Commercial Banking Co of Sydney Ltd v R H Brown & Co

[1972] HCA 24

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Menzies, Owen and Gibbs JJ. (THE RIGHT HONOURABLE MR JUSTICE OWEN died before the delivery of judgment in this case.)

COMMERCIAL BANKING CO. OF SYDNEY LTD. v. R.H. BROWN &CO.

(1972) 126 CLR 337

10 April 1972

Fraudulent misrepresentation

Fraudulent misrepresentation—Deceit—Inducement—Inquiry as to financial standing of dealer—Representation of creditworthiness made to plaintiffs' banker—No knowledge of particular customer for whom inquiry made—Disclaimer—Whether protection against claim for fraud—Damages.

Decisions

April 10.
The following written judgments were delivered:-
BARWICK C.J. In this appeal I have had the advantage of reading the reasons for judgment prepared by my brother Menzies. The facts and circumstances of the case are there sufficiently set out and I do not wish to supplement them. (at p339)

2. I agree with my brother's conclusions and his reasons therefor. For myself, I would add that I think there was ample material to support the conclusion that the statements made by the appellant's Perth manager could not have been made honestly having regard to the knowledge of the affairs of Wool Exporters Pty. Ltd. which he undoubtedly had. (at p339)

3. Further, the evidence before the trial judge of the practice of bankers in Australia made it proper, in my opinion, to find that the intention of the appellant's manager in issuing the bank report was that it should be communicated in terms to that customer or those customers on whose behalf or in whose particular interest the report had been sought by the Bank of New South Wales. No doubt, had fraud not been present, the appellant would have sought to rely, as against the respondent, on the limitation of responsibility sought to be made in the report. This makes this case, as my brother Menzies observes, quite unlike the case of Hosegood v. Bull (1876) 36 LT 617. (at p340)

4. As to damages, I agree that, in fact, it was the terms of the bank report which was relevantly the cause of the delivery of the plaintiff's wool to the carrier for carriage to Wool Exporters Pty. Ltd. It seems to me that the fact, if it be the fact, that a refusal by the plaintiff to deliver the wool would have been a breach of the contract of sale between it and Wool Exporters Pty. Ltd. cannot be relied upon by the appellant to deny the respondent damages for the loss of the value of the wool by reason of the false statements made by its Perth manager. (at p340)

5. I agree that the appeal should be dismissed. (at p340)

McTIERNAN J. I agree in the judgment of my brother Gibbs and in his reasons. (at p340)

MENZIES J. This appeal is against a judgment of the Supreme Court of Western Australia (Virtue S.P.J.) (1971) WAR 201 in favour of the plaintiffs, the present respondents, against the defendant, the present appellant, for damages for fraudulent misrepresentation. (at p340)

2. The misrepresentation, which the plaintiffs alleged, was not made to them directly. They were a firm of woolgrowers who had sold their clip on the sheep's back to a dealer, Wool Exporters Pty. Ltd., for delivery on trucks at Cranbrook. When the time to deliver the wool was approaching, the plaintiffs, having heard rumours that the buyer was in financial trouble, were in doubt whether or not they would deliver their wool. They requested the manager of their own bank (the Bank of New South Wales) at Cranbrook to make inquiries about the buyer. This the manager did from the manager of the defendant's branch in Perth where the buyer banked. The request, and the response thereto, were as follows:

"Confidential 233

BANK OF NEW SOUTH WALES CRANBROOK. . W.A. 9th November 1966.

Reference . . . . . The Manager, Commercial Banking Co. of Sydney Ltd. PERTH.

Dear Sir, Kindly favour us with your opinion as to the financial position, character, standing and occupation of WOOL EXPORTERS PTY. LTD. and say whether you consider them quite safe in the way of business for Pound generally. Please reply by . . . . . . Yours faithfully,

Stamped &signed. (signed)

Manager.

