L Shaddock & Associates Pty Ltd v Parramatta City Council
150 CLR 22536 ALR 385
(Judgment by: GIBBS CJ)
Between: L SHADDOCK & ASSOCIATES PTY LTD
And: PARRAMATTA CITY COUNCIL
Judges:
Gibbs C.J.Stephen J.
Mason J.
Murphy J.
Aickin J.
Subject References:
Negligence
Damages
Judgment date: 28 October 1981
Judgment by:
GIBBS CJ
The appellant companies, the plaintiffs in the Supreme Court of New South Wales, claim that they sustained loss by reason of their reliance on erroneous information supplied to them innocently but negligently by the respondent, the Council of the City of Parramatta. The learned trial judge, Waddell J., found that the Council had been careless but that it owed no relevant duty of care to the appellants. He accordingly gave judgment for the Council although, following a very useful practice, he nevertheless proceeded to assess damages lest his decision as to liability should be reversed. He held that if he was in error on the question of liability the amount of damages to which the appellants would be entitled is $173,938. The Court of Appeal, by a majority, affirmed his decision dismissing the appellants' action (1979) 1 NSWLR 566.
On 21 May 1973 the appellants entered into a contract for the purchase of a property on the corner of Macquarie and O'Connell Streets, Parramatta. Settlement under the contract took place on 9 July 1973. The property was bought for the purpose of redevelopment. The appellants would not have concluded the purchase if they had known that the land would be substantially affected by road widening proposals which had been approved in principle by the Council in 1971. On 10 May 1973 their solicitor, Mr. Carroll, made a telephone call to the Council and inquired from an unidentified person in the town planning department whether there was any local road widening proposal affecting the land. He was told that there was not. On the following day he lodged with the Council a document, in a form prepared by law stationers, and commonly used, by which he made application for certificates under s. 160 and s. 342AS of the Local Government Act 1919 (NSW), as amended, and for "Other information indicated under Remarks". Under that heading the question was asked, "Is the property affected or proposed to be affected by any of the following... Road widening or re-aligning proposals?" The form showed as the purchaser one of the appellant companies, and stated that the purpose for which the information was required was "Conveyancing". Fees for the issue of certificates under s. 160 and s. 342AS were enclosed but no fee was sent for the additional information and none was customarily sent or required. In response to this application Mr. Carroll received a certificate under s. 342AS with respect to the matters prescribed by cl. 9 of Ordinance 107 as matters with respect to which a Council is authorized to issue certificates under s. 342AS. Those matters do not include the effect on the land to which the certificate relates of a proposed local road widening scheme which is not included in a prescribed scheme or a scheme in course of preparation; the local road widening proposals in the present case were not so included, and there was no obligation under s. 342AS or Ordinance 107 to include the information in a certificate issued under that section. However, Mr. Carroll believed, and in consequence the appellant companies believed, that the absence of any notation as to a local road widening proposal on the certificate indicated that there was no such proposal. His previous experience indicated that it was the practice of the Council, when it received a request for a certificate under s. 342AS and for additional information as to whether the property was proposed to be affected by road widening proposals, and when there was a relevant proposal, to type or write (usually in red ink) a reference to the proposal at the foot of the certificate, below the space left for answers to the questions as to the matters prescribed by Ordinance 107. During the period from 1970 to May 1973 he had received about eight such certificates and had seen at least two others sent to other solicitors. Evidence given by the Town Clerk of the Council showed that it was the practice of the Council to give information, other than that which the Council was authorized by s. 342AS to give, including information as to road widening proposals, both orally over the telephone and by indorsements on certificates issued under s. 342AS. An examination of the files of the Council revealed that about ten thousand certificates under s. 342AS had been issued during the period from January 1971 to July 1973, of which about six hundred and fifty had been indorsed with a reference to road widening proposals. The evidence abundantly supports the finding of the learned trial judge that it was the practice of the Council to answer inquiries as to the existence of any road widening proposals made by the use of the law stationers' form by making an appropriate indorsement on the certificate issued under s. 342AS if there was such a proposal. In the light of this practice Mr. Carroll was led to believe, by the absence of any such notation on the certificate which he received, that there were no relevant road widening proposals. Although the relevant proposals were not formally adopted until February 1974, there was little doubt, in May 1973, that they would be implemented and would seriously affect the subject land. The proposals were embodied in a plan in the Council's records. The Council had referred to them in certificates in relation to other land in the vicinity. There is no evidence which would explain the failure to make a similar reference in the certificate issued to Mr. Carroll.
