent to be combined with the third party's right against the principal. On the other hand, there is no need to have this anomalous and artificial situation if the liability of the person actually at fault to the person who has actually suffered the loss is recognised in accordance with general tortious theory.
From the cases in which the point has been specifically discussed it is possible to select three cases of particular relevance: Punjab National Bank v de Boin ville [1992] 1 Lloyds 7; Gran Gelato (sup); and Hend erson (sup).
In Punjab National Bank, the plaintiff bank was the assured under, and/or assignee of, policies which it turned out were voidable by the under writers on the grounds of misrepresentation and nondisclosure. The brokers who had placed the risks were two firms of Lloyds brokers; they were limited liability companies. The individuals who had failed to make the relevant disclosure and who had made the misrepresentations were two individuals, Mr de Boinville and Mr Deere, who were at materi al times employees of one or other of the firms. There was no contract between the bank and either of the individual defendants, yet both at first instance and in the Court of Appeal it was held that they owed to the bank a duty of care. (pp.17-19 and 35-37) The judgments considered the question of principle and, specifically, the case Ministry of Housing v Sharp [1970] QB 223, CA, where a related point was discussed. They conclude that the careless employees, who were the actual individuals carrying out the transactions which gave rise to the obligation to exercise reasonable skill and care, themselves owed a legal duty of care towards persons who might suffer loss as a result of their carelessness. The relevant consideration is the part they play in the transaction, not the fact that they are the servant or agent of another; they are responsible for their own conduct.
"It is not every employee of a firm or company providing professional services that owes a personal duty of care to the client; it depends what he is employed to do: see the judgment of Cross LJ in Ministry of Housing v Sharp. But here Mr de Boinville and Mr Deere, whether in their employ ment with Wrights or with Fieldings, were evidently en trusted with the whole or nearly the whole of the task which their employers undertook. Mr Milligan argued that they were more remote from the bank than their employers. On the contrary, I think that their proximity was greater." (per Staughton LJ at p.37)
In Gran Gelato the plaintiffs were the purchasers of a 10 year underlease and the relevant defendants were the vendors' solicitors. The solicitors had carelessly given an incorrect answer to a pre-contract inquiry. The plaintiffs had as a result suffered a serious and foreseeable financial loss which the vendors were possibly unable to pay. Sir Donald Nicholls VC held that the solicitors owed to the purchasers no duty of care. He recognised, at p.571, that if the vendors became insolvent this would leave the purchasers without an effective remedy. He was not referred to either Sharp or Punjab National Bank (by which he was bound). His judgment starts with the recognition that the vendors for whom the solicitors were acting owed the purchasers a duty of care and that the solicitors were in breach of their duty of care to the vendors. (p.569)
He applied the Bridge formula, including whether the existence of a duty was "fair, just and reasonable". He said there was no problem about foreseeability or the presence of a close and direct relationship. The solicitors intended, or must be taken to have intended, that the purchasers would rely on the accuracy of the answers to the enquiries and that they would do so in connection with that particular transaction. The solicitors also foresaw, or were to be taken to have foreseen, that the solicitors might suffer financial loss if the answers were incorrect. The purchasers relied upon the solicitors to apply their legal exper t ise as solicitors when answering the enquiries. He continued (p.569):
"Thus far all the indications point towards it being just and reasonable to impose on [the solicitors] a duty of care in favour of Gran Gelato. Indeed all the factors which lead to the conclusion that a duty of care was owed by [the vendors] exist also in the case of [the solicitors]. The only material difference is that in making the representations [the solicitors] were acting not as principals but as agents on behalf of [the vendors]. They gave their answers as [the vendors'] solicitors for and on behalf of [the vendors]. Does this make any difference?"
Having referred to the fact that in Smith v Bush [1990] 1 AC 831 and Resolute Maritime v Nippon KK [1983] 1 WLR 857, the liability in negligence of an agent acting within the scope of his authority had been recognised under the Hedley Byrne principles, he made a distinction for solicitors involved in conveyancing trans actions. He referred to the fact that Morritt J in Cemp Properties v Dentsply Research [1989] 2 EGLR 205 at 207 had observed that "it would be absurd if the solicitor for one party to the transaction owed a duty of care to another party as well as to his own client".