Reply: The Company is capably managed by Directors well experienced in the wool trade. The Company has always met its engagements, is trading satisfactorily and we consider that it would be safe for its trade engagements generally. THIS OPINION IS CONFIDENTIAL AND FOR YOUR PRIVATE USE AND WITHOUT RESPONSIBILITY ON THE PART OF THIS BANK OR ITS OFFICERS. X 89 11 Nov 1966" (at p341)

3. On 15th November, when a carrier was actually at the plaintiffs' woolshed ready to transport some of their wool to the railway station at Cranbrook, one of the plaintiffs, Brown, rang Lindsey, the manager of the Bank of New South Wales, Cranbrook. According to his Honour's finding, (1971) WAR, at p 208 this is what then occurred:

"Brown asked Lindsey if he had any further information with regard to Wool Exporters. Lindsey replied that he had an opinion from their bankers. He said 'this opinion is given confidentially and without responsibility on the part of his bank or Wool Exporters' bank' Lindsey then read the opinion out as follows: 'The company is capably managed by directors well experienced in the wool trade. The company has always met its engagements, is trading satisfactorily and we consider that it would be safe for its trade engagements generally. This opinion is confidential and for your private use and without responsibility on the part of the bank or its officers'. Brown then asked Lindsey whether it would be all right for him to send his wool to Wool Exporters. Lindsey said 'on the face of that opinion it would seem to be all right. But the decision must rest with you. If you do send it get immediate payment.'" (at p341)

4. His Honour found that the opinion so conveyed to the plaintiffs was not honestly held by the manager of the defendant at Perth and that it misrepresented the buyer's financial position. His Honour found further (1) that the defendant's manager knew that the manager of the Bank of New South Wales had "sought the report on behalf of a customer or customers entering into or likely to enter into trade relations with the company, and that it was likely to be relied on by such customers", and (2) that the report "was made with intent to deceive and with intent that it should be acted on by the first defendant" (i.e. the Bank of New South Wales) "and any customer of the first defendant concerned in obtaining the opinion, and that the plaintiff was such a person and it was in fact acted on by the plaintiff" (1971) WAR, at p 213 . (at p342)

5. The learned trial judge therefore found that the plaintiffs were entitled to damages. These were assessed at $14,548.95 being the value of the wool at the time when the plaintiffs delivered it to Wool Exporters Pty. Ltd. and for which they received no payment. On 12th December the defendant appointed a receiver of Wool Exporters Pty. Ltd. which was hopelessly insolvent. (at p342)

6. For the appellant it was argued as follows:
(1) That the finding of fraud was not supported by evidence or was against the weight of the evidence and should be set aside. (2) That the appellant had not made a representation to the respondents.
(3) That, if the appellant had made a false and fraudulent misrepresentation to the respondents, the representation had not induced them to deliver their wool to Wool Exporters Pty. Ltd.
(4) That, in any event, the respondents had not suffered damage because they were under a contractual duty to Wool Exporters Pty. Ltd. to deliver their wool and their loss was merely due to their performance of their contractual duty. (at p342)

7. In the course of their argument, counsel for the respondent were informed that the Court did not wish to hear them on the first matter and it can be dealt with shortly. The position of Wool Exporters Pty. Ltd. on 11th November 1966, as known to the manager of the Perth branch of the defendant's bank, was (1) that, having an overdraft limit of $2,000,000, the company was overdrawn to the extent of about $2,350,000 and it was in the middle of the season when it faced large payments to woolgrowers for wool which had been bought and was being delivered; (2) that the head office of the bank was dissatisfied with the account ; (3) that Wool Exporters Pty. Ltd. had resorted to the tactics of holding up the sending out of cheques, drawn in favour of wool-growers for wool already delivered ; (4) that the company had purchased some wool for which it had no firm orders and that, to this extent, it had purchased wool speculatively ; (5) that the price of wool was falling - thus the wool purchased from the plaintiffs at 59 cents per lb. was, at the date of delivery, worth only 51 cents per lb. ; (6) that the last accounts of the company for the year ended 31st December 1965 showed a profit of only $42,000 on a turnover of over $4,700,000, and that this profit depended entirely upon the accuracy of the value of stock on hand, viz.$807,818, which had not been independently valued. Accounts for the year ended 30th June 1966, although requested by the bank, had not been supplied by the company. (at p343)