There is no doubt that the officer of the Council who answered the telephone was careless in stating that there was no local road widening proposal affecting the land. It is however a critical question whether the Council, in issuing a certificate which was silent as to the road widening proposals, thereby informed Mr. Carroll that there were no such proposals. The question is not free of difficulty. The law of evidence provides an analogy. The failure to answer a letter is not evidence of the truth of the statements in it unless the relation between the parties is such that a reply might properly be expected, as e.g., where it is the ordinary practice of people to reply: Wiedemann v. Walpole [1891] 2 QB 534 , at p 538 ; Young v. Tibbits (1912) 14 CLR 114 , at p 122. In the present case, having regard to the practice of the Council to indorse information as to road widening proposals at the foot of the certificates, its failure to do so when it had been asked, by the use of the form commonly employed, to supply the information for conveyancing purposes could reasonably have been understood by the recipient of the certificate as information that no proposal existed, and the Council ought to have known (although Mr. Carroll had not expressly informed it of his awareness of the practice) that it would probably be so understood. The return of the certificate unindorsed was therefore tantamount to the giving of information that there were no proposals; clearly it was careless to give such a certificate.
The question then is whether there was a duty to answer carefully the questions put to the Council orally and in writing. It is now settled by the decisions in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964) AC 465 and Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1968) 122 CLR 556 (High Court) and (1970) 122 CLR 628 ; (1971) AC 793 (in the Judicial Committee) that a person can be liable for financial loss resulting from a negligent misstatement of fact or opinion, although the mis-statement was honestly made, and there was no fiduciary or contractual relationship between the parties. The question that is not settled by those authorities is what is the principle by which the courts are to determine whether a duty of care exists. The courts in those cases rejected the view that the principle stated by Lord Atkin in Donoghue v. Stevenson (1932) AC 562, at p 580 , which is usually the starting point in any inquiry as to whether a duty of care exists (see Anns v. Merton London Borough Council (1978) AC 728, at pp 751 - 752 ), provides the basis of liability in the case of negligent mis-statements. There are obvious differences between negligent words and negligent acts. In the first place, negligent words by themselves can cause no loss or damage - they cause loss or damage only because persons act in reliance on them. Secondly, people speaking on social or informal occasions may not uncommonly make statements or express opinions with much less care than if they were giving advice or information professionally or for business purposes. Thirdly, words may receive - and foreseeably receive - so wide a circulation that the application of the principle in Donoghue v. Stevenson might open the door to a multiplicity of claims for very large amounts of damages. Even if the third of these considerations were dismissed as irrelevant, the others would remain compelling. It would appear to accord with general principle that a person should be under no duty to take reasonable care that advice or information which he gives to another is correct, unless he knows, or ought to know, that the other relies on him to take such reasonable care and may act in reliance on the advice or information which he is given, and unless it would be reasonable for that other person so to rely and act. It would not be reasonable to act in reliance on advice or information given casually on some social or informal occasion or, generally speaking, unless the advice or information concerned "a business or professional transaction whose nature makes clear the gravity of the inquiry and the importance and influence attached to the answer", to use the words of Lord Pearce in Hedley Byrne (1964) AC, at p 539. Equally it would not be reasonable to rely upon advice or information given by another unless the person giving it either had some special skill which he undertook to apply for the assistance of another or was so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry. Further a person should not be liable for advice or information if he had effectually disclaimed any responsibility for it. These general principles - they are not hard and fast rules - were accepted by the majority of their Lordships in Hedley Byrne, although Lord Devlin expressed a rather different point of view. The same general principles are supported by the judgments of the members of this Court in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1968) 122 CLR 556 .