The Vice Chancellor gave three reasons for his conclusion that "in normal conveyancing transactions solicitors who are acting for a seller do not in general owe to the would-be buyer a duty of care in answering enquiries before contract or the like". His three reasons were each similar. They effectively amount to the conclusion that it would not be "just and reasonable" to impose a liability on the solicitor towards the purchaser notwithstanding that it was the solicitor who was answering the questions and it was the solicitor's exercise of care and skill that was involved. The Vice Chancellor took the view that there were remedies against the vendor and that the law should require the purchaser to look exclusively to the vendor (even if he was not personally at fault and, any way, could not pay). His first reason was a simple statement that, in a conveyancing transaction, he was "far from persuaded that the fair and reasonable reaction to these facts is that there ought also to be a remedy against the other party's solicitor personally". (p.570) His second reason was that if the misrepresentation was made within the scope of the agent's authority there was a tortious remedy against the vendor. The third of his reasons I will quote in full:
"Thirdly, at the forefront of his submissions, Mr Jackson presented an argument that to impose a duty of care on solicitors would be to expose them to conflicting duties, with one duty owed to their clients, and another different duty to the buyer. I am not persuaded that this would be so. The duty to the buyer would be to take reasonable care to see that the answers provided were accurate. That duty would march hand in hand with a duty to the same effect owed by the solicitor to his own client. There would be no conflict. Nevertheless, and although I am not impressed by this argument based on conflict, it does seem to me that in the field of negligent misrepresentation caution should be exercised before the law takes a step of concluding in any particular context, that an agent acting within the scope of his authority on behalf of a known principle, himself owes to a third party a duty of care independent of the duty of care he owes to his principals. There will be cases where it is fair, just and reasonable that there should be such a duty. But in general in a case where the principal himself owes a duty of care to the third party, the existence of a further duty of care, owed by the agent to the third party, is not necessary for the reasonable protection of the latter. Good reason, therefore, should exist before the law imposes a duty when the agent already owes to his principal a duty which covers the same ground and the principal is responsible to the third party for the agent's shortcomings. I do not think there is good reason for such a duty in normal conveyancing transactions." (p.571)
The reasoning of the Vice Chancellor, unless it is confined to stating a special rule applicable to solicitors in conveyancing transactions, is in my judgment inconsistent with the ratio decidendi of Punjab National Bank and with the general principle of tortious liability where the person doing the relevant act is the agent of another, which the Vice Chancellor himself recognised in his citation of Smith v Bush and Resolute Maritime.
With respect to the Vice Chancellor, when he says that "where the principal himself owes a duty of care to the third party, the existence of a further duty of care, owed by the agent to the third party is not necessary", he appears to overlook that, in the relevant context, the duty in tort arises from the act of the solicitor in choosing to answer the inquiry. There is only one duty; it is the duty of the solicitor to take reasonable care in answering. The duty in tort is both created and broken by the solicitor. The tortious liability of the principal is, in this context, not for what he has himself done but is a vicarious liability for the tort of the solicitor.
There are other situations where the basis of the principal's liability is different. Thus, the tortious act of the agent may have been specifically authorised by the principal; or the agent may have been innocent and the actual fault may be that of the principal, as for example where the misrepresentation by the agent was the result of his having passed on information given to the agent by the principal which the agent did not know was incorrect. In such cases there is a direct, not an imputed, liability of the principal. Similarly, the liability of the principal may arise under statute as, for example, under the Misrepresent ation Act 1967. In any such situation the analysis will be different. Such considerations were discussed in, for example, Ministry of Housing v Sharp, Punjab National Bank and in cases such as Anderson v Rhodes [1967] 2 AER 850. The position under the Misrepresentation Act was analysed in Resolute Maritime v Nippon KK and clearly was an important factor influencing what Morritt J said in Cemp v Dentsply.
In the Dentsply case a vendor of land had had to pay the purchaser over £150,000 under s.2(1) of the Misrepresentation Act to com pen sate the purchaser for having paid a price for the land which exceeded its true value. The vendor's solicitors had failed to disclose to the purchaser, when answering pre-contract inquiries, that there were deeds which granted neigh bouring proprietors rights to light and air. The fault was the solicitors'. The relevant result was that the purchaser had paid and the vendor had obtained too high a price for the land; even after compensating the purchaser the vendor had not suffered a loss. In this respect he had merely been put back into the position he would have been in had the solicitor given the correct answers. The relevant part of proceedings before Morritt J was a claim in third party proceedings by the vendor (R&D) against the solicitors (DHB) to recover a contribution under s.2(2) of the Civil Liability (Contribution) Act 1978 in respect of the vendor's liability to the purchase under the Misrepresentation Act -
2(2)Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).
Morritt J said:
"Thus R&D would have to establish that DHB was liable to Cemp for the same damage. As the disclosed agent acting within the scope of their authority, DHB could not be liable to Cemp under the Misrepresentation Act 1967 (see Resolute Maritime Incorporated v Nippon KK). It may be that in some cases there are circumstances giving rise to a special relationship between the vendor's solicitor and the purchaser from which a common law duty of care arises, but this was a perfectly normal conveyancing transaction in which the vendor's solicitors answered inquiries before contract raised by the purchaser's solicitors. In those circumstances it would be absurd if the solicitor for one party to the transaction owed a duty of care to another party as well as to his own client." (p.207)
In this situation, the obviously just result is that the liability to make good the purchaser's loss should ultimately be borne by the party who has been unjustly enriched, that is to say, the vendor. But it does not follow that if, for any reason, the vendor is unable to make good the purchaser's loss the purchaser should not be compensated by the person actually at fault, the solicitor or other agent who made the misrepresentation. If the vendor and the agent are to be treated as joint tortfeasors each liable in respect of the same damage, the 1978 Act provides a method of apportioning liability between them which is just and equitable. If on the other hand the agent is to be treated as protected from tortious liability, the Act will not apply; this was the result of the decision of Morritt J. There are bound to be problems where the careless ness of the agent causes his principal's property to be sold at an over-value but they are not avoided by refusing to recognise the tortious liability of the agent for his own fault; and there may be cases where the solicitors' careless misrepresent ation has caused other types of loss to the purchaser which do not carry equivalent benefits to the vendor.
