NEPLINE SDN. BHD v.

JONES LANG WOOTTON

HIGH COURT MALAYA, PENANG
DATO' ABDUL HAMID BIN HAJI MOHAMED J
CIVIL APPEAL NO. 12-68-89
11 NOVEMBER 1994

TORT: Negligent misrepresentation - Duty of care - Whether

duty extended to omission - Misstatement incurred pure
economic loss - Whether recoverable when definite amount
claimed.
PRACTICE & PROCEDURE: Section 3 Civil Law Act - Scope of
applicability - Proviso thereof - Whether a guidance to Court
to develop Malaysian common law.
The respondent is a firm of registered real estate agents and
chartered valuer. By a letter dated 20 September 1988 the
respondent offered to let one-half portion of a premises to the
appellant. In the course of the negotiations the respondent,
by conduct or impliedly, represented to the appellant
that, inter alia, the said premises was not subject to any
foreclosure proceedings or order for sale. Relying on the
representation, the appellant paid a sum of RM15,372 as
rental and maintenance deposit. However at that material
time, there was a foreclosure proceeding pending in Court in
respect of the said premises and the respondent knew about
it but did not disclose the fact to the appellant. The said
premises was foreclosed and the appellant demanded return
of the deposit.
The respondent contented that the duty of care is not
applicable in this case as it is merely an omission and not a
positive statement. It was further contended the in a case
involving pure economic loss such as this the Courts should

be strict in granting damages.

Held :
[1] In applying s.3 of the Civil Law Act 1956, the approach the
Court should take is first to determine whether there is any
written law in force in Malaysia. If there is none, then the
Court should determine what is the common law of, and the
rules of equity as administered in England on 7 April 1956.
Having done that the Court should consider whether "local
circumstances" and "local inhabitants" permit its application
as such. If it is "permissible" the Court should apply it. If not,
the Court is free to reject it totally or adopt any part which is
"permissible", with or without qualification. Where the Court
rejects it totally or in part, then there being no written law in
force in Malaysia, the Court is free to formulate Malaysia's
own common law. In so doing, the Court is at liberty to look at
any source of law, local or otherwise, be it England after 7
April 1956, principles of common law in other countries,
Islamic law of common application or common customs of the
people of Malaysia. Under the provision of s.3 of the Civil Law
Act 1956, that is the way the Malaysian common law should
develop.
[2] This is not a case of a friend telling another friend that
there is a horse for rent. This is a case of a professional firm,
holding out to be a professional with expertise in its field
earning its income as such professional. They know that
people like the appellant would act on their advice. Indeed
they would hold out to be experts in the field and are reliable.
It would be a sad day if the law of this country recognises
that such a firm, in that kind of relationship, owes no duty of
care to its clients yet may charge fees for their expert
services.
In the circumstances the defendant in this case owned a duty
to the plaintiff to disclose that there was a foreclosure

proceeding pending. The provision of s.3 of Civil Law Act 1956,

especially the proviso thereto allows the Court to do so.
[3] The claim in the present case is for pure economic loss. It
is not for an injury to person or property. Also there is a need
to limit recoverability of damages for pure economic loss.
However, here the amount claimed is definite. It is a definite
amount which had been paid by the appellant. It is that
amount only which the appellant now seeks to recover. On
the facts of this case, the respondent is liable.
[Appeal allowed]

Case(s) referred to:

Hedley Byrne & Co. Ltd. v. Heller & Partners [1964] AC (HL)
465 (refd)
Anns v. London Borough of Merton [1977] 2 All ER 492
(HL) (refd)
Caparo Industries Plc v. Dickman & Ors. [1990] 2 WLR 358
(HL) [1990] 2 WLR 358 (HL) (refd)
Murphy v. Brentwood District [1990] 2 All ER (refd)
Pacific Associates Inc. & Anor. v. Baxter & Ors. [1990] 1 QB
993 (CA) @ 1009-1010 (refd)
Mooney & Ors. v. Peak Marwick, Mitchell & Co. & Anor. [1966] 1 LNS
109 [1967] 1 MLJ 87 (refd)
Bank Bumiputra Malaysia Bhd. v. Yeoh Ho Huat [1977] 1 LNS 11
Neogh Soo On & Ors. v. G. Rethinasamy 1983 CLJ 663 [1984] 1 MLJ
126 (refd)

