Strauss, Dominique v Canberra Commercial Development Authority

[1983] FCA 349

Re: DOMINIQUE STRAUSS; MICHAEL GOTOVAC
And: CANBERRA COMMERCIAL DEVELOPMENT AUTHORITY (1983) 74 FLR 22
Nos. G73 and G74 of 1982
Negligent Misrepresentation - Pleading - Contract - Tort - Appeal

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Blackburn(1), McGregor(2) and Neaves(3) JJ.

CATCHWORDS

Neglient Misrepresentation - failure to correct representation which was true when made but became untrue - representation which was not the sole inducement to the representee.

Pleading - failure by party to apply for striking out of defective pleading - whether point not pleaded or argued at first instance should be entertained on appeal.

Contract - collateral warranty - representation held not have promissory effect.

Contract - Misrepresentation - Alleged misrepresentation not sole reason for entering agreement - Whether misrepresentation induced contract - Whether representation of existing or past fact.

Tort - Misrepresentation - Negligent misrepresentation - Representation true when made - Representation false when representee entered agreement - Whether representor should have informed representee - Law Reform (Misrepresentation) Ordinance 1977 (A.C.T.), s.4.

Contract - Collateral warranty - Whether representation had promissory content.

Appeal - Point not pleaded - Point not argued at first instance - Whether point to be entertained on appeal.

HEADNOTE

The Canberra Commercial Development Authority, a corporate body, sued, in two actions heard together by consent, the appellants in the Supreme Court of the Australian Capital Territory for rent and outgoings due under an agreement for sub-lease of certain shop premises in Belconnen Mall, Canberra. The appellants (defendants), by way of defence and counterclaim, relied, inter alia, on alleged misrepresentations which they claimed had induced them to enter into the agreement. They also alleged that the same misrepresentations had effect by way of collateral contracts.

The trial judge, having found in favour of the respondent and dismissed the counterclaims, an appeal was made to the Full Court of the Federal Court of Australia.

Held, per curiam dismissing the appeal: (1) The appellants' argument that the respondent was negligent in not informing the appellants of the fact that a representation made by the respondent, true when originally made, had become false before the appellants acted on it, should not be allowed to succeed because it was not pleaded and was not before the court at first instance.

Introvigne v. Commonwealth (1980) 48 FLR 161, followed.

(2) As to the alleged collateral contract the trial judge was right in finding that the representation in question had no promissory content.

HEARING

Canberra, 1983, March 29, 30; November 25. #DATE 25:11:1983

APPEAL.

Appeal from a judgment of the Supreme Court of the Australian Capital Territory to the Full Court of the Federal Court of Australia.

C. S. C. Sheller Q.C. and A. J. Sullivan, for the appellants.

B. T. Sully Q.C. and R. E. Williams, for the respondent.

Cur. adv. vult.

Solicitors for the appellants: Colquhoun Murphy Constance & Phillips.

Solicitors for the respondents: Gallens.

E.F.F.

ORDER

The appeals be dismissed with costs.

Orders accordingly

JUDGE1

Canberra Commercial Development Authority, in two actions, sued Mr Gotovac and Mr Strauss respectively for rent and outgoings due under an agreement for lease of a shop in Belconnen Mall. The defendants, by way of defence and of counter-claim, relied inter alia on misrepresentations which they claimed had induced them to enter into the agreement. They also alleged that the same misrepresentations had effect by way of collateral contracts. The learned trial judge gave judgment for the plaintiff in each action, dismissing the counter-claims. The defendants appeal to this Court.

I deal first with the question of misrepresentation.

The material part of each of the defences (relied on also for the counter-claims) is as follows:

"6. Further or in the alternative, in about February or March, 1978 the Plaintiff by its agent Dennis O'Brien of Peter Howarth & Associates, in order to induce the Defendant to enter into the alleged agreement represented to the Defendant that the Gallery Level of the Belconnen Mall which contained the premises referred to in paragraph 2 of the Statement of Claim would:

(a) contain a cinema and ice skating rink;

(b) contain a Mark Foys store;

(c) have only shops selling high quality merchandise of the standard of the shops in the Gallery Level of the Centrepoint Building in Sydney.

7. The Defendant entered the alleged agreement in reliance on these representations.

8. The said representations were and are untrue and misleading in that the said Gallery Level does not and never has had a cinema or ice skating rink or Mark Foys store and does not have only shops which sell high quality merchandise."

This should have been struck out, on the plaintiff's application, as soon as it was pleaded. A representation must be a statement of existing or past fact. None of the statements pleaded was capable in law of being a representation. The learned trial judge found that O'Brien represented that Mark Foys had agreed to take a shop in the Gallery Level, and he generously treated this fact as establishing a representation which was a fulfilment of paragraph 6(b) of the defence, or at any rate a relevant representation. The trial might have been shorter if the plaintiff had at the proper time insisted on proper pleading.

This representation concerning Mark Foys was the only one relevant to this appeal. The learned trial judge found that the representation was made neither fraudulently, recklessly, nor negligently, in that O'Brien had reason to believe, and did believe, at the time of its making, that there was in existence a firm arrangement between the plaintiff and Mark Foys to lease a shop in the Gallery Level.

Before this Court, counsel for the respondent sought to uphold the judgment on one ground (inter alia) which was not the subject of attack by the appellants, namely that the representation did not induce the appellants to enter into the agreement. This involved the contention that the learned judge's finding on this point was wrong. No notice of contention was filed in accordance with Order 52 rule 22(3), but this point was not taken by counsel for the appellants.

His Honour dealt with the question as follows:

"Furthermore, the defendants agreed to take premises in the Gallery Level in reliance on the representation made by O'Brien. I find that the representation was a significant reason, but not necessarily the only reason, that they entered into the agreement."

This finding correctly reflected the law, which is that a representation sufficiently induces a contract if it is an inducing cause though not the sole inducing cause: Field v. Shoalhaven Transport Pty. Ltd. (1970) 3 N.S.W.R. 96, per Asprey J.A. at 100; Spencer Bower and Turner on Actionable Misrepresentation, 3rd edition, paragraph 120. The fact that the defendants did not afterwards complain in writing about the absence of Mark Foys does not, in my view, show that the representation about Mark Foys was not at all an inducement on which the defendants relied. I agree with the learned judge's finding.