The limited scope of the decision in Gran Gelato appears to have been recognised in White v Jones [1995] 2 AC 207 both in the Court of Appeal and in the House of Lords. White v Jones also involved the potential liability of a solicitor, in that case, a solicitor employed by a prospective testator who had instructed the solicitor to prepare a will for him under which legacies were to be left to the plaintiff. The solicitor, in breach of his duty to his employer, delayed in the preparation of the will with the result that his employer died without executing the will which would have left the money to the plaintiff. Both the Court of Appeal and (by a majority) the House of Lords held that the solicitor did owe the plaintiff a duty of care. In the Court of Appeal, in the judgment of Nicholls VC himself, and in the House of Lords, in the speech of Lord Goff, Gran Gelato was referred to and the Vice Chancellor put a restric ted interpretation on the scope of his earlier decision.
"In general and always leaving reliance cases on one side, a solicitor owes a professional duty of care to his client and no one else. He is subject to professional rules and standards, and he owes duties to the court as one of its officers. But within that framework it is to his client alone that he owes a duty to exercise the standard of skill and care appropriate to his status as a solicitor. Thus, in general, when acting for a seller of land a solicitor does not himself owe a duty of care to the buyer: see Gran Gelato v Richcliff." (p.223)
Lord Goff referred to what Nicholls VC had said in the Court of Appeal as an aspect of the well established general rule "that a solicitor acting on behalf of his client owes a duty of care only to his client". A solicitor owes a duty of care to his client which arises concurrently in contract and in tort.
"But, when a solicitor is performing his duties to his client, he would generally owe no duty of care to third parties. Accordingly, as Sir Donald Nicholls VC pointed out in the present case, a solicitor acting for a seller of land does not generally owe a duty of care to the buyer: see Gran Gelato v Richcliff." (p 256)
It thus appears that there is a rule of policy which gives a solicitor a special immunity even in a non-adversarial context such as conveyancing where, as Nicholls VC himself pointed out in Gran Gelato, there is no conflict between the duty owed to the client and that which might be owed to the third party. Further this immunity is apparently to co-exist with a continuing (vicari ous) tortious liability of the principal. In White v Jones it was not necessary for the House of Lords to consider the more general question of the liability of agents and indeed, the actual decision holding the solicitor liable is in no way inconsistent with agents being liable for their prima facie tortious acts. White v Jones was also the case in which Lord Browne-Wilkinson made the statement about the ambit of Hedley Byrne which I have already quoted.
In the Henderson case, the Punjab National Bank case was cited in the speech of Lord Goff with which the other members of the House all agreed. The case was concerned with whether manag ing agents had a duty of care to "indirect" Names, that is to say, Names who had given authority for risks to be underwritten at Lloyds which were binding on them but who were not in contractual relations with the agents who were doing the actual underwriting. Since there was no contractual liability, the question was whether there was a tortious liability arising out of the careless and unskilful underwriting of the agents which had caused loss to the plaintiff Names. The House of Lords held that the Defendants did owe the plaintiffs a duty of care. Lord Goff, as illustrated by the quotations that I have already made from his speech, based his decision firmly upon the principles to be found in Hedley Byrne and the concept of assumption of responsibility. Applying that principle to managing agents at Lloyds, he said (at pp.181-2):
"Since it has been submitted on behalf of the managing agents that no liability should attach to them in negligence in the present case because the only damage suffered by the Names consists of pure economic loss, the question arises whether the principle in Hedley Byrne is capable of applying in the case of underwriting agents at Lloyds who are managing agents. Like Saville J and the Court of Appeal, I have no difficulty in concluding that the principle is indeed capable of such application. The principle has been expressly applied to a number of different categories of person who perform services of a professional or quasi-professional nature, such as bankers (in Hedley Byrne itself); solicitors (as foreshadowed by Lord Devlin in Hedley Byrne, as held in the leading case of Midland Bank Trust Co Ltd v Hett Stubbs, and other cases in which that authority has been followed); surveyors and valuers (as in Smith v Bush); and accountants (as in Caparo Industries v Dickman). Another category of persons to whom the principle has been applied and on which particular reliance was placed by the Names in the court below and in the argument before your Lordships his insurance brokers. As Phillips J pointed out in Youell v Bland Welch [1990] 2 Lloyds 431, 459, it has been accepted, since before 1964, that an insurance broker owes a duty of care in negligence towards his client, whether the broker is bound by contract or not. Furthermore in Punjab National Bank v de Boin ville it was held by the Court of Appeal, affirming the decision of Hobhouse J, that a duty of care was owed by an insurance broker not only to his client but also to a specific person whom he knew was to become an assignee of the policy. For my part I can see no reason why a duty of care should not likewise be owed by managing agents at Lloyds to a Name who is a member of a syndicate under the management of the agents. ... The managing agents have accepted the Names as members of a syndicate under their management. They obviously hold themselves out as possessing a special expertise to advise the Names on the suitability of risks to be underwritten; and on the circumstances in which, and the extent to which, reinsurance should be taken out and claims should be settled. Names, as the managing agents well knew, placed implicit reliance on that expertise in that they gave authority to the managing agents to bind them to contracts of insurance and reinsurance and to the settlement of claims. I can see no escape from the conclusion that, in these circumstances, prima facie a duty of care is owed in tort by the managing agents to such Names. To me, it does not matter if one proceeds by way of analogy from the categories of relationship already recognised as falling within the principles in Hedley Byrne or by a straight application of the principles stated in the Hedley Byrne case itself. On either basis the conclusion is, in my opinion, clear. Furthermore, since the duty rests on the principle in Hedley Byrne, no problem arises from the fact that the loss suffered by the names is pure economic loss."