However, it was held by the majority of the Judicial Committee in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1970) 122 CLR 628 ; (1971) AC 793 that this duty of care is cast only on a person who carries on a business or profession which involves the giving of advice of a kind which calls for special skill and competence, or on a person who, although not carrying on such a business or profession generally, has let it be known that he claims to possess skill and competence in the subject matter of the particular inquiry comparable to those who do carry on the business or profession of advising on the subject matter and is prepared to exercise a similar skill and competence in giving the advice (1970) 122 CLR, at pp 637-638; (1971) AC, at pp 805-806. It was recognized that in regard to the subject matter with which their Lordships were concerned - financial stability and safety of investment - no distinction need be drawn between "information" and "advice" (1970) 122 CLR, at p 633; (1971) AC, at p 802. Their Lordships did not intend to state the principles exhaustively so as to cover every case; they emphasized (1970) 122 CLR, at p 642; (1971) AC, at p 809 "that the missing characteristic of the relationship which they consider to be essential to give rise to a duty of care in a situation of the kind in which Mr. Evatt and the company found themselves when he sought their advice, is not necessarily essential in other situations - such as, perhaps, where the adviser has a financial interest in the transaction upon which he gives his advice."
Lord Reid and Lord Morris of Borth-y-Gest, who dissented, took a broader view. They held that:
"... when an inquirer consults a business man in the course of his business and makes it plain to him that he is seeking considered advice and intends to act on it in a particular way... his action in giving such advice"... (gives rise to)... "a legal obligation to take such care as is reasonable in the whole circumstances."
(I have cited the passage in the abbreviated form suggested by Lord Denning M.R. in Howard Marine & Dredging Co. Ltd. v. Ogden & Sons (Excavations) Ltd. (1978) QB 574, at p 591.) They said (1970) 122 CLR, at p 646; (1971) AC, at p 812 , that they were "unable to accept the argument that a duty to take care is the same as a duty to conform to a particular standard of skill", and continued:
"One must assume a reasonable man who has that degree of knowledge and skill which facts known to the inquirer (including statements made by the adviser) entitled him to expect of the adviser, and then inquire whether such a reasonable man could have given the advice which was in fact given if he had exercised reasonable care."
On either view, the duty in my opinion can exist in relation to the giving of information as well as advice. This was the view of Barwick C.J. in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt, who pointed out (1968) 122 CLR, at p 572 , that in many instances the distinction between the two is very slight and that on occasion information becomes inextricable from advice. Taylor J., one of the dissentients, disagreed; he did not regard Hedley Byrne as authority for the proposition that a duty of care will arise whenever one person makes inquiry of another, merely because the latter is, or is thought to be, in possession of special information relating to the subject matter of the inquiry or is in a better position than the inquirer to obtain such information (1968) 122 CLR, at pp 591, 601. In Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt, Lord Diplock, who delivered the judgment of the majority, said (1970) 122 CLR, at pp 634-635; (1971) AC, at p 803 :
"Where advice which calls for the exercise of special skill and competence by the adviser is not to be based exclusively upon facts communicated to him by the advisee no relevant distinction can be drawn between the ascertaining by the adviser of the facts upon which to base his judgment as to the advice to be given, and the forming of that judgment itself. The need for special skill and competence extends to the selection of the particular facts which need to be ascertained in order to form a reliable judgment and to the identification of the sources from which such facts can be obtained."