The principal argument addressed to us by leading counsel for the appellants (who did not appear at the trial of the action) was that the representation was a continuing representation; that even if true when made, it had become false by the time it was acted on by the appellants, since the respondent had by then been told by Mark Foys that they would not take a shop in the Mall; and that the negligence of the respondent consisted in failing to inform the appellants of this fact before the appellants acted on the representation.

No hint of this argument appears in the pleadings or in the reasons for judgment of the learned judge. From the evidence it is clear beyond dispute that Mark Foys in fact withdrew their proposal to take a shop in the Mall, by letter to the respondent, and that the respondent did not cause this withdrawal to be reported to the appellants. The reason given (in cross-examination) was that it was not thought to be important. Counsel for the appellants informed us that the matter had been raised in argument at the trial, though no reference to it appears in the reasons for judgment. In these circumstances counsel contended that the point was open to the appellants notwithstanding that it was not expressly pleaded.

Counsel for the respondent contended that the point was not open to the appellants as it did not appear in the pleadings and was not the subject of any finding by the trial judge. He apparently conceded, however, that the point was put to the trial judge.

I have read the transcript of the final addresses of counsel for both parties at the trial. It is clear that the argument that the representation about Mark Foys was a continuing representation, and that the negligence of the respondent consisted in its failure to correct it when it became untrue, was not put to the trial judge. All that was said was that the failure of the respondent to correct the statement before the appellants entered into the agreement showed a failure by the respondent to appreciate the importance to the appellants of the statement about Mark Foys. It was mentioned only in that context. In these circumstances it is not surprising that the learned trial judge did not mention the question in his judgment, and I certainly would not hold that he was wrong in not mentioning it. I would not allow the appellants to succeed on an issue which was not pleaded and which was not before the Court at first instance.

A surprising situation was revealed when counsel for the appellants referred us to the Law Reform (Misrepresentation) Ordinance 1977, s.4 of which is as follows:

"(1) Where a person enters into a contract after a misrepresentation has been made to him by -

(a) another party to the contract;

(b) a person acting for, or on behalf of, another party to the contract; or

(c) a person who receives any direct or indirect material advantage as a result of the formation of the contract, and as a result of so entering into the contract he suffers loss, any person (whether or not he is the person by whom the misrepresentation is made) who would be liable for damages in tort in respect of the loss had the misrepresentation been made fraudulently, shall, subject to this section, be so liable, notwithstanding that the misrepresentation was not made fraudulently."

This provision appears to be one which might have been advantageous to the appellants; yet it was not pleaded, not mentioned at the trial, and of course not mentioned by the learned trial judge. Not surprisingly, counsel did not apply to this Court for leave to treat the pleadings as amended. We should not permit the litigation in this Court of an issue which was not in existence in the court of first instance. I refer to what this Court said in Introvigne v. The Commonwealth (1980) 32 A.L.R. 251 at 260:

"An appeal court will only allow any amendment of pleadings in relation to an issue if it emerged at the trial and has been litigated. The court is then only formalizing the actuality of the case being made. As Jacobs J said in Maloney v. Commissioner for Railways (1978) 18 ALR 147 at 151, the principle is that a respondent should not be able to disregard an issue which is clearly raised and argued at the trial, just because it is not in the pleadings. But this does not mean that an appeal court of its own motion should seek out a case for the appellant if he has not sought to rely on it before."

On the question whether there was a collateral contract, I need say no more than that I am clearly of opinion that the learned judge was right in finding that the representation in question had no promissory content; it was not the consideration, or any part of it, for the execution of the agreement by the appellants. In thus briefly indicating my agreement with the learned judge, I am dealing too shortly with the admirably clear argument and review of the authorities, which was submitted by Mr Sheller, counsel for the appellants. But I cannot escape from the conclusion that, on an objective view of the evidence, the statement in question was not made as a promise inter-dependent with the execution of the agreement, and was not so received by the appellants.

In my opinion there was no fault in the findings of fact or in the legal reasoning of the learned trial judge, and I would dismiss the appeals with costs.

JUDGE2

CANBERRA COMMERCIAL DEVELOPMENT AUTHORITY (respondent) a body corporate sued in two actions heard together by consent DOMINIQUE STRAUSS (Strauss) and MICHAEL GOTOVAC (Gotovac) (who together may be referred to as defendants) to recover moneys said to have been due by each under a sub-lease referred to in a Deed of Agreement for lease dated 8 May 1979 in respect of shop premises numbered 157 and 157A Gallery level. Belconnen Mall in the Australian Capital Territory. The term of the sub-lease was four years. Each of the defendants entered into occupancy of their premises on 16 October 1978 and remained there until 19 November 1979. The amount claimed was $33,680.07 less payments made of $7,920.70, leaving a balance due of $25,759.37. Details of how this amount is made up is set out in the reasons for judgment against which this appeal is brought and need not be repeated. The learned trial judge noted there was no challenge to the figures by either defendant. He entered judgment for the plaintiff against the defendants severally in the sum of $25,759.37 and costs. There is no dispute about this finding or the actual amount. His Honour dismissed a counter claim for damages by the defendants; though at the request of the parties, and, in the event that his judgment should be upset on appeal, assessing damages at $17,500 payable to the defendants. Both defendants have appealed to this court, though there is no appeal against the amount so assessed provisionally.

The appeals are against the dismissal by the trial judge of the defendants' counter claims. It was contended below and before us that the defendants suffered damages as the result of negligent misrepresentation and breach of collateral warranty by the respondent through its agent, Dennis O'Brien of Peter Howarth & Associates, described on their letterhead as Property Consultants and Real Estate Agents. It is asserted that in order to induce each defendant to enter into the Agreement for Lease, it was represented to each of them that the Gallery level, on which the two shop premises were located would contain a cinema, an ice skating rink and a Mark Foys store (in shop 159) and have only shops selling high quality merchandise of the standard of the shops on the Gallery level of Centrepoint building in Sydney. However, we were told by senior counsel for the defendants that his clients would not be concerned to press the representations about the cinema, ice skating rink or shops selling high quality merchandise. The claim of the defendants, which is now argued is restricted to the alleged negligent misrepresentation and breach of collateral warranty as to the commitment or intention of Mark Foy's Ltd. (Mark Foys) to occupy premises in Belconnen Mall. It is common ground that Mark Foys did not become an occupant of shop 159 or any part of Belconnen Mall, at least at any relevant time.