8. Having reviewed the foregoing circumstances inter alia and having referred to the confidence of the Perth manager of the defendant in Hewett, the principal of Wool Exporters Pty. Ltd., his Honour said (1971) WAR, at pp 212-213 :

"Of course his belief in Hewett, his faith that Hewett would pull through as he had done in previous years was not the thing in point as far as the honesty of his opinion was concerned. What was in point was whether he could honestly say that Wool Exporters was safe for its trade engagements generally - that there would be no substantial risk in a person trading with him whatever the amount involved. I am quite unable to accept his opinion under the circumstances as an honestly held opinion. . . . In the state of facts as existing on 11th November and known to Mr. Wilson I can still only conclude that he gave a dishonest opinion at least to the extent that it was given recklessly and indifferently as to whether it was true or false so as to bring the case within the rule in Derry v. Peek (1889) 14 App Cas 337." (at p343)

9. There is no sound basis upon which this Court could set aside this finding. Notwithstanding the manager's belief in Hewett it could not have honestly been said that the company had always met its engagements, that it was trading satisfactorily, and that it would be safe for its trade engagements generally. (at p343)

10. The second matter is more difficult. A person who makes a false and fraudulent misrepresentation is only liable to the persons to whom it is made, i.e. to the persons whom it is intended should act upon it : Peek v. Gurney (1873) LR 6 HL 377 . It is not necessary for liability that the misrepresentation should be made directly, it can be made to one, to be passed on to another; it is not necessary that it should be made to a particular person ; it can be made to a group to which the plaintiff belongs so that the plaintiff is one of those intended to be deceived. The representation must, however, in one way or another, be made to the plaintiff to induce him to act upon it. Here the Perth manager of the defendant's bank was aware that the manager of the Bank of New South Wales at Cranbrook did not want the information which was sought merely for the purposes of the bank itself. The information was obviously sought for a customer or customers of the bank proposing to deal with Wool Exporters Pty. Ltd. and, it appears to me, that it was open to his Honour to hold, as he did, that it was supplied to be passed on to such customers. (at p344)

11. Once his Honour so found, the terms of what have been called the disclaimer in the report can be properly appreciated. The limitation is not that the information was given merely to the Bank of New South Wales confidentially for its purposes, but it was intended that the limitation should apply to those to whom the information would be communicated by the bank, so that customers, such as the plaintiffs, would themselves receive the information confidentially and without responsibility on the part of the Commercial Banking Co. of Sydney or its officers. Hedley Byrne &Co. Ltd. v. Heller &Partners Ltd. (1964) AC 465 illustrates the point. There information was negligently provided by one bank to another bank for communication to a customer of the second bank and that customer, although it suffered damage by reason of the incorrect information, was held disentitled to recover because the disclaimer was addressed to it and communicated to it. Once it be found, therefore, as it was found, that the defendant contemplated the communication of its opinion to customers of the Cranbrook branch of the Bank of New South Wales, the customers to whom it was communicated were representees of the defendant. It follows that, in so far as the disclaimer could protect the defendant, it would, but it could not protect it against fraud. This case is like Swift v. Winterbotham (1873) LR 8 QB 244 , rather than like Hosegood v. Bull (1876) 36 LT 617 , as in the former case there was a finding that the information was to be communicated. In the latter there was a contrary finding that the information given to the bank was not to be communicated. Thus in the former case Quain J., for himself and Cockburn C.J., said, (1873) LR 8 QB, at pp 252-253 :