I respectfully agree with the opinion of Barwick C.J. that there is no valid ground on which to distinguish between information and advice for the purposes of the rule in Hedley Byrne. Although the giving of advice must always necessarily require an exercise of skill or judgment, and the giving of information may not necessarily do so, a person giving information may be so placed that others can reasonably rely on his ability carefully to ascertain and impart the information. Other authorities support this view. A prospective tenant of a site for a filling station may reasonably rely on a statement made by an employee of an oil company, the owner of the site, as to the potential through-put of the filling station; the oil company has a duty to use reasonable care to see that the information is correct: Esso Petroleum Co. Ltd. v. Mardon (1976) QB 801. The owners of a sea-going barge must take reasonable care to answer correctly a question put by a prospective hirer as to the deadweight capacity of the barge: Howard Marine & Dredging Co. Ltd. v. Ogden & Sons (Excavations) Ltd. (1978) QB 574. I can see no reason in principle why a person who, being possessed of special knowledge or means of knowledge, undertakes to impart information to another, and is aware that the other will act in reliance on the information, should be in a different position from a person who, being possessed of special skill, undertakes to advise another, knowing that the other will act on his advice. The attention paid in the authorities on this question to Low v. Bouverie (1891) 3 Ch 82 indicates that the rules apply equally to information and advice, for in that case it was information, not advice, that was sought from the defendant trustee.
The judgment of the majority in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt has been much criticized by academic writers, and in at least two cases in the Court of Appeal a preference has been expressed for the minority view: Esso Petroleum Co. Ltd. v. Mardon (1976) QB, at p 827 , per Ormrod L.J.; Howard Marine & Dredging Co. Ltd. v. Ogden & Sons (Excavations) Ltd., per Lord Denning M.R. (1978) QB, at p 591 and per Shaw L.J. (1978) QB, at p 600. This Court, unlike the Court of Appeal of New South Wales, is free to adopt the view of the minority in the Judicial Committee rather than that of the majority. With all respect I find it difficult to see why in principle the duty should be limited to persons whose business or profession includes giving the sort of advice or information sought and to persons claiming to have the same skill and competence as those carrying on such a business or profession, and why it should not extend to persons who, on a serious occasion, give considered advice or information concerning a business or professional transaction. However, in the present case it does not seem to me to be necessary to decide whether the view of the majority or that of the minority in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt should be accepted. In this branch of the law it seems desirable to follow the example already set by the House of Lords and the Judicial Committee, and to avoid attempting to lay down comprehensive rules but rather to proceed cautiously, step by step. It is unnecessary in my opinion to choose between the conflicting views in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt because even if the views of the majority of the Judicial Committee are accepted, it should in my opinion be concluded that the respondent owed a duty of care to the appellants in the present case. Their Lordships in Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt spoke of a business of giving advice or information, but emphasized that their opinion, like all judicial reasoning, must be understood secundum subjectam materiam (1970) 122 CLR, at p 643; (1971) AC, at p 809. They did not have in view, and did not discuss, the case of a public body which, for the convenience of the public, follows the practice of giving on request information of which it has become possessed in the course of its public duties. From the standpoint of principle there is no difference between a person who carries on the business of supplying information and a public body which in the exercise of its public functions follows the practice of supplying information which is available to it more readily than to other persons, whether or not it has a statutory duty to do so. In either case, the person giving the information to another whom he knows will rely upon it in circumstances in which it is reasonable for him to do so, is under a duty to exercise reasonable care that the information given is correct. A public body, by following the practice of supplying information upon which the recipients are likely to rely for serious purposes, lets it be known that it is willing to exercise reasonable skill and diligence in ensuring that the information supplied is accurate. In the circumstances, diligence might be more important than skill, although competence in searching for and transmitting the information must play a part. However, even if diligence only and not skill were required, a public body might be specially competent to supply material which it had in its possession for the purposes of its public functions.
The conclusion that the duty now under discussion extends to public bodies which follow the practice of supplying information is supported by the decision of the Court of Appeal in Ministry of Housing and Local Government v. Sharp [1970] 2 QB 223 , where a rural district council, whose clerk had negligently failed to mention, in a certificate given in response to a search, made by an intending purchaser, of the register of local land charges, that the plaintiff Ministry had a charge on the land, was held liable for the loss suffered by the Ministry because the purchaser in consequence took the land free of the charge. It is true that this decision was given before Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt, but since the decision in that case it has been mentioned without disapproval by Lord Edmund-Davies in Moorgate Ltd. v. Twitchings (1977) AC 890, at p 920 , and applied by Sir Robert Megarry V-C in Ross v. Caunters (1980) Ch 297, at pp 316-318 , and it was, in my respectful opinion, correct.
In the present case, Mr. Carroll, as solicitor for the appellants, relied on the Council to exercise reasonable care in advising him whether the land was subject to local road widening proposals. It was reasonable for him to do so, because the Council was in a position to know better than anyone else whether any such proposals existed, and it commonly followed the practice of giving information as to that matter when requested. The Council ought to have known that Mr. Carroll's clients were relying on the information which he sought. The importance of certificates given under s. 342AS for conveyancing purposes is obvious and well known. It is true that Mr. Carroll did not expressly say what the purchasers intended to do with the land, but the Council ought to have known that the road widening, if carried out, would adversely affect the use of the land for most conceivable purposes. The Council was so placed that others could reasonably rely upon its ability to give accurate information as to any local road widening proposals, and it followed the practice, in the course of exercising its functions, of making such information available. The nature of the inquiry - made by a solicitor, for conveyancing purposes, on a form commonly used and prepared by law stationers - made clear the gravity of the inquiry and the importance attached to the answer. The Council therefore owed a duty of care to Mr. Carroll's clients, the appellants, in answering the written inquiry.
It would not, however, have been reasonable for the appellants to have relied on an unconfirmed answer given by an unidentified person in response to an inquiry made over the telephone. The Council therefore owed no duty of care in making response to such an inquiry.
It is clear from what has been said that the Council, in giving what amounted to a negative answer to Mr. Carroll's written inquiry, was in breach of its duty of care to the appellants. The fact that its negative answer was given by the omission to make a positive statement does not affect the question. The Council may have been entitled in law to decline to give the information sought, although to have taken that course might have rendered it liable to well-merited criticism. But for the reasons given, if it had wished to decline to give the information, it was bound to say so, because its failure to mention the local road widening proposals in the circumstances amounted to a statement that none existed.
The remaining question is whether the damages assessed by the learned trial judge were excessive. The learned trial judge commenced by determining that the difference between the price paid by the appellants for the land and its value as affected by the road widening proposals was $133,000. This element in the assessment was not challenged before us. He then assessed consequential damage at $18,745. Three items in this part of the assessment also were not challenged. The remaining items, which totalled $13,215, and which were challenged, comprised Council rates, and water and sewerage rates, for the years 1973 and 1974, land tax for 1974, insurance and the additional stamp duty and solicitors' costs payable because the price of the land was the contract price rather than the amount of its real value as affected by the proposals. It was submitted on behalf of the Council that if the appellants, who had the land, were given $133,000 in addition, they would be in the same position as if the land had not been affected by the proposals and that the payment to them of the additional items would give them a windfall benefit. It was submitted that if they had received the land unaffected by the road widening proposals they would have been bound to meet the additional expenses in question, and that since they were to be given an amount which would mean that they would receive the full value of the land in the condition in which they intended to buy it they should not be paid in addition the amounts which they would have been required to spend if the Council's representation that the land was unaffected by the proposals had been true. No question of directness, remoteness or foreseeability arises. The only question is whether in fact there has been a duplication in the assessment of damages. The appellants are entitled to be put, so far as money can do, in the same position as if they had not made the purchase. If the purchase had not been made the appellants would have kept the money paid to the vendor and would not have made the other payments in question. The award of $133,000, when added to the actual value of the land bought, recompensed the appellants for the payment out of the purchase money, but did not recompense them for the other expenses that they had to meet. It is true that the rates, tax, insurance, stamp duty and costs would have been payable if the land had not been affected by the road widening proposals, but it was so affected, and the payments would not have been made if the Council had not made the negligent mis-statement on which the action is founded. Of course the appellants were bound to mitigate their loss, but the learned trial judge was entitled to find that it was reasonable for the plaintiffs to continue to hold the land until the end of 1974, while they were exploring what could be done with the land and endeavouring to salvage what they could from the disastrous purchase. For these reasons the challenge made to the assessment of damages should not succeed. The assessment also included an amount of interest on the amount employed in the purchase from the date of purchase until the end of 1974 and this was not challenged.
For these reasons I would allow the appeal and would enter judgment for the appellants in the amount of $173,938.