Esso vs Mardon - Duty of Care and Negligence Cases

Esso Petroleum Co Ltd v Mardon

[1976] QB 801, [1976] 2 All ER 5, [1976] 2 WLR 583, [1976] 2 Lloyd's Rep 305, 120 Sol Jo 131, 2 BLR 85

Court: CA
Judgment Date: circa 1976

Case History

Annotations	Case Name	Citations	Court	Date	Signal
-	Esso Petroleum Co Ltd v Mardon	[1976] QB 801, [1976] 2 All ER 5, [1976] 2 WLR 583, [1976] 2 Lloyd's Rep 305, 120 Sol Jo 131, 2 BLR 85	CA	circa 1976
On Appeal from	Esso Petroleum Co Ltd v Mardon	[1975] QB 819, [1975] 1 All ER 203, [1975] 2 WLR 147, 119 Sol Jo 81	QBD	circa 1975

Cases referring to this case

Treatment	Case Name	Citations	Court	Date	Signal
Applied	European Bank of Reconstruction & Development v Tahsin Tekoglu	[2004] All ER (D) 534 (Mar)	Comml Ct	29/03/200 4
Considered	Sabena Technics SA v Singapore Airlines Ltd	[2003] EWHC 1318 (Comm), [2003] All ER (D) 145 (Jun)	Comml Ct	11/06/200 3
Considered	Watford Electronics Ltd v Sanderson CFL Ltd	[2000] 2 All ER (Comm) 984, [2001] IP & T 148, [2000] All ER (D) 1145	Tech & Constr Ct	27/07/200 0
Applied	Downs v Chappell	[1996] 3 All ER 344, [1997] 1 WLR 426	CA	03/04/199 6
dictum Lord Denning Considered	Lancashire and Cheshire Association of Baptist Churches Inc v Howard & Seddon Partnership (a firm)	[1993] 3 All ER 467, 65 BLR 21	QBD	circa 1993
Considered	Kleinwort Benson Ltd v Malaysia Mining Corpn Bhd	[1989] 1 All ER 785, [1989] 1 WLR 379, [1989] 1 Lloyd's Rep 556, 5 BCC 337, 133 Sol Jo 262, [1989] 16 LS Gaz R 35, [1989] NLJR 221	CA	circa 1989
Applied	Gubay v Kington (Inspector of Taxes)	[1984] 1 All ER 513, [1984] 1 WLR 163, [1984] STC 99, 57 TC 601, 128 Sol Jo 100, [1984] LS Gaz R 900	HL	circa 1984
Applied	Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm)	[1979] Ch 384, [1978] 3 All ER 571, [1978] 3 WLR 167, 121 Sol Jo 830	Ch D	circa 1979
Applied	Batty v Metropolitan Property Realisations Ltd	[1978] QB 554, [1978] 2 All ER 445, [1978] 2 WLR 500, 122 Sol Jo 63, 7 BLR 1, 245 Estates Gazette 43	CA	circa 1978
Distinguishe d	Laurence v Lexcourt Holdings Ltd	[1978] 2 All ER 810, [1978] 1 WLR 1128, 122 Sol Jo 681	Ch D	circa 1978
Considered	Argy Trading Development Co Ltd v Lapid Developments Ltd	[1977] 3 All ER 785, [1977] 1 WLR 444, [1977] 1 Lloyd's Rep 67, 120 Sol Jo 677	QBD	circa 1977

Cases considered by this case:

Treatment	Case Name	Citations	Court	Date	Signal
Applied	Bentley (Dick) Productions Ltd v Harold Smith (Motors) Ltd	[1965] 2 All ER 65, [1965] 1 WLR 623, 109 Sol Jo 329	CA	circa 1965
Applied	Hedley Byrne & Co Ltd v Heller & Partners Ltd	[1964] AC 465, [1963] 2 All ER 575, [1963] 3 WLR 101, [1963] 1 Lloyd's Rep 485, 107 Sol Jo 454	HL	circa 1964
Applied	Heilbut, Symons & Co v Buckleton	[1913] AC 30, 82 LJKB 245, 20 Mans 54, [1911-13] All ER Rep 83, 107 LT 769	HL	circa 1913

NEGLIGENCE - GENERAL PRINCIPLES OF THE LAW OF NEGLIGENCE - NATURE OF NEGLIGENCE - THE DUTY TO TAKE CARE - NECESSITY FOR - NO NEGLIGENCE WITHOUT DUTY.

Plaintiffs (Esso) were a company engaged in the production and distribution of petroleum.

In 1961 Esso acquired a site on a busy main street of a town for development as a petrol filling station. The site was acquired on the basis of calculations which showed that the estimated annual consumption of petrol at the station would be 200,000 gallons from the third year of operation. After the site had been acquired the local planning authority required the forecourt and petrol pumps to be placed at the back of the site which was accessible only from side streets and which was not visible from the busy main road.