"We think, therefore, that it must be intended that the answers to such inquiries would be sent not merely for the use or benefit of the bank making the inquiry, but for the use and benefit of the customer on whose behalf the inquiry is made, and we think it must be taken in this case that the jury have so found. These facts we think bring the present case within the law as laid

down in Langridge v. Levy (1837) 2 M &W 519 (150 ER 863) as it must

be considered that it was within the contemplation of the defendants when the representation was made that it would or might be communicated to the customer of the bank on whose behalf the information was sought ; where that is so, and the person to whom the false representation is thus communicated acts on it and suffers damage thereby, he is entitled to maintain an action for such damage in the same manner as if the representation had been made directly to himself."

In the latter case Cleasby B. said (1876) 36 LT, at p 620 :

"It would be a breach of confidence and contrary to the instructions conveyed in the letter itself, for the Somersetshire Bank to make use of the name of the Gloucestershire Bank, so as to induce any creditors of theirs to act upon the representation of the Gloucester Bank, which obviously was meant only for the private information and use of the person or persons to whom it was addressed and sent." (at p345)

12. Accordingly, the second point fails. (at p345)

13. The third point relates to another matter of fact. His Honour found in effect that the plaintiffs would not have delivered their wool had they not been induced to do so by the defendant's opinion of the solvency of Wool Exporters Pty. Ltd. The evidence, I think, compelled this conclusion. (at p345)

14. The fourth point is not essentially different from the third. The plaintiffs would not have delivered their wool, notwithstanding their contract, had they not had the defendant's opinion that the buyer could be expected to pay for wool delivered. It was this assurance, not the contract with Wool Exporters Pty. Ltd., which brought about delivery, and it was by delivery on trucks at Cranbrook that the property in the wool passed from the plaintiffs to Wool Exporters Pty. Ltd. It was for this loss of their property in the wool that damages were awarded to the plaintiffs. In my opinion to award such damages was correct. (at p345)

15. Accordingly, I would dismiss the appeal. (at p345)

GIBBS J. The facts of this case have been stated by my brother Menzies whose judgment I have had the advantage of reading and I agree that for the reasons he has given the finding of fraud should not be set aside. (at p345)

2. However, it was argued for the appellant bank that the representations contained in the confidential opinion given on 11th November 1966 were not made to the respondent because the opinion was given to the Bank of New South Wales in response to an inquiry made by that bank and because it contained the words: "This opinion is confidential and for your private use and without responsibility on the part of this Bank or its officers." (at p346)

3. In my opinion the evidence justifies the conclusion that the appellant's manager should have known, when he received the inquiry from the Bank of New South Wales, that it was probably made on behalf of a woolgrower contemplating a sale of wool to Wool Exporters Pty. Ltd. The manager himself was asked, "I put it to you that it would be a fair and probable appreciation that the request was on behalf of a grower about to do business with Wool Exporters?" And he replied, "Yes, it could be a probable assumption." Further the evidence given by one Ransom, called by the respondent as an expert on banking conditions, supported the view that a bank manager knowing the type of business in which Wool Exporters Pty. Ltd. were engaged would conclude from the fact that the inquiry came from a bank in a farming community, that it was made on behalf of a grower intending to sell his wool to that company. On this evidence it was open to the learned trial judge to find that when the appellant's manager gave the opinion he contemplated that the substance of it would be passed on by the Bank of New South Wales to the customer on whose behalf the inquiry had been made, and intended that the customer should act upon it. (at p346)

4. The plaintiff in a common law action of deceit must establish, amongst other things, that the false representation was made with the intention that it should be acted upon by the plaintiff, or by a class of persons which will include the plaintiff, in the manner which resulted in damage to him: Bradford Third Equitable Benefit Building Society v. Borders (1941) 2 All ER 205, at p 211 . It is not, however, necessary that the representation should have been made to the plaintiff himself. It is enough that it was made to another person with the intention that it should be acted on by the plaintiff. In Swift v. Winterbotham (1873) LR 8 QB 244, at p 253 , it was said in the judgment of the Court:

"It is now well established that in order to enable a person injured by a false representation to sue for damages, it is not necessary that the representation should be made to the plaintiff directly; it is sufficient if the representation is made to a third person to be communicated to the plaintiff, or to be communicated to a class of persons of whom the plaintiff is one, or even if it is made to the public generally with a view to its being acted on, and the plaintiff as one of the public acts on it and suffers damage thereby."