In a later passage in his judgment (pp.195-6) Lord Goff contrasted this conclusion with the position of a building sub-contractor who will normally only owe a limited tortious duty to the employer although he is under contractual obligations to the head contractor.
These authorities show that the governing principle is still that in Hedley Byrne and that an agent can be held responsible for a careless misrepresentation as much as his principal. In certain special situations, rules which restrict the liability of the agent may be superimposed. One such situation is, on the basis of Gran Gelato, a solicitor in a conveyancing transaction. The present case concerns a prospective purchase of an estate in land but the agent involved is the estate agent not the solicitor. The question therefore becomes whether in this transaction the same special rule should be applied to the estate agent in respect of a misrepresentation. The difficulty in answering this question lies in identifying the reason, consistent with principle as reconfirmed in Henderson and binding authority as in Punjab National Bank, for the solicitor's immunity. For myself I am unable to make a wholly confident identification but it is apparently based upon the special role of a solicitor and grounds of policy relating to that role. Nicholls VC seems to have put it this way in what he said in the Court of Appeal in White v Jones: It is the professional duty of the solicitor that is owed to his client alone. It is in the activities covered by the rules and standards of his profession and his duties to the court as one of its officers that the restriction applies. Within that framework and when exercising the standard of skill and care appropriate to his status as a solicitor his duty is confined to that to his client. In any other situation, or when it is a reliance (ie Hedley Byrne) case, the special rule does not apply. This conclusion is the minimum which is consistent with deciding White v Jones in favour of the plaintiff. There is no need to discuss the further problem whether the activities of a solicitor in a conveyancing transaction, and in answering precontract inquiries, will invariably fall into the protected category. What is clear is that these reasons cannot apply to an estate agent or an agent who will not be liable save on a Hedley Byrne basis.
I therefore approach the present case applying the principles to be derived from Hedley Byrne as stated by Lord Goff and Lord Browne-Wilk in son without the superimposition of any extra requirement of fairness or justice or any special rule of policy.
The Structure of the Transaction
In the present case there was a direct relationship between Mr Scott and Mr McCullagh. Mr Scott made the representation to Mr McCullagh: he chose to speak to him and make a factual statement which was designed to influence the decision making processes of Mr McCullagh. Mr Scott was holding himself out as a person who knew the area of the land being offered for sale, presumably because he had measured it or had supervised its measurement. He had a special knowledge which was not available to Mr McCullagh. The relation ship was a business one. Mr Scott had a financial interest in influencing persons to buy the property and to buy at as high a price as could be negotiated. His remuneration, as everyone knew, was dependant upon someone agreeing to buy the land and upon the price at which that person was willing purchase. He would be paid by way of a commission payable out of the deposit paid by the purchaser. Indirectly, he would be paid by the purchaser. The absence of a specific consideration moving directly from the representee to the representor is the only thing which prevents the rela ti on ship between them from being contractual. Thus far I see nothing in the structure of the transaction which would negative a duty of care to be owed by the estate agent in relation to any representation the estate agent chooses to make to the prospective purchaser for the purpose of influenc ing him to buy. It is his choice to make a representation intended to influence the representee which amounts to the assumption of responsibility. It is foreseeable that such a representation may be relied on since it was intended to have the effect of influencing the prospective purchaser to buy.
The Defendants counter this conclusion with an argument which can be advanced both as a matter of principle and by reference to the facts of this case. In the law of negligence the concept of proximity is inconsistent with the contemplation or expectation of an intermediate check. In Donoghue v Stevenson [1932] AC 562 at 582, Lord Atkin referred to "the proximate relationship which may be too remote where inspection even of the person using [the article], certainly of an intermediate person, may be interposed". Thus, in product liability cases, the likelihood that there will be an intermediate inspection or check, negatives the existence of the duty of care. (Herchtal v Stewart & Arden [1940] 1 KB 155; Haseldine v Daw [1941] 2 QB 343)
In a transaction for the sale of land, it will normally be contemplated that there will be pre-contract enquiries which will be used by the prospective purchaser to obtain specific represen tations verifying important facts. Similarly parties will very frequently instruct a surveyor to carry out a structural survey before deciding to make an offer or to exchange contracts. Thus, it does not follow that a representation, although intended to influence the representee, will be relied upon in the relevant way without an intermediate check. It is therefore necessary to examine further the significance of the representation in the transaction. This is not something which is peculiar to estate agents nor does it amount to some special principle of qualified liability for estate agents.