Chin Sin Motor Works Sdn. Bhd. & Anor. v. Arosa

Development Sdn. Bhd. & Anor. [1992] 1 CLJ 102;[1992] 1
MLJ 23 (refd)
Syarikat Batu Sinar Sdn. Bhd. & 2 Ors. v. UMBC Finance Bhd. 2 Ors
[1990] 2 CLJ 691 (foll)
Commonwealth of Australia v. Mindford (Malaysia) Sdn. Bhd. & Anor.
[1990] 1 CLJ 77 [1990] 1 MLJ 878 (foll)

The Philippine Admiral [1977] AC 373 (refd)

Khalid Panjang & Ors. v. PP (No. 2) [1963] 1 LNS 53 [1964] MLJ 108
FC (refd)

The Parlement Belge [1880] (5) PD 197 (refd)

Trendex Trading Corporation v. Central Bank of Nigeria [1977]
2 WLR 356 (refd)
The I. Congreso Del Partido [1983] AC 244 (refd)
Nocton v. Lord Ashburton [1914] AC 932 (refd)
Girardy v. Richardson [1793] 1 Esp. 24 (refd)

Legislation referred to:

Civil Law Act, s. 3

Other source(s) referred to:

Law of Torts, R.P Balkin & J.L.R Davis, pp. 421 to 424

Clerk & Lindsel on Torts, 14th Edit, (1975), para. 866, p. 481

Counsel:
For the appellant - Tan Beng Hong; M/s. Lim Gim Leong & Co.
For the respondent - Logan B. Sabapathy (later Charanjeet
Kaur Kang); M/s. Skrine & Co.

JUDGMENT
Abdul Hamid bin Hj. Mohamed J:
This is an appeal from a judgment of the Sessions Court.
According to the Statement of Claim of the appellant/plaintiff,
during all the material time, the respondent/defendant was a
firm of registered real estate agents and chartered valuer. By
a letter dated 20 September 1988 the respondent offered to
let one-half portion of the premises in question to the
appellant at a monthly rent of RM3,343. According to the
appellant, in the course of the negotiations the respondent,
by conduct or impliedly represented to the appellant that:
(a) the landlord and/or owner had a good title to the
premises; (b) that the said premises was not subject to any
foreclosure proceedings or order for sale; and
(c) that the appellant could have a quiet and peaceful
possession of the premises.
Relying on the said representations, the appellant said that

they:
(a) entered into a tenancy agreement with the landlord for a
period of two years from 1 March 1989;
(b) paid to the landlord through the respondent a sum of
RM15,372 as rental and maintenance deposit; and
(c) renovated the said premises at the cost of RM67,480.
The appellant alleged that the respondent had acted
negligently in:
(a) failing to exercise any or proper care in ascertaining that
the landlord or owner had a good right or title to the said
premises;
(b) failing to exercise any or proper care in ascertaining that
at all material times the said premises was not subject to any
foreclosure proceedings and/or order for sale;
(c) failing to exercise any or proper care in ascertaining that
the appellant could have quiet and peaceful possession of the
said premises.
To give a clearer picture I should interject here to say that it
was not disputed that during the material time there was a
foreclosure proceeding in Court in respect of the said
premises and that the respondent knew about it but did not
disclose the fact to the appellant. The appellant executed the
tenancy agreement on 31 January 1989, paid rental for March
1989 and rental deposit for three months to the respondent.
Keys were handed to the appellant on 1 February 1989.
Renovation work commenced on 20 February 1989. However
on 25 February 1989 a proclamation for sale was put up on
the premises. (It should be noted here that the tenancy was
to commence from March 1989)

Going back to the Statement of Claim, on 1 March 1989,

(upon becoming aware of the pending auction) the appellant
through their solicitors sent a notice to the respondent
rescinding the said tenancy agreement and demanding the
refund of the rental, rental deposit and maintenance deposit
amounting to RM15,372, costs of renovation, cost of
advertising the appellant's premises and travelling expenses
"and inconvenience caused".
As the respondent failed to pay the amount claimed the
appellant filed this action.
The material defence raised by the respondent was that the
respondent, in its capacity as an estate agent appointed by
the landlord, was under no obligation whatsoever to carry out
the investigations, inspections and searches. The respondent
also denied that it owed a duty to the appellant to exercise
proper care in ascertaining the matters that the appellant
alleged the respondent was negligent of. Indