Supreme Court: Property developer’s €350k award for negligent misstatement overturned

About this case:

• Judgment:
  External link

The Supreme Court found that the estate agents did not owe the man a duty of care, and that they were therefore not liable for the purchaser’s reliance on the brochure.

Background

In January 2007, the High Court delivered judgment awarding Mr David Walsh, a property investor, €350,000 in damages in respect of a negligent misstatement regarding particulars that were contained in a sales brochure produced by Jones Lang Lasalle Ltd (JLL), a well-known firm of estate agents and auctioneers.

In the Supreme Court, JLL appealed against the finding of liability

The Court heard that Mr Walsh invested in property, and was described in the judgment of Mr Justice Donal O’Donnell as someone who had ‘significant experience in the property market’.

In 2000, Mr Walsh purchased 77 Upper Gardiner Street, Dublin 1, for £2.342 million after he had been shown the property by a representative of JLL.

The sole focus of the present proceedings was that this representative of JLL gave Mr Walsh a brochure outlining the details of the property, and set out the property’s measurements to be “2,142 m2 (23,057 sq ft); Site Area 0.13 Hectares (0.31 Acres)”.

At the bottom of the page was the following disclaimer:

“Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchasers/lessees should satisfy themselves as to the correctness of the information given.”

Unfortunately, the measurement of the premises (23,057 sq ft) was incorrect – and the legal issue was whether, in the light of the disclaimer, JLL were liable to Mr Walsh in respect of that misstatement.

The true area of the first floor was 8,573.5 sq ft making the overall area 21,248 sq ft. The shortfall was just over 1,800 sq ft,

Mr Walsh commissioned a survey of the premises – however this was a condition survey and did not involve any measurement.

Mr Walsh gave evidence that he ‘did a back-of-the-envelope calculation’; allowing a figure of £20 per sq ft for both the ground floor and first floor area..

Allowing for refurbishment and other costs, he estimated the value of the premises as £2.5 million. Consequently, he submitted a bid of £2.342 million which was successful.

High Court

Justice O’Donnell described the approach taken in the High Court as a broad approach “which could have important consequences for the law of negligence generally”.

The High Court rejected arguments based on Caparo Industries Plc v Dickman 2 AC 605, and relied on Wildgust & anor v Bank of Ireland & anor 1 I.R. 570.

Following Wildgust, the High Court held that “rima facie therefore, the relationship between the plaintiff and the defendant was sufficiently proximate to give rise to a “special relationship” of the kind identified by the Supreme Court (Geoghegan and Kearns JJ.) in Wildgust”.

JLL argued that the disclaimer precluded the existence of a special relationship and was, furthermore, a justification for rejecting the existence of duty of care based on the third element in Caparo (and adopted in Glencar), namely that it was an element making it unfair, unjust and unreasonable to impose a duty of care.

Supreme Court

Justice O’Donnell explained that Wildgust “could not be taken as itself justifying a single unified approach to all cases of negligence, whether of negligent act or misstatement, and jettisoning traditional considerations such as proximity, and undertaking of responsibility” in such a way that this case could be approached as one in which there was a duty of care and the only relevant consideration was whether liability was successfully excluded by the terms of an exemption clause.

Furthermore, Wildgust was not treated by the Court as representing a substantial revision of the general law of negligence - the issue for which it is authority is on the question of reliance, and it “is not authority for the proposition that cases of negligent misstatement do not require a consideration of whether there has been an assumption of risk on the part of the maker of a statement, or more broadly whether the circumstances are such as to give rise to a duty of care”.

It was also important to note that the statement relied upon by Mr Walsh here was made in a brochure which was generally available – therefore by the logic of the High Court judgment, an indeterminate number of claims could be made by prospective purchasers who missed out on the sale as an indirect consequence of the misstatement.

Justice O’Donnell considered Hedley Byrne v. Heller A.C. 465 at length, explaining that this landmark case was approved in Ireland by Securities Trust v. Moore and Bank of Ireland v. Smith; having “established the principle that the author of a statement could, in certain circumstances, be liable for financial loss caused by it to a person relying on it”.

Wildgust did not provide justification for adopting an approach to this case, which would involve a dramatic departure from Hedley Byrne – ultimately, Mr Walsh’s case was about the allocation of risk.

Accordingly, if a purchaser’s interest is in reliance on information provided in a brochure, the purchaser “should contract for that… and otherwise bear the risk of reliance in error, unless the agent has, and for whatever reason, clearly assumed the risk”.

In circumstances of the present case, it could not be said that the that JLL assumed that responsibility to Mr Walsh.

Accordingly, the Supreme Court held, in a 3:2 majority that JLL did not owe a duty of care to Mr Walsh in respect of the accuracy of the internal measurements of the Property as shown in the brochure – therefore JLL’s appeal was allowed, discharging the order of the High Court.