The law is similarly stated in other authorities : see Langridge v. Levy (1837) 2 M &W 519 (150 ER 863); (1838) 4 M &W 337 (150 ER 1458) ; Barry v. Croskey (1861) 2 J &H 1, at p 23 (70 ER 945, at pp 954-955) ; Peek v. Gurney (1873) LR 6 HL 377, at pp 412-413 ; Richardson v. Silvester (1873) LR 9 QB 34, at p 36 ; Robinson v. National Bank of Scotland (1916) SC (HL) 154, at p 155 . Accordingly it was held in Swift v. Winterbotham (1873) LR 8 QB 244 , which on this point was affirmed in Swift v. Jewsbury (1874) LR 9 QB 301 , that the defendant, the manager of the G. Bank, who, in response to an inquiry by the S. Bank, gave a fraudulent opinion as to the solvency of one of the customers of the G. Bank, was liable to the plaintiff, a customer of the S. Bank, since it was proved to be the usage among bankers to make inquiries of this kind on behalf of their customers and it was held that the manager must have known and contemplated that his opinion would or might be communicated to the customer of the S. Bank on whose behalf the information was sought. It may be added that in that case the G. Bank itself was held not to be liable because the false representation was not signed by the defendant as required by Lord Tenterden's Act and also because in the circumstances of that case it was held that the representation was that of the manager personally and not of the bank. In the present case, on the other hand, no defence based on the Western Australian equivalent of Lord Tenterden's Act was raised and it was not submitted that the appellant bank was not responsible for the opinion given on 11th November 1966. (at p347)

5. However, it was submitted in the present case that it cannot be held that the appellant intended that the respondent should act on its opinion, because the document conveying the opinion to the Bank of New South Wales expressly stated that the opinion was "for your private use". It was saide that these words clearly showed that the opinion was intended to be used only by the Bank of New South Wales itself, and that although that bank might use the opinion for the purpose of giving its own advice to its customer it was not intended that it sould be communicated to the customer as the appellant's opinion. In this submission strong reliance was placed on Hosegood v. Bull (1876) 36 LT 617 . That was an action for deceit against a bank and its manager. It was pleaded by the plaintiffs that through their bankers (Stuckey's Banking Co.) they caused a letter to be written to the defendant bank (The County of Gloucester Bank) requesting a confidential opinion as to the credit of one John French and that "In answer to the said letter, the County of Gloucester Bank, intending thereby to deceive the plaintiffs and induce them to give credit to the said John French, caused a letter of reply to be sent to the said Stuckey's Banking Co., which said letter was written and signed by the defendant C. W. Kingdom " (the manager, who was the second defendant) which letter included the words, "Confidential. For your private use, and without responsibility on the part of this bank or the manager". The defendants demurred on the ground, inter alia, "that it appeared upon the face of the written representation set forth in the said statement of claim, and of the letter to which the same was a reply, that the representation was made solely to and for the private use of Stuckey's Banking Co. therein mentioned". Cleasby B. allowed the demurrer. He held that the representation was obviously meant only for the private information and use of the bankers to whom it was addressed and that the defendants did not give the information to the plaintiffs' bankers "for the purpose of its being, or with any knowledge that it would be, communicated to any third person as their opinion of the responsibility in a pecuniary point of view of the individual as to whom the inquiry was made". In the course of his judgment the learned Baron said (1876) 36 LT, at p 620 :

"When A. asks B. his opinion in confidence respecting the solvency of C., and the question is answered by B. without any intimation having been given to him that the information was sought for the purpose of its being communicated by A. to any particular individual, I cannot help thinking that the case does not come within any class of cases in which relief on the ground of misrepresentation can be obtained against B. by the individual to whom the information has been communicated by A."