The application of this principle must depend upon the facts of the case before the court. The facts of the present case can be broken down into 5 stages -
(1)At No.61, Mr Scott tells Mr McCullagh that the area is 0.92 acres.
(2)Mr Scott learns that the intention of Mr McCullagh is to demolish the house and re-build. From this it would be reasonable to infer that Mr Scott would not be troubling with a structural survey of the house.
(3)In Mr Scott's presence, Mr McCullagh is given a copy of the Lane Fox particulars, which includes the statement about the acreage and the disclaimer.
(4)Mr McCullagh makes a subject to contract offer to Mr Scott and Mr Scott tells him of the need for speed in view of the other offer. Mr McCullagh increases his offer and says that he will exchange the following day. From this it would be reasonable to infer that it would be quite likely that Mr McCullagh would not make any further inquiries or carry out any independent check of the acreage before committing himself contractually.
(5)In reliance upon the statement that the area was 0.92 acres, Mr McCullagh commits himself contractually and suffers loss.
In my judgment, the relevant time at which to ask whether the tort of negligence has been committed is the time at which it is said that the plaintiff has suffered loss. Causing loss or damage is an essential part of the tort of negligence. If by this time the requisite elements of the commission of the tort have come into existence, it is immaterial that at some earlier time they may not all have done so. For example, a food manu facturer may, without negligence on his part and without being aware that it has occurred, deliver contaminated food to a supermarket. Shortly afterwards he discovers what has happened. With this knowledge, he can foresee that, if he does not immedi ately warn the supermarket, consumers may be injured. It is easy to understand that he consequently owes to possible consumers a duty of care to warn the supermarket. If he does not and consumers are injured, it will be no answer for him to say that the original manufacture of the food was not careless. The Donoghue v Stevenson principle relates to the avoidance of injury to the plaintiff: the duty is to take reasonable steps to protect from injury those persons whom he can reasonably foresee may be injured by his product.
Returning to the present case, I consider that the question whether Mr Scott owed to Mr McCullagh a duty of care must be answered taking into account all that Mr Scott knew and ought reason ably to have known and contemplated at the time he last spoke to Mr McCullagh before Mr McCullagh finally relied upon what he had said on the Saturday morning. Having made a representation, the relationship had been established and the potential for a duty of care continued up to the time that the representation was finally relied on. As soon as it becomes reason ably foreseeable by him that a careless misrepresentation might cause loss to Mr McCull agh, it was his duty to take reasonable steps to see that Mr McCullagh was not caused loss. The law of negligence is in line with the law of contract and other aspects of the law of tort. A representation is treated as continuing up to the time of the making of the contract, or other reliance, with a co-relative duty on the maker to correct any misrepresentation. (Banque Keyser Ullman v Skandia [1990] 1 QB 665; Davies v London Provincial Marine (1878) 8 Ch D 469.) Accordingly I do not accept the Judge's approach to the origin of the duty (if any) of the Defendants nor the Defendants' argument based upon the Judge's approach.
On the Sunday, Mr Scott knew, or ought to have known, that his representation was likely to be relied on by Mr McCullagh. However he also knew that Mr McCullagh had the Lane Fox particulars which included both the relevant statement and the disclaimer. In my judgment the result of this is that the element of proximity was negatived. A reasonable person, appreciating that the statement which he was proposing to rely upon was a statement contained in the particulars and the fact that those particulars also stated that
"all statements contained in these particulars as to this property are made without responsibility on the part of Lane Fox ...",
would understand that there was no assumption of responsibility by Lane Fox. This understanding would be reinforced by para graphs 3, 4 and 5 of the disclaimer. In my judgment the dis claim er puts the present case on all fours with the actual decision in Hedley Byrne as explained earlier.
The Judge avoided this conclusion by approaching the disclaimer as if it were a contractual exclusion. On such an approach it would need to be strictly construed and the argument was available that it did not as such cover an oral statement. But that is not, in my judgment, the right approach. It is not an exclusion to be construed. The right approach, as is made clear in Hedley Byrne, is to treat the existence of the disclaimer as one of the facts relevant to answering the question whether there had been an assumption of responsibility by the Defendants for the relevant statement. This question must be answered objectively by reference to what a reasonable person in the position of Mr McCullagh would have understood at the time that he finally relied upon the representation. In this context, it is obvious that the statement that the acreage of the property is 0.92 was a statement which was taken from the particulars and that the Defendants were not assuming responsi bility for that statement. The mere fact that Mr Scott, when showing Mr Mc Cullagh round the property, gave the same inform ation to Mr McCullagh orally would not lead a reasonable person to conclude that the Defendants were there by choosing to assume responsi bility for the statement which they said in the particulars they were not assuming responsi bility for. The sub mission that such a conclusion would be reasonable is unreal. It was not supported by any evidence. Mr McCullagh said (surprisingly) that he had not bothered to read the particulars but he also said that he knew that they would contain disclaimers of the type which they in fact did. The submission was further inconsistent with paragraph 5 of the dis claimer. The essence of the law of negligence is the application of objective standards of reason ableness. By those standards, it is clear that the Defendants were not assuming responsibility for the accuracy of the statement about the acreage. The position might be different if the representation had been about something not, or not expected to be, included in the particulars.
The result of this conclusion is that, having regard to the disclaimer, Mr McCullagh was not reasonably entitled to believe that the Defendants were assuming responsibility for the relevant statement. Therefore, applying Hedley Byrne, they owed him no duty of care in relation to its accuracy unless the Unfair Contract Terms Act 1977 precludes the Defendants from using the dis claimer.
I should, however, add that I see a further difficulty in the way of the Plaintiff's case. The act of reliance which is critical to the Plaintiff's case - the factor which was alleged to connect the conduct of the Defendants to the loss suffered by Mr Mc Cullagh - was Mr McCul lagh's entry into the contract to purchase No.61. As previously stated, it was a term of that contract that:
"13.The purchaser hereby acknowledges that the purchaser has not entered into this contract in reliance wholly or partly upon any statement or representation whether made orally or in writing or otherwise howsoever by or on behalf of the vendor save for the written replies of the vendor's solicitors to enquiries made by the pur chaser's solicitors."
Thus at the very time at which he has to say as against the agent that he is relying on what the agent acting for the vendor has repre sented, he is contracting with the vendor that he has not relied upon that representation in entering into the contract. The diffi culties that this presents for the imposition by the law on the agent of a duty of care to the purchaser in respect of such a statement have not been the subject of argument before us. I would require to be persuaded that it was open to the purchaser to adopt this inconsistent stance as against the agent and his principal within the scope of the same transaction and in relation to an act of the former as an agent of the latter. I would not regard it as, to use Lord Bridge's phrase, "fair, just and reasonable". However, for the reasons which I have already given, I do not need to enter further into this aspect of the case and do not base my decision of this appeal upon it.
The Unfair Contract Terms Act
In view of his other decisions, Colman J did not have to consider the effect of this Act. Despite its title, the Act applies to more than just contractual terms. Section 2 provides:
"(1)A person cannot by reference to a contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.
(2)In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness."
Section 11 provides:
"(3)In relation to a notice (not being a notice having contractual effect) the requirement of reasonableness under this Act is that it should be fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen."
It is thus clear, that if it would not be fair and reasonable to allow the Defendants to rely upon the disclaimer in the particulars, the disclaimer will have to be disregarded and, for the reasons given earlier in this Judgment, the consequence would be that the Defendants must be taken to have assumed responsibility for the representation and to have owed a Hedley Byrne duty of care to Mr McCullagh. The relevance of the Act and the ability to rely upon a disclaimer was central to the decision of the House of Lords in Smith v Bush and Harris v Wyre Forest [1991] AC 831 and is explained and elaborated in the speech of Lord Griffiths at pp.856-859.
It is for the Defendants to establish that it is fair and reasonable that they should be allowed to rely upon the disclaimer. This was a transaction which involved a sophisticated and experienced member of the public. Mr McCullagh had himself given Mr Scott to understand this. Mr McCullagh had the relevant document in his possession and was aware that it would contain a disclaimer. If, as the Judge was apparently prepared to accept, Mr McCullagh did not even trouble to read the document, he had more than an ample opportunity to do so and to inform himself fully of what it contained. There is no suggestion that he was in any way misled or was in any material respect unaware of the likely, and actual, contents of the document. He had ample opportunity to regulate his conduct having regard to the disclaimer. He could have obtained, had he so chosen, an independent check of the acreage. Indeed he appears to have accepted in evidence that, even within the tight time-table which he was following, he did have this opportunity had he wished to avail himself of it.
Further Mr McCullagh had, and would have been assumed by all concerned to have, the benefit of legal advice and representation. The normal structure of contracts for the purchase of land is that the intending purchaser, before he exchanges contracts, is able through his own solicitor to interrogate the proposed vendor and is entitled to rely upon the answers to such enquiries as representations which have induced the contract with all the legal consequences that flow from that situation. The use of disclaimers to insulate the estate agent, and the estate agent's principals, from responsibility for representations made by estate agents is commonplace and is the normal basis upon which house sale transactions are carried out every day across the country. It was also normal that there should be a term in the contract of sale such as clause 13. Mr McCullagh had complete freedom of contract and was in a position to negotiate on an equal footing with the vendor.
There was no basis for saying, in the context of the present case, that it would be unfair to Mr McCullagh to allow the Defendants to rely upon the disclaimer nor that it would be unreasonable. Indeed, since Mr McCullagh expected that the particulars would contain a disclaimer, it would, in my judgment, be unreasonable and unfair to the Defendants to allow him to claim against the Defendants as if there had been no such disclaimer. The point would have been wholly unarguable if Mr McCullagh had been relying upon the statement in the written document. In my judgment, the fact that the same statement was made orally does not reduce the fairness and reasonableness of the Defendants' reliance on the disclaimer. In the present case, the oral comment of Mr Scott had the character of an oral quotation of what Mr McCullagh would expect to be contained in the written particulars and the oral statement did not in fact go beyond anything contained in the written particulars; these considerations show clearly that reliance on the disclaimer is both fair and reasonable.
Accordingly, in my judgment, the position remains that the Defendants did not owe to the Plaintiff the alleged duty of care and they are not liable to him. The Appeal will fall to be dismissed on this ground. The remaining points can be disposed of shortly.
THE REMAINING POINTS
Reliance in Fact
The Judge accepted Mr McCullagh's evidence that he did in fact rely upon what Mr Scott had told him on the Saturday morning. Mr McCullagh's evidence was that the acreage was a matter of importance to him and that he was strongly influenced by his belief, derived from what Mr Scott had said, that the area of the plot was more than 0.9 of an acre. The Judge was entitled to accept this evidence. It follows that the Judge was entitled to find further that the misrepresentation had induced Mr McCullagh to enter into the contract to buy the land for £875,000. The Judge was also entitled to find that the misrepresentation of Mr Scott was a cause of Mr McCullagh's loss. This is in truth the relevant conclusion as the question is one of causation. Therefore had the duty of care been established the criterion of causation would have been satisfied.
Contributory Negligence
Colman J did not have to deal with this allegation; nor do I. Further, it depends upon the hypothesis that Mr McCullagh was entitled, in entering into the contract to purchase, to rely on what Mr Scott had said. In my judgment he was not. However, if the hypothesis was to be accepted together with the implications which follow from it, there would be very considerable diffi culties in the way of the Defendants' allegation that Mr Mc Cullagh was guilty of contributory negligence. Mr McCullagh, when ques tioned about the reasonableness of what he had done, answered robustly in the terms which I have quoted earlier:
"Why should I doubt Lane Fox's word?" (Day 1, p.34).
Nicholls VC, in Gran Gelato at pp.572-575 rejected a similar allegation of contributory negligence. He referred to what Sir George Jessel MR had said in Redgrave v Hurd (1881) 20 Chancery Division 1, at p.14:
"... It has been repeatedly held that the vendor cannot be allowed to say, 'You were not entitled to give credit to my statement'. It is not sufficient therefore to say that the purchaser had the opportunity of investigating the real state of the case but did not avail himself of that opportunity."
In Nocton v Lord Ashburton [1914] AC 932 at 962 Lord Dunedin said:
"No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he made it had available the means of correction."
CONCLUSION
For the reasons given in this Judgment, which are not the same as those given by the Judge, this Appeal should be dismissed and the Judgment in favour of the Defendants should stand.
SIR CHRISTOPHER SLADE:
I have had the advantage of reading the judgment of Lord Justice Hobhouse in draft. Subject to what is said below, relating to the duty of care owed by Lane Fox to Mr McCullagh, I am in entire agreement with his conclusions.
Two striking features of this case deserve mention. First, though the particulars relating to No. 61 Hartington Road prepared by Lane Fox contained a specific representation that the property is "set in 0.92 of an acre of its own private gardens", the misrepresentation contained in the particulars has not been relied on by the plaintiff's counsel, either in pleading or in argument, as giving rise to a cause of action. It was, no doubt, accepted that paragraph 2 of the disclaimers at the end of these particulars would provide a complete answer to any such argument.
Secondly, the plaintiff's statement of claim in effect asserted that the alleged duty of care owed by Mr. Scott to the plaintiff arose (and was broken) at the time when, during the plaintiff's first visit to the property in the morning of Saturday 12th May 1990, Mr. Scott informed the plaintiff that the size of the site was .91 acres. This, I understand, was the basis on which the plaintiff's case was presented in the Court below.
That submission, however, gave rise to difficulties which were appreciated by the Judge. I believe that one of the salient features of all the cases in which, in the absence of a contractual relationship between representor and representee, a misrepresentation has been held to give rise to a breach of duty of care in tort, is that the defendant has known, actually or inferentially, that it was likely the plaintiff would rely on the representation without further independent inquiry, for the purpose for which he did rely on it: (see for example Caparo Industries PLC v. Dickman [1990] 2 AC 605 at pp. 620H-621A per Lord Bridge and at p. 683D per Lord Oliver).
In the present case, Colman J. was in my judgment clearly right to form the view that Mr. Scott did not owe the plaintiff a duty of care on the Saturday morning when Mr. Scott made the relevant statement, if only because at that time he would have been entitled reasonably to take the view that his statement would be independently checked and would not be relied on.
The more pertinent question is whether (as the Judge held and was argued in the alternative on behalf of the plaintiff in this Court) the duty of care arose at the time when Mr. Scott first appreciated that the plaintiff would be exchanging contracts without a survey.