As to the claim of negligent misrepresentation, senior counsel for the defendants submitted on the evidence, that at all relevant times Mr. O'Brien (O'Brien) was the agent of the respondent with authority to make representations to each of the defendants in relation to their possible occupancy of shops in the Gallery level of Belconnen Mall; by that authority he was empowered to give information to each defendant concerning occupancy or proposed occupancy of that area by others including Mark Foys; O'Brien was aware that there might be other retail traders occupying the Gallery level and that the standing and status of such occupants in trade were matters of importance to the defendants. Further, O'Brien was aware of the significance of these matters to them when they were deciding to accept the terms offered by the respondent and then later, as they did, to move into shops 157 and 157A at the Gallery Level. In these circumstances, O'Brien, so he argued, represented that there was an existing commitment by Mark Foys or an existing intention by it that it would become an occupant of Belconnen Mall. Further, he submitted, that at the time at least when each defendant was considering what course he should take, the respondent, through or by O'Brien, had a duty to take reasonable care not to give incorrect information including information which might induce them or either of them to become lessees; having given information in good faith which then became incorrect, O'Brien had a further duty to inform the defendants and each of them accordingly.

As to representation of an existing fact, counsel referred to Spencer Bower & Turner, Actionable Misrepresentation 3rd ed. paras. 11, 12, 26, 73 and 74. He submitted that before the defendants acted on this representation, Mark Foys had decided not to move into the Belconnen Mall, as O'Brien knew; therefore, the representation had become false; that change in circumstance should have been communicated to the defendants. He referred to With v. O'Flanagan (1936) Ch. 575 (O'Flanagan) at pp.581, 583-6 per Lord Wright M.R. and per Romer L.J. at p.586; Law of Contract, Cheshire & Fifoot, 4th Australian Ed. para.1014. As to the giving of information to enable a party to consider a proposal, being within an agent's authority, he cited Australasian Brokerage Limited v. ANZ Banking Corporation Ltd.(1934) 52 C.L.R. 430 at pp.441, 450, 452; Colonial Mutual Life Assurance Society Ltd. v. Producers & Citizens Co-operative Assurance Co. of Australia Ltd. (1931) 46 C.L.R. 41 at pp.46, 48, 50; Trade Practices Commission v. Bata Shoe Company of Australia Pty. Limited (1980) 3 ATPR 40-161 at pp.42,259, 42,265; Briess v. Woolley (1954) A.C. 333 at pp.334, 344, 347; Bowstead on Agency 14th ed., article 97. As to the duty owed by the respondent he referred to Mutual Life & Citizens' Assurance Co. Limited v. Evatt (1968) 122 C.L.R. 556 (MLC) per Barwick C.J. at p.572, itself cited in Shaddock (L) & Associates Pty. Limited v. Parramatta City Council (1981) 36 ALR 385 (Shaddock) at pp.404-5, 409, 410. Counsel submitted that the correct statement of the relevant duty could be described thus -

"A speaker comes under a duty to exercise reasonable care in the provision of information or advice that he chooses to give when he gives it to another upon a serious matter in circumstances where the speaker realises or ought to realise that he is being trusted to give the best of his information or advice as a basis of action on the part of the other party and it is reasonable in the circumstances for the other party to act on that information or advice."

As to representations made in the course of negotiations leading up to a contract, he referred to Esso Petroleum Limited v. Mardon (1976) Q.B. 801 (Esso Petroleum) at pp.818, 832. He submitted that the judgments of Mason, Murphy and Aickin JJ. in Shaddock supported that the judgment of Barwick C.J. (in the minority) in MLC were correct; the significant passage at p.572 in the last cited case was recaptured by Mason J. (with whom Aickin J. agreed) in Shaddock at p.404 et seq. Counsel submitted the test adopted by Murphy J. was to the same effect. He referred to the judgment of Gibbs C.J. at p.391 who had supported in principle what Mason J. had said; and to the judgment of Ormrod L.J. in Esso Petroleum at p.827 i.e. accepting that Esso Petroleum was a case of special knowledge so also was the instant case, the knowledge being of the agent, O'Brien.

He submitted, further, that the relevant statements by O'Brien amounted to a collateral warranty. He referred to Chitty on Contracts 24 Ed. No. 1 para. 673; supporting that a plaintiff would have to show an intention, by one or both parties that a party should be contractually liable in respect of the accuracy of the relevant statement, the test being objective: would an intelligent bystander reasonably infer that a warranty or quarantee was intended; that matters of e.g. inducement were irrelevant. He referred to Spencer Bower & Turner (supra) at para.22. He submitted account should be taken of whether the maker of the statement was in a better position than the other to ascertain its truth. He referred to Oscar Chess Ltd. v. Williams (1957) 1 W.L.R. 370; Dick Bentley Productions Limited v. Harold Smith (Motors) Limited (1965) 1 W.L.R. 623; Heilbut, Symons & Co. v. Buckleton (1913) A.C. 30; De Lassalle v. Guildford (1901) 2 K.B. 215. He conceded there was no evidence from either defendants as to how they regarded the statements. He sought to rely on the Law Reform (Misrepresentation) Ordinance 1977; even though not mentioned in argument at the trial. It provides:-

"4. (1) Where a person enters into a contract after a misrepresentation has been made to him by -

(a) another party to the contract;

(b) a person acting for, or on behalf of, another party to the contract; or

(c) a person who receives any direct or indirect material advantage as a result of the formation of the contract, and as a result of so entering into the contract he suffers loss, any person (whether or not he is the person by whom the misrepresentation is made) who would be liable for damages in tort in respect of the loss had the misrepresentation been made fraudulently, shall, subject to this section, be so liable, notwithstanding that the misrepresentation was not made fraudulently.

(2) It is a defence to an action under sub-section (1) that -

(a) where the representation was made by the defendant - the defendant had reasonable grounds for believing, and did believe up to the time the contract was made, that the representation was true; and

(b) where the representation was made by a person acting for or on behalf of the defendant - both the defendant and that person had reasonable grounds for believing, and did believe up to the time the contract was made, that the representation was true."