With the greatest respect, if the learned Baron meant that it is necessary that the representor should have received an express intimation that the information was sought for the purpose of being communicated to another, the statement would be too narrow, for, as cases such as Swift v. Winterbotham (1873) LR 8 QB 244 , and Robinson v. National Bank of Scotland Ltd. (1916) SC (HL) 154 , show the very nature of a request, having regard to the usage of bankers, may indicate that it was made by a bank on behalf of a customer. Later in his judgment Cleasby B. said (1876) 36 LT, at p 620 :

"The statement in par. 3 of the statement of claim that 'in answer to the said letter, the County of Gloucester Bank, intending thereby to deceive the plaintiffs and induce them to give credit to the said John French', might be satisfied by this, that they had in their minds at the time the proper intention to keep alive the credit of John French, who was indebted to them, and so an intention to deceive any person who might act upon the communication which they made to the other bank. I do not, however, think it necessary to go further into this part of the case. I dwell rather upon the view which I entertain, that the language is such as not to satisfy me that at the time the answer was given it was known that the plaintiffs were the persons on whose behalf the inquiry was made, or that the answer would be communicated to them."

The decision appears to have depended upon the view formed by Cleasby B. that the statement of claim did not sufficiently allege that the defendants made the representation with the intention that it should be communicated to the plaintiffs. We need not consider the correctness of this judgment in so far as it concerns the effect of a particular pleading. However, it cannot be regarded as laying down a principle that the mere inclusion in an opinion given by one bank to another of the words "for your private use, and without responsibility on the part of this bank or the manager" necessarily protects the bank giving the opinion from liability for damages for deceit to the customer of the other bank for whom the opinion was obtained. Later cases do not appear to have recognized any such principle. In Parsons v. Barclay &Co. Ltd. (1910) 103 LT 196 , an inquiry by the M. Bank as to the financial position of a customer of the B. Bank was answered by the manager of the latter bank, whose letter contained the words: "This information is for your private use only, and is given without any responsibility on our part." (1910) 103 LT, at p 197 In an action for fraud brought by the customer of the M. Bank at whose request the inquiry was made the question whether the defendant made the representation with the intention that it should be passed on and acted on as his own representation was left to the jury as a question of fact. It is true that in that case the terms of the inquiry showed on their face that the opinion was sought for the purposes of a customer of the bank, but, if the appellant's argument in the present case is correct, that fact would have been immaterial and the statement contained in the letter would have been conclusive in favour of the defendant. The effect of similar words in a bank's opinion was discussed in Hedley Byrne &Co. Ltd. v. Heller &Partners Ltd. (1964) AC 465 , but that was a case of negligent misrepresentation, and not of fraud, and the decision does not assist in the determination of the present case. It is one thing to say that a man cannot be held voluntarily to be undertaking a responsibility if at the moment when he is said to be accepting it he declares that in fact he is not (see per Lord Devlin (1964) AC, at p 533 ); it is quite another to say that a man who fraudulently gives false information to A., with the intention that B. will act upon it, can avoid responsibility by telling A. that the information is for his use only. In my opinion the question whether a representation was made to one person, with the intention that another should act on it, is simply one of fact. The circumstance that the document containing the representation included the statement that it was for the private use of the person to whom it was addressed is relevant, but is only one of the circumstances of the case, all of which have to be considered. It is not conclusive. (at p350)