The station was constructed in compliance with that requirement. The result of that change of plan was to falsify the basis on which Esso had calculated the annual consumption of petrol, but through lack of care Esso failed to revise their original estimate of 200,000 gallons. Subsequently Esso opened negotiations with defendant for the grant to him of a tenancy of the station. During the negotiations L, an Esso representative who had had 40 years' experience in the petrol trade, told defendant in good faith that Esso had estimated that the throughput of petrol would reach 200,000 gallons a year in the third year of operation of the station.

Defendant was aware of the deficiencies of the station and suggested that a lower estimate would be more realistic, but L's greater expertise quelled his doubts, and on the basis of L's representation as to the potential throughput defendant was induced to enter into a tenancy agreement in April 1963. That agreement was for three years at a rent assessed by Esso in accordance with their estimate of the potential throughput of petrol.

Defendant put capital into the station and incurred a bank overdraft to operate it but, despite his hard work, at the end of the first 15 months only 78,000 gallons of petrol had been consumed at the station and defendant had incurred a loss in running it. In July 1964 he tendered notice to quit the tenancy but Esso wished to retain him as the tenant and granted him a new tenancy agreement, dated 1 September 1964, at a reduced rent.

Defendant accepted the new tenancy in an attempt to mitigate the loss already incurred, but continued to lose money in the business, since the site with the pumps situated at the back was only capable of an annual throughput of some 70,000 gallons of petrol. By August 1966 defendant was unable to pay Esso for petrol supplied to the station and in December 1966 Esso issued a writ against him claiming possession of the station, money due for petrol and mesne profits.

Defendant continued trading at the station until March 1967 when he gave up possession. He had lost all the capital he had put into the station and had incurred a substantial overdraft. By his defence and counter-claim defendant claimed damages in respect of the representation made by L as to the potential throughput of petrol, alleging (i) that it amounted to a warranty for breach of which defendant was entitled to damages, and (ii) that it also amounted to negligent misrepresentation in breach of Esso's duty of care to defendant in advising him as to the potential throughput.

The trial judge rejected the claim for breach of warranty, but held that Esso were liable in damages for breach of their duty of care to defendant. In assessing those damages the judge limited the recoverable loss to that suffered between April 1963 and September 1964 on the ground that the misrepresentation made in 1963 had not induced defendant to enter into the tenancy agreement of September 1964. Defendant appealed: Held the appeal would be allowed and the decision of the judge varied because -

(1) where, during the course of precontractual negotiations, one party, who had special knowledge and expertise concerning the subject matter of the negotiations, made a forecast based on that knowledge and expertise with the intention of inducing the other party to enter into the contract, and in reliance on the forecast the other party did enter into the contract, it was open to the court to construe the forecast as being not merely an expression of opinion but as constituting a warranty that the forecast was reliable, ie that it had been made with reasonable care and skill. Since the forecast made by Esso of the throughput of petrol was based on their wide experience of the petrol trade and had induced defendant to enter into the tenancy agreement, the forecast was to be construed as constituting a warranty that it was sound. Accordingly, since the estimate had been made negligently and was therefore unsound, Esso were liable to defendant for breach of that warranty;

(2) there was no ground for excluding liability for negligence in relation to statements made in the course of negotiations which culminated in the making of a contract. Accordingly, where a person who had special knowledge or skill made representations to another by way of advice, information or opinion, with the intention of inducing the other to enter into a contract with him, he was under a duty to use reasonable care to see that the advice, information or opinion was reliable; furthermore (per Ormrod, LJ), the duty of care was not limited to persons who carried on the business or profession of giving advice. In the circumstances, the relationship between Esso and defendant was such as to give rise to a duty on the part of Esso to take care since they had special knowledge and skill in estimating the throughput of a filling station. It followed that Esso were in breach of that duty since the forecast had been made negligently and therefore they were also liable to defendant in damages for negligence;

(3) the measure of damages was the loss defendant had suffered by having been induced to enter into a disastrous contract. That loss included loss suffered after the date of the new tenancy entered into in September 1964, since that also was attributable to the original misrepresentation; in taking the new tenancy defendant had acted reasonably in attempting to mitigate the losses which he had already incurred in running the station.

Tagged with: esso petroleum v mardon 1976 lloyd rep 305, company had a history of a lack of duty of care, duty of care cases, case law, negligence, miscellaneous law cases

Esso Petroleum Co Ltd v Mardon

NEGLIGENCE - GENERAL PRINCIPLES OF THE LAW OF NEGLIGENCE - NATURE OF NEGLIGENCE - THE DUTY TO TAKE CARE - NECESSITY FOR - NO NEGLIGENCE WITHOUT DUTY.

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