He submitted that even though not specifically pleaded, there were sufficient (relevant) allegations in the pleadings to enable the defendants to rely on it. He summed up his clients' case thus -

". . . . We say firstly that the plaintiff gave information to the defendants on a serious matter, and in circumstances where it realized or ought to have realized it was being trusted to give the best of information. . . . . That it was being trusted, thirdly, to give the basis of information as a basis of the action on behalf of the defendants and it was reasonable for the defendants to act on that basis; and that, if that be so the plaintiff was under a duty to exercise reasonable care in the provision of the information and it was in breach of that duty. . . . . . Alternatively, we submit that the plaintiff intended that there should be a contractual liability in respect of the accuracy of the statement. That it in effect warranted that Mark Foys was committed to occupying of the premises and that a finding of that intention is supported by a purpose of the assurance to induce the contract, the importance of the truth of the statement to the terms of the lease. May we point out that when Mark Foys withdrew it was seen as a possible basis for re-negotiating leases. . . . that the plaintiff knew and the defendant was ignorant, and the plaintiff assumed to assert the fact. And finally, that insofar as there was an absence from the written document of the warranty that is explained by what was said by the High Court in Shepperd's case. And, of course, finally. . . . . . if the test is not made out in terms of MLC v. Evatt, well then we fall back upon the terms of the ordinance to which we have just referred."

Senior counsel for the respondent Authority submitted there was no error made in law, in his perception of the evidence, or in the way in which the trial judge applied the relevant legal principles to that evidence. As to negligent misrepresentation, he submitted that the statement of principle by Lord Denning in Esso Petroleum to which the trial judge referred, is applicable to the facts of the present case; particularly since that authority dealt specifically with the concept of negligent misrepresentation where there has been a contract made between the representor and representee said to have been so induced. The relevant statement by Lord Denning at p.820 is -

". . . . if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another - be it advice, information or opinion - with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side into a contract with him, he is liable in damages."

He argued that what was before the High Court in Shaddock was materially different from that in Esso Petroleum. So, he said, Lord Denning's statement was the correct starting point for a discussion of the law as it applied to the present case. He submitted that upon the evidence it could not be said that O'Brien had or professed to have some relevant special skill or knowledge; he did not give, based upon any special skill, advice or information or opinion on the subject of a commitment by Mark Foys to take up space; nor did he intend, by reference to Mark Foys, to induce the defendants to enter into a contract with his principal. The effect of his submission was that if there was any difference in duty established by Shaddock, as against Esso Petroleum, the evidence did not support that O'Brien had taken upon himself or assumed responsibility to give advice or information on serious matters which might occasion loss or damage; there was no discernable conduct upon any rational view of the evidence by him indicating a positive assumption of responsibility in the sense mentioned. Further, he argued that the actual definition of the claim as it appeared in the pleadings and in the conduct of the case was limited by the reference in the Amended Defences to the period in or about February or March 1978. The reference, he argued, to Mark Foys was in the context of a much wider conversation about an already, as he described it, pre-determined intention of the defendants. The references to Mark Foys in two conversations were simply in ordinary language, falling short of anything amounting to a representation. The trial judge, he submitted, was entitled to make the finding that the respondent through O'Brien had merely conveyed to the defendants what he had reason to believe about Mark Foys; the contention that the representation, subsequently becoming untrue, obliged the respondent to advise the defendants to that effect, was not open on the pleadings and should have been pleaded specifically; that from the judgment it did not appear that the trial judge had been asked to deal with the question of a continuing representation. He did not concede that any alleged representation was made with the intention of inducing a contract; nor did O'Brien have or profess to have some relevant special skill or knowledge or assume a responsibility in the sense used by Mason J. in Shaddock. Rather, the information he gave was peripheral arising almost incidently in the course of more diffuse conversations. He submitted that on the evidence and findings of the trial judge there was no intention i.e. by the reference to Mark Foys, to induce the defendants to enter into the contract. It was not permissible, he said, to go through a total statement made in circumstances such as these, find some trifling error, claim that that conveyed information and claim that, in an overall sort of way, there had been in that statement an intention to bring about a contract. Further, the reference to Mark Foys was so passing that it could not be said to convey the particular intention that the representee would thereby be induced to enter into a contract; and, anyway, they were not thereby so induced. The duty, he submitted, never arose; but if contrary to his argument it could be said to have arisen, there was no breach. He referred to the judgment of Ormrod L.J. in Esso Petroleum at p.825.

As to the question of collateral warranty, he submitted that the question for decision really was -

"Was the totality of what Mr. O'Brien said about Mark Foys capable of being regarded as promissory rather than merely as representational?"

that one has to look at a practical and commercial approach rather than a technical or legalistic one. He submitted that as a matter of ordinary expression and language, one simply could not say that there was anything about the so called peripheral references to Mark Foys of a promissory as distinct from a representational nature. He referred to the difficulty of reconstructing precisely what it was sought to be said was promissory in the words used by O'Brien. He submitted that the findings made by the trial judge were ones open to him and should not be disturbed. He referred to the Law Reform (Misrepresentation) Ordinance 1977; that Ordinance did no more than create a cause of action for damages for innocent misrepresentation; such a cause of action had never been and even now was not pleaded.

I have not attempted fully to set out the argument of counsel for each party nor yet to refer in detail to the evidence some of which was read to the court and to some of which we were directed. A consideration of that material, however, has been of assistance in evaluating the findings of fact of the learned trial judge and the reasons therefor. Those findings, in which the terms as used by his Honour "plaintiff" and "defendant" are repeated (for convenience I have numbered them) include the following -

1. At the initial meeting between O'Brien and Strauss, O'Brien said, in answer to a question from Strauss, that a deal had been done with Mark Foys, meaning to convey that Mark Foys had made a commitment to the defendant Authority and would be occupying premises on the Gallery level of the Belconnen Mall.

2. At their second meeting O'Brien "confirmed the shop" and that Mark Foys would be taking the premises. At the time of discussions upon this subject, O'Brien honestly believed there was a firm arrangement with Mark Foys to lease shop 159 and he was conveying that honest belief.
3. On a subsequent occasion in May or June 1978, in the presence of both defendants, O'Brien again indicated the shop which Mark Foys had agreed to occupy.

4. At this time O'Brien still believed Mark Foys would occupy these premises and was conveying his honest belief.

5. Insofar as the statement was made by O'Brien on three occasions it was a representation of an existing fact, viz. that Mark Foys had agreed to take the premises, that in the ordinary course they would occupy them and operate their business when the Belconnen Mall opened. This was a representation that the Gallery level of the Belconnen Mall would contain a Mark Foys store.