6. I can see no reason to disturb the findings made by the learned trial judge in the present case that the representation contained in the opinion given by the appellant was made with intent that it should be acted on by any customer of the Bank of New South Wales concerned in obtaining the opinion, and that the respondent was such a person, and that it was in fact acted on by the respondent. (at p350)

7. A further submission on behalf of the appellant was that the respondent did not suffer any damages recoverable at law by acting on the fraudulent representation. The respondent had agreed to sell and deliver the wool to Wool Exporters Pty. Ltd. before an opinion as to the reliability of that company was obtained from the appellant bank. It appeared that under the contract payment of the price of the wool was not a condition precedent to delivery, at least in the case of some of the wool. When the time for delivery arrived, the respondent, so it was submitted, would not have been entitled to refuse delivery, even if he had been made fully aware of all the facts known to the appellant as to the company's financial difficulties and as to the risky nature of its business. It was said that those facts would have done no more than raise a suspicion that the company was insolvent, whereas the respondent would only have been excused from what would otherwise have amounted to a breach of its contract if the insolvency of the company had been clearly established by its acts or words: In re Phoenix Bessemer Steel Co.; Ex parte Carnforth Haematite Iron Co. (1876) 4 Ch D 108, at pp 113-114, 120-121, 122 . Thus it was said that the respondent did no more than discharge his legal obligation to Wool Exporters Pty. Ltd. and that he cannot claim damages for having done so. (at p351)

8. There can be no doubt that if the respondent had known what the appellant knew about the situation of Wool Exporters Pty. Ltd., he would have refused to deliver any wool except in exchange for actual payment, or proper security for payment. Equally there can be no doubt that if the respondent had refused to deliver and had been sued by Wool Exporters Pty. Ltd. for damages for breach of the contract, and if the failure to deliver the wool was held to be in breach of the contract (a question which it is unneccessary to consider), Wool Exporters Pty. Ltd. could have obtained no more than nominal damages for the breach, because the value of the wool had dropped below the contract price: see Valpy v. Oakeley (1851) 16 QB 941 (117 ER 1142) and Griffiths v. Perry (1859) 1 El &El 680 (120 ER 1065) . If the respondent had withheld delivery it would have kept the wool for itself and would at the worst have had to pay nominal damages, whereas by acting on the representation and making delivery it has lost the value of the wool. The loss which it has suffered was a direct and foreseeable consequence of the fraudulent representation. The argument for the appellant that in these circumstances the respondent is not entitled to damages rests on what is said to be the principle expressed in Halsbury's Laws of England, 3rd ed., vol. 11, at p. 231, as follows:

"Thus the expense of discharging legal obligations, or of endeavouring to evade them, is not damage for which compensation can be recovered unless the obligation was imposed by reason of the breach of duty of another and not by the general law or the plaintiff's own conduct."

The statement in that passage derived from a dictum of Lord Finlay L.C. in Neville v. London "Express" Newspaper Ltd. (1919) AC 368, at p 380 , where it was held that the plaintiff, who claimed that the defendant had unlawfully maintained a number of Chancery actions against him, could not recover the damages obtained against him in those actions, or the costs which he had to pay or bear in defending them. It is quite unnecessary to consider the scope of this rule of public policy, for it can have no application to the present case. The respondent's damage was in no way attributable to his own wrongdoing. Moreover his loss resulted, not simply because he discharged a legal obligation to deliver the wool to Wool Exporters Pty. Ltd., but because he did so in circumstances in which he had no hope of getting paid. If the respondent had known of the financial situation of Wool Exporters Pty. Ltd. it would have been reasonable and prudent to withhold delivery until payment had been made or, at least, until security for payment had been given, whether or not the withholding of delivery would have amounted to a technical breach of contract. In these circumstances there is no consideration of public policy that requires that the respondent should be precluded from recovering the damages that he suffered by reason of the fraudulent misrepresentation for which the appellant is responsible. (at p352)

9. I would dismiss the appeal. (at p352)

Orders

Appeal dismissed with costs.