This conclusion imports the concept that, at that time, Mr. Scott became under a duty to correct his previous oral misstatement as to acreage, even though (a) at the time when he had made it he owed no duty to the plaintiff, and (b) at the relevant later time he was still not aware that his previous statement had been mistaken. I, for my part, find this a difficult concept. The decision in Davies v. London & Provincial Marine Insurance Company [1878] 8 Ch. D. 469 referred to by Lord Justice Hobhouse is authority for the well established principle that if a party to a contract has made a statement to the other party which he believes to be true but which in the course of the negotiation he discovers to be false, he is bound to correct his erroneous statement. I accept also that a failure to speak can give rise to tortious liability in negligence under Hedley Byrne principles, provided that there has been on the facts a voluntary assumption of responsibility in the relevant sense, so as to give rise to a duty to speak, and reliance on that assumption: (see Banque Keyser Ullman v. Skandia [1990] 1 QB 665 at p. 794D). Special considerations may apply to cases where parties are negotiating a contract uberimae fidei. In other cases, however, I am doubtful whether a mere failure to correct an innocent misrepresentation can give rise to liability in tort unless either (a) the representor assumed responsibility for its truth at the time when the representation was originally made, or (b) the representor subsequently became aware that it was untrue and was likely to be acted upon, before in fact it was acted upon by the representee. No authority has been cited to us which supports a contrary conclusion. Neither condition (a) nor condition (b) is in my view satisfied in the present case.
I therefore incline to the view that, on the particular facts of this case, no breach of duty by Lane Fox to the plaintiff would have been established even in the absence of the disclaimers contained in the particulars.
When the particular facts of this case are examined, however, the disclaimers in my judgment put the matter beyond doubt. The relevant oral misrepresentation made on the Saturday morning was not even made in response to a question addressed to Mr. Scott by the plaintiff. As the Judge found, the circumstances in which it was made were as follows:
"When [the plaintiff] mentioned that No. 61 was a one acre site, Mr. Scott corrected him, saying that it was in fact only '0.91 acres'."
I have already given reasons for concluding that Mr. Scott assumed no responsibility to the plaintiff for the truth of that representation at that time. The suggestion is that he assumed responsibility for its truth later in the weekend, after the meeting at the property had ended and Mr. Scott came to realise that contracts were to be exchanged on the Monday. But by that time the plaintiff had been supplied with the particulars and could be reasonably expected to have read them, even if he did not do so. I agree with Lord Justice Hobhouse that in the light of the disclaimers contained in them, the plaintiff, at the time when he exchanged contracts, could not reasonably have supposed that Mr. Scott, on behalf of Lane Fox, had assumed responsibility for the accuracy of any statement of the acreage, whether it was contained in the particulars or had been made orally. The assumption of responsibility had been negatived by an appropriate disclaimer: (see per Lord Goff in Henderson v. Merrett Syndicates [1995] 2 AC 145 at p. 181). I also agree that, on the facts of this case, the Unfair Contracts Terms Act 1977 does not have the effect of negativing the disclaimers.
The Property Misdescriptions Act 1991, which came into force on 4th April 1993 gives additional protection to the public by making estate agents criminally liable for statements as to specified matters which are false or misleading to a material degree. These specified matters include statements as to "accommodation, measurement or sizes": (see The Property Misdescriptions (Specified Matters) Order 1992 No. 2834, Schedule, paragraph 5). The statutory defence to this offence afforded by section 2 is one based on "due diligence". Section 1 (4), however, expressly provides that no right of action in civil proceedings in respect of any loss shall arise, by reason only of the commission of an offence under this section. Thus, so far, Parliament has not thought it necessary to legislate so as to impose civil liability on estate agents who, in the course of acting for sellers of property, make misrepresentations as to its area or other characteristics. I, for my part, do not doubt that in some circumstances civil liability in tort can arise from such misrepresentations under the common law. Whether or not it will do so must depend on the facts of the particular case.
While I have some sympathy with the plaintiff, I conclude that, on the facts of the instant case, no relevant duty of care arose and would concur in dismissing the appeal on this ground.
LORD JUSTICE NOURSE:
I have had the advantage of reading in draft the judgments of Lord Justice Hobhouse and Sir Christopher Slade. While I would, like them, decide the damages issue in favour of the plaintiff, I agree that the appeal fails on the ground that no duty of care was owed to the plaintiff by Lane Fox.
On the latter issue my approach is similar to that of Sir Christopher Slade. In particular, for the reasons given by him, I share his inclination to the view that, on the particular facts of this case, no breach of duty by Lane Fox to the plaintiff would have been established even in the absence of the disclaimers contained in the particulars. However, since the disclaimers put the matter beyond doubt, it is unnecessary to be more positive than that. Nor, since all these cases in the end depend on their own facts, is it desirable to decide more than it is necessary to decide.
It was suggested in argument that the position of an estate agent acting for a vendor in a house sale is analogous to that of a solicitor acting for a vendor in such a transaction, so that in general the estate agent does not himself owe a duty of care to the purchaser; cf. Gran Gelato Ltd. v. Richcliff (Group) Ltd. (1992) Ch. 506 and the observations on that decision in White v. Jones (1995) 2 AC 207, at pp.223 and 256. While recognising that there is, to some extent, such an analogy, I am nevertheless of the opinion that it should be approached with caution. That is because the very function of an estate agent so acting is prone to take him out of the general and bring him under a particular duty to a prospective purchaser, especially one who is not himself represented by an agent in the transaction. Perhaps the lesson of this case is that an estate agent is well advised not act for a vendor in a house sale without appropriate disclaimers, to which the attention of prospective purchasers is drawn.
The appeal is dismissed.
Order:appeal dismissed with costs; leave to appeal to the House of Lords refused.
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