6. The defendants agreed to take the premises in the Gallery level in reliance on the representation made by O'Brien. The representation was a significant though not necessarily the only reason that they entered into the agreement.

7. The defendants have not discharged the onus of proving the representation was false or was made recklessly or that O'Brien was careless whether it be true or false.

8. Even if O'Brien did possess "special knowledge or skill", i.e. in the sense mentioned by Lord Denning in Esso Petroleum, or gave the defendants so to understand so as to give rise to the duty of care, his statement to the defendants did not amount to a breach of that duty.

9. In telling the defendants that the plaintiff had done a deal with Mark Foys which had made a commitment as to occupancy earlier referred to, O'Brien did not negligently give misleading information in order to induce the defendants to contract with the respondent. He merely conveyed to them what he had reason to believe as to that occupancy.

In his consideration of the claim as to collateral warranty, his Honour referred to J.J. Savage & Sons Pty. Ltd. v Blakney (1970) 119 C.L.R. 435 and the passage at p.442, particularly the following -

"The question is whether there is a promise by the appellant that the boat would in fact attain the stated speed . . . . . . . The only conclusion which will support a collateral warranty (is that) the statement so relied on was promissory and not merely representational."

His Honour also referred to Ross v. Allis-Chalmers Australia Pty. Ltd. (1980) 32 A.L.R. 561.

His Honour's reasons indicate that he considered the representation as to occupancy by Mark Foys was but one matter which induced the occupancy by the defendants. His Honour's comments about the witness O'Brien suggest that he found him truthful. A consideration of the evidence does suggest that the references to Mark Foys in conversations may appear to have been, to borrow counsel's word, "peripheral", but it was repeated three times; nor when uttered does the information seem to have been greeted or noted as of great significance. But the information has been found to be an inducing cause. Though counsel has supplied a reason as to why no claim that the representation as to occupancy by Mark Foys was pleaded as a continuing representation, the fact remains that it was not so pleaded and is not so discussed in the detailed, careful reasons for judgment. Transcript of submissions at the trial I have seen do not support that defendants' then counsel did seek to make a case for damages as to a continuing representation which had become untrue. If this was part of the argument submitted by defendants' counsel, his Honour has apparently declined to make any positive finding in terms that there was a continuing representation. He may have declined because he noted also the relatively minor reference to Mark Foys in discussions between the parties; or because he was of the view that the statement conveyed the honest belief of O'Brien as at May or June 1978 that there had been a "commitment", an appropriate description of O'Brien's belief; though without further assurances indicative of more than a then present situation, an existing fact. At its best, from defendants' point of view, is his Honour's statement at p.78 of the judgment, viz.-

". . . it was a representation that the Gallery Level of the Belconnen Mall would contain a Mark Foys store."

On undisputed evidence, Mark Foys had withdrawn from the deal by 28 July 1978. The question then is whether what was an aspect of the original inducement having disappeared, the defendants should have been advised; or, rather, whether the respondent was negligent - and not merely in error - in not having done so. This is not like some of the situations referred to in O'Flanagan i.e. where an original representation was false, though honestly made; its falsity was discovered later so the duty of correction was then said to have arisen. In O'Flanagan itself the facts were of a representation honestly made, though one might regard them as crucial, being falsified by later events. Lord Wright M.R. referred to authorities, obviously with approval, relating to representations which have become untrue thereby attracting a duty to correct. He quoted from Traill v. Baring 4 De G.J. & S. 318,329, where Turner L.J. spoke of the "imperative duty of the party who has made the representation to communicate to the party to whom the representation has been made the alteration of those circumstances;". Lord Wright did not think the doctrine was limited to certain classes of contract or there being a confidential relationship requiring a peculiar duty of discovery. At p.584 he said -

"The matter, however, may be put in another way though with the same effect, and that is on the ground that a representation made as a matter of inducement to enter into a contract is to be treated as a continuing representation."

This passage was cited with approval in Reg. v. Secretary of State for the Home 'Department, Ex parte Zamir in the Court of Appeal by Eveleigh L.J. That decision was confirmed by the House of Lords; Zamir v. Secretary of State for the Home Department (1980) A.C. 930. And later at p.585 in O'Flanagan Lord Wright M.R. said -

"On these grounds, with great respect to the learned judge, I think he ought to have come to the conclusion that the plaintiffs have established their case . . . ."

Romer L.J. and Clauson J. agreed. I note the case was one seeking rescission and repayment of purchase money. The result of such a proceeding and one such as this where damages are sought for negligent misrepresentation could be different since rescission implies that the parties can be restored to their original position and in an "action for rescission" for innocent misrepresentation damages would not be recoverable unless the representation were incorporated in the contract, e.g. a warranty; yet the award of damages for tort as here seeks to achieve that result, i.e. that a party shall be put back in the same position as if the representation had not been made.

The notion of a duty to correct a representation which has been discovered to have been or become untrue is also to be discerned in the judgment of Lord Tucker in Briess v. Woolley (supra) at pp.353-354. See also Winfield and Jolowicz on Tort 11th ed. at p.249 and these words -

"Does the law permit A to remain silent or does it compel him to correct B's false impression under pain of an action of deceit? It is submitted that the latter answer is in general correct."

I note that this passage is under the heading "Essentials of Deceit"; but it seems it may apply to negligent misrepresentation also. In The Law of Torts, Fleming, 5th ed. under the heading of "Misrepresentation" the learned author at p.618 says -

"Secondly . . . . one who makes a true statement which later events falsify must correct it at any time before the deal is actually closed."

Authorities, some of which have been cited, are referred to. As to the use of the word "must" in this context, see also The Law of Torts, Prosser, at p.697. This is not a situation similar to that referred to in Presser v. Caldwell Estates Pty Ltd. (1971) 2 N.S.W.L.R. 471 where the information supplied by the agent O'Brien could be said to be "beyond the generally recognised limits of a real estate agent's authority . . . . . ".

I would feel great reluctance in making a finding of negligence against the respondent because of the failure of O'Brien to advise the defendants of the change of circumstance where the original matter was mentioned without great acclaim in conversation, "peripheral" as it were, and where O'Brien said -

"I do not think it occurred to me to tell the defendants"

and referring to having told them that a deal had been done with Mark Foys -

"If I thought that that statement, or if I was suspicious that that statement, was of some material importance to them, I would. (i.e. have told the defendants)."

Later he said -

"I did not know it was a significant fact to Strauss that Mark Foys were going in there."

Yet O'Brien agreed Strauss did not know that Mark Foys was not going in to the Gallery level; and that it was of great materiality to a person in the fashion industry with a retail shop selling high class fashion goods to know that Mark Foys would be present.

In my view, having regard to the authorities to which I have referred and the findings in the reasons of the learned trial judge, we ought accept that there was a continuing representation which was materially inducing, untrue at the critical stage i.e. when the defendants finally entered into the transaction, and causing damage.

Understandably in my view the learned trial judge did not deal with any implication arising upon a continuing representation. There is, therefore, no finding by the trial judge that O'Brien was negligent in failing to advise defendants (as was made by the trial judge in Shaddock v. Parramatta City Council; see (1979) 1 N.S.W.L.R. 566 at pp.567, 592). O'Brien learnt of Mark Foys change of mind on 28 July 1978 but did not at once accept it. He received written advice on 1 August 1978. The agreement for lease, signed by the defendants reached him on 10 August 1978. His office was in Sydney; the evidence was that he was "busy"; Strauss had not seemed "too fussed" about Mark Foys; he did not know it was a significant fact to Strauss that Mark Foys was going into the Mall. Strauss had not indicated it was a significant matter; but was non-committal; whereas other prospective tenants had made a specific requisition as to what would happen if another prospective tenant (Myers) did not "go ahead". Even if such an argument had been advanced, I doubt very much that the learned trial judge would have made a finding that respondent was negligent in failing to acquaint the defendants of the change of plans by Mark Foys. Speaking for myself, I am not persuaded that the respondent was negligent in this regard or this Court should make such a finding now. The defendants, therefore, fail on this aspect of their appeal.

In their argument as to collateral warranty, counsel on both sides have made extensive detailed reference to authority. The learned trial judge, in his reasons, isolated what finally, with respect, are the most significant areas of the leading cases; to which I would add, for completeness, a reference to Cutts v. Buckley (1933) 49 C.L.R. 189 and, in particular, to what was said by Dixon J., as he then was, at p.198 -

"It would be necessary to find in the conversation deposed to by the plaintiff an antecedent promise by the defendant as to the correctness of his estimate of the average house takings, given antecedently to and in consideration of the plaintiff's entering into the contract of purchase and intended to be collateral, extrinsic or supplementary to the main contract as distinguished from being part of it. The circumstances narrated by the plaintiff support no such view of the statement which the plaintiff attributes to the defendant."

The words of Evatt J. at p.202 (ibid) are of assistance in listing some of the matters which would assist in discriminating between that which is promissory and that which is representational. He said -

"They were by way of inducement, I have no doubt, but, having regard to the non-existence of the contract when the alleged warranties were made, the time which elapsed before the contract was made, the elaborate provisions of the contract as to analogous matters, and the complete absence of any suggestion that the statement as to the takings was promissory in character or was intended to be made part of the actual bargain, I conclude that there was no evidence to support the count of collateral warranty."

It is entirely appropriate that one should treat with respect the conclusion to which the learned trial judge came when assisted by relevant citation of authority with the opportunity he had of observing the witnesses and the importance they themselves appear to attach to what was said. I consider additionally, and on an objective view of the evidence and probabilities, and not overlooking the words of Evatt J. quoted, there was almost no basis at all for treating the references to Mark Foys as promissory. The learned trial judge's conclusion on this aspect of the case was, I consider, with due deference, correct.

The Law Reform (Misrepresentation) Ordinance 1977 was not pleaded or even referred to during the hearing before the trial judge. The Ordinance speaks of a "misrepresentation" having been made, which does not comfortably describe O'Brien's actions. The circumstances in which an appellate court will consider a point not taken below are referred to in e.g. Davison v. Vickery's Motors Ltd. (in Liquidation) (1925) 37 C.L.R. 1 per Isaacs and Higgins JJ (dissenting) at p.7 and later, and p.29 respectively, and Starke J. at p.35.; Suttor v. Gundowda Proprietary Limited (1950) 81 C.L.R. 418 at p.438. See also Wilson v. United Counties Bank Ltd. (1920) A.C. 102 at p.106. The cases do not refer to a failure to advance a claim thought to be available on what might be described as a statutory cause of action. See also Moloney v. Commissioner for Railways 18 A.L.R. 147. No amendment of pleadings was sought before us, as in case of Introvigne v. Commonwealth of Australia 32 A.L.R. 251 (see at p.260), nor was the point taken in the Notice of Appeal. Quite apart from the difficulty of applying the Ordinance because of its wording, it does not seem appropriate that we ought give an effect to an argument which defendants did not seek hitherto, in what follows I make further reference to this subject.

So far those reasons proceed upon the basis not only that there may be a liability for damages for negligent misstatement to which a class wider than those who carry on or profess to carry on a profession or business involving skill and competence may be subject - cf. per Gibbs C.J., Mason, Murphy and Aickin JJ. in Shaddock; but that there is also liability where -
(i) there has been a representation;
(ii) which was true when made (thus not made negligently);
(iii) but becomes untrue by later events;
(iv) thereafter the representor fails to advise the representee; and
(v) negligence may then be found arising out of the failure at (iv).

Cases such as O'Flanagan are concerned with the remedy of rescission of contract plus repayment of a deposit paid in respect of the contract, itself induced by a representation which, as time passed, but before the contract was entered into, was falsifield.

