Facts
- Esso Petroleum provided Mr. Mardon with an estimate of the potential sales volume for a petrol station as part of negotiations for a tenancy agreement.
- The sales estimate was produced by Esso’s expert advisors but was based on inaccurate information, resulting in an inflated projection.
- The rental value in the tenancy agreement was calculated using this overstated sales forecast.
- Mr. Mardon relied on Esso’s specialist assessment and estimate, but actual sales were much lower than predicted, rendering profitable operation of the station impossible.
- Mr. Mardon suffered financial loss and brought a legal action claiming that Esso was liable for the misrepresentation.
Issues
- Whether Esso’s forecast, given as an estimate rather than a statement of fact, could ground a claim for misrepresentation or negligent misstatement.
- Whether Esso, given its specialist knowledge and the nature of the negotiation, owed a duty of care to Mr. Mardon in providing the sales estimate.
- Whether Esso’s breach of any such duty rendered it liable for Mr. Mardon’s resulting financial losses.
Decision
- The court found that Esso’s sales forecast, though described as an estimate, could give rise to liability if made negligently by an expert intended to induce reliance.
- It was held that Esso owed a duty of care to Mr. Mardon when providing projections, given their specialist knowledge and Mr. Mardon's dependency on their assessment.
- The standard applied was whether Esso exercised reasonable care and skill in preparing the estimate.
- The court concluded that Esso breached this duty of care, and that Mr. Mardon was entitled to recover damages for the losses suffered as a result.
- The decision relied in part on the principles from Hedley Byrne v Heller regarding negligent misstatement, and distinguished the facts from Bisset v Wilkinson, as here the representor was an expert.
Legal Principles
- A party with specialist knowledge who makes a representation during contractual negotiations may be liable for negligent misstatement if the recipient relies upon it and suffers loss.
- The duty of care, established in Hedley Byrne v Heller, applies where an expert undertakes to provide information or advice intended for reliance.
- Estimates or opinions provided by experts can found liability if carelessly made, contrasting with statements of opinion by non-experts (as in Bisset v Wilkinson).
- The existence and breach of such a duty require evidence of reliance, causation, and financial loss.
Conclusion
Esso Petroleum Co Ltd v Mardon affirmed that an expert’s negligent estimate, intended to be relied upon in contractual negotiations, can give rise to a duty of care and liability for resulting losses, clarifying and reinforcing the scope of negligent misstatement and the obligations of professional advisors.