It is clear, however, that there is what may be an important difference in the action before us, being one claiming damages and not seeking a declaration of an entitlement to rescission. We were not referred to any authority where in corresponding circumstances damages have been awarded or even claimed. This may well explain why the respondent's case as argued before us was never so submitted to the learned trial Judge. The formulation of the duty by Lord Denning in Esso Petroleum and, indeed, as outlined by senior counsel for the appellant, gives no hint of a duty of care to correct. O'Flanagan itself refers to duty, but does not phrase it as a duty of care which one may fail to discharge in such circumstances, indicating negligence. The existence of a duty was adverted to by Lord Blackburn in his three propositions in Brownlie v. Campbell 5 App. Cas. 925 at p.950; but not where breached, in terms of negligence; nor in the other cases cited in O'Flanagan. As Romer L.J. said at p.586, that the representor should not be able to hold the representee to the bargain was ". . . . obviously consistent with the plainest principle of equity." It would be necessary to amend its terms to make it apply here. In Robertson & Moffat v. Belson (1905) V.L.R. 555 there was apparently action for fraud, so found by a jury; though the report is not clear as to how the jury were directed; nor does the judgment on appeal refer to fraud. The authority whose facts are most similar to the present is Jones v. Dumbrell (1981) V.R. 199; but there the representor "by his conduct" continued the representation. The action was for fraud, breach of warranty and of fiduciary duty. The plaintiff succeeded on the first but failed on the other two; and no question of negligent misstatement was discussed.

Assuming there may be a cause of action for damages or negligence in a failure to correct a statement which becomes or is discovered to be untrue, it would not, I suggest, be easily comprehended under the negligent misrepresentation theme; but rather under the general law of negligence - cf. Abrams Ltd. v. Ancliffe (1978) 2 N.Z.L.R. 420.

I would propose that the appeals be dismissed with costs.

JUDGE3

Separate proceedings were commenced in the Supreme Court of the Australian Capital Territory by the Canberra Commercial Development Authority (hereinafter called "the Authority") against Dominique Strauss and Michael Gotovac to recover amounts alleged to be due by way of rent and other outgoings under an agreement for a sub-lease of certain premises described as shops 157 and 157A on what was called the Gallery Level in a retail centre known as "Belconnen Mall" in the Australian Capital Territory. The matters were heard together and the Supreme Court entered judgment against Strauss and Gotovac severally in the sum of $25,759.37 and dismissed the counter-claim filed on behalf of each defendant (appellant). From this decision appeals have been brought to this Court.

The appeals raise the question whether the appellants are entitled to succeed in their claim against the Authority for damages - pleaded by way of set off and counter-claim - for negligent misrepresentation or, alternatively, for breach of a collateral warranty.

The representations relied upon were alleged to have been made by one Dennis O'Brien of the firm of Peter Howarth & Associates who had been engaged by the Authority as leasing agents in respect of the Belconnen Mall. The representations as pleaded are to be found in paragraph 6 of the amended defence delivered on behalf of each appellant, that paragraph in each case reading -

"Further or in the alternative, in about February or March, 1978 the plaintiff by its agent Dennis O'Brien of Peter Howarth & Associates, in order to induce the Defendant to enter into the alleged agreement represented to the Defendant that the Gallery Level of the Belconnen Mall which contained the premises referred to in paragraph 2 of the Statement of Claim would:

(a) contain a cinema and ice skating rink;

(b) contain a Mark Foys store;

(c) have only shops selling high quality merchandise of the standard of the shops in the Gallery Level of the Centrepoint Building in Sydney."

The learned trial judge found that, except as to the allegation concerning a Mark Foy's Ltd. store, the appellants had not established that the representations alleged had been made. His Honour's findings in that regard were not challenged before this Court.

Evidence was given before the Supreme Court of conversations that took place between the appellant Strauss and O'Brien on 23 and 28 February 1978. The learned trial judge found that

"at the initial meeting between O'Brien and the defendant Strauss, O'Brien said, in answer to a question from Strauss, that they had done a deal with Mark Foys, meaning to convey that Mark Foys had made a commitment to the plaintiff Authority and would be occupying premises on the Gallery Level of the Belconnen Mall."

His Honour also found that on the occasion of the second conversation -

"Strauss pointed out the location of the shop which he understood from their earlier discussion to have been allocated to Mark Foys and O'Brien confirmed the shop and that Mark Foys would be taking the premises."

His Honour further found on the balance of probabilities that on the occasion of a subsequent conversation with O'Brien in May or June 1978 when both appellants were present, "O'Brien again indicated the shop which Mark Foys had agreed to occupy".

The learned trial judge concluded that, even if the circumstances were such as to give rise to a duty of care in O'Brien with regard to the information concerning Mark Foy's Ltd. that he conveyed to the appellants, there had been no breach of that duty. His Honour said:-

"In telling the defendants that he had done a deal with Mark Foys and that Mark Foys had made a commitment to the plaintiff Authority and would be occupying premises on the Gallery Level of Belconnen Mall, O'Brien did not negligently give misleading information in order to induce the defendants into a contract with the plaintiff. He merely conveyed to the defendants what he had reason to believe - that Mark Foys would be occupying a shop in the Gallery Level."

In my opinion there was ample evidence to support his Honour's finding and, with respect, I see no reason to disagree with it. That O'Brien was not guilty of any failure to take reasonable care in conveying the information he gave to the appellants in this regard is clearly supported by the fact that by letter dated 28 March 1978 Mark Foy's Ltd. had forwarded to Peter Howarth & Associates an application to lease shop 159 on the Gallery Level. The letter envisaged that the shop would open in October 1978 and the recipient was asked "to accept this letter as an instrument of intent to occupy the premises and a guarantee that, providing the agreement to lease is acceptable to us, we will occupy the premises as outlined." This served to confirm for O'Brien what he had understood the position to be.

Although the learned trial judge found it unnecessary to decide whether the circumstances gave rise to a relevant duty of care, his Honour referred to the statement of principle by Lord Denning M.R. in Esso Petroleum Co. Ltd. v. Mardon (1976) 1 Q.B. 801 at p. 820 and to the decision of the majority of the Judicial Committee of the Privy Council in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1971) A.C. 793; (1970) 122 C.L.R. 628. Counsel for the appellants submitted that his Honour erred in referring to the decision of the majority of the Judicial Committee and that, by reason of what was said by a majority of the Justices of the High Court in Shaddock & Associates Pty. Ltd. v. Parramatta City Council (1981) 36 A.L.R. 385, the conditions which in Australian law give rise to a duty of care in the provision of advice or information are those to be found in the judgment of Barwick C.J. in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1968) 122 C.L.R. 556. Counsel for the Authority argued that the relevant statement of principle is that stated by Lord Denning M.R. in the case cited, that statement, he said, having special relevance to the present case in that it deals specifically with the concept of negligent misrepresentation in the context of a contract made between the representor and the representee and said to have been induced by the allegedly negligent representation.

In the light of his Honour's finding that O'Brien was not guilty of any failure to take reasonable care in conveying to the appellants the information which he gave to them concerning Mark Foy's Ltd., a finding with which I agree, and in the light of the matters to which I will later refer, it becomes unnecessary to resolve the question whether there is any inconsistency between the statements of principle in the cases cited.

Counsel for the appellants put an argument based on the circumstance that, whatever might have been the position at the time the statements concerning Mark Foy's Ltd. were made by O'Brien, by the time the appellants acted on those statements they no longer represented the true position. Counsel referred to a letter dated 28 July 1978 by which Mark Foy's Ltd. had informed Peter Howarth & Associates that the company had decided not to proceed at that time with the proposed lease of shop 159 in the Belconnen Mall. It was submitted that, as what was said to the appellants by O'Brien amounted to a continuing representation, the Authority was under a duty to the appellants to communicate to them the change of circumstances before they were allowed to close the transaction for the sub-lease of shops 157 and 157A. By reason of the failure of its agent to do so, the Authority was, so it was submitted, liable to the appellants in damages.

To support this argument counsel relied on With v. O'Flanagan (1936) Ch. 575 and Briess v. Woolley (1954) A.C. 333. In neither of those cases, however, was a claim for damages made based on negligent misrepresentation. With v. O'Flanagan was a proceeding in equity for the recission of a contract for the sale of a medical practice. Recission was ordered on the ground that a representation made to the purchasers during the negotiation of the contract that the takings of the practice were at a specified rate had, by reason of a change of circumstances, ceased to represent the true position at the date the contract was signed. The principle of equity invoked in that case was succinctly stated by Romer L.J. at p. 586 as follows -

"If A. with a view to inducing B. to enter into a contract makes a representation as to a material fact, then if at a later date and before the contract is actually entered into, owing to a change of circumstances, the representation then made would to the knowledge of A. be untrue and B. subsequently enters into the contract in ignorance of that change of circumstances and relying upon that representation, A. cannot hold B. to the bargain."

That the decision did not turn on any finding of fraud or negligence is made abundantly clear by Lord Wright M.R. at p. 584. To the same effect is the passage cited at p. 583 from Traill v. Baring 4 De G.J. & S. 318 at p. 329 where Turner L.J. describes as "imperative" the duty resting upon a person who has made a material representation, true at the time it was made, to communicate an alteration of circumstances which may affect the course of conduct which may be pursued by the party to whom the representation was made. See also Davies v. London and Provincial Marine Insurance Company (1878) 8 Ch. D. 469 at p. 478.

The other authority relied upon, Briess v. Woolley (1954) A.C. 333, was a common law action for damages for deceit based upon a fraudulent misrepresentation. As Lord Oaksey said at p. 344 -

"It is not a case in which an innocent misrepresentation has been forgotten or a truthful representation has been changed into an untruthful representation by a change of circumstances."

The Court was not referred in argument to any authority where damages for negligent misrepresentation were awarded, or even claimed, in respect of a representation as to a material fact which was true at the time it was made but which by reason of subsequent events no longer stated the correct position. Reference should, however, be made to two cases that were not referred to in argument. One of these, Jones v. Dumbrell (1981) V.R. 199 was an action to recover damages for fraud. The evidence did not establish that the representation was false when made but notwithstanding this damages were awarded on a basis clearly stated in the following passage from the reasons for judgment of Smith J. at p. 204 -

"In the present case the facts fall clearly within the principle laid down in Robertson and Moffat v. Belson, supra. For after Dumbrell's representation had become false to his knowledge he continued it (in fact and not merely constructively) by his conduct in completing the negotiation without disclosing the falsity, and he did this with the intention that the representation should continue to operate on the minds of the plaintiffs and consequently to mislead them, and with the knowledge that by reason of his conduct it was in fact doing so. The essential element of fraudulent intent is therefore clearly established. Indeed the facts go further than is necessary to bring the case within the principle of Robertson and Moffat v. Belson supra: they include, as already pointed out, positive acts of fraudulent concealment by Dumbrell; cf.: Fleming, The Law of Torts, 3rd ed., p. 599; Salmond, Torts, 14th ed., p. 553."

The other case which should be mentioned is J. & J.C. Abrams Ltd. v. Ancliffe (1978) 2 N.Z.L.R. 420. That was an action by a building company claiming a balance owing for work done by it on the construction of two residential units. The defendant counter-claimed for damages alleging economic loss as a consequence of the plaintiff's negligence. In so far as the counter-claim was based on an allegation that the builder had been negligent in failing to exercise due care, skill and judgment in providing to the defendant an estimate for certain building work, the counter-claim failed. The court, however, upheld an alternative claim on the basis that the relationship between the parties was not limited to the duration of the original inquiry by the defendant and the giving of the estimate in response thereto but had become a "general" relationship in which the special character of trust and confidence in the builder to advise on cost continued from the time the defendant asked for and obtained the original estimate until the giving of a final price for the work some nine months later. This relationship was held to create a positive duty in the builder to give to the defendant reliable information about building costs and, there having been a breach of that duty, damages were awarded.

In my opinion, for the appellants to succeed on the basis that there was a failure by the Authority or its agent O'Brien to communicate to them that Mark Foy's Ltd. had decided not to proceed with the proposed lease of shop 159 in the Belconnen Mall, it would be necessary for them to establish that the relationship between the parties was such as to give rise to a duty of care of an entirely different character from that which was alleged in the pleadings and upon which the case was conducted in the Supreme Court.

In the circumstances it is a question whether the appellants should be allowed to raise the issue for the first time on the hearing of the appeal to this Court. It is clear that the evidence adduced at the trial was directed only to the issues raised by the pleadings and it is by no means certain that additional evidence may not have been adduced if the issue now sought to be raised had been adverted to in the Supreme Court. The issue is not simply a question of law arising on undisputed facts or facts found by the learned trial judge. These considerations lead me to the conclusion that the appellants ought to be limited to the course taken before the Supreme Court and that it is now too late to raise the further issue.

For the reasons I have given the appellants' claim on the basis of negligent misrepresentation fails.

I have considered the alternative claim based on alleged breach of collateral warranty. The learned trial judge concluded that the appellants had not established that the representation concerning Mark Foy's Ltd. was promissory. With respect, I agree with his Honour's conclusion.

The appeals should be dismissed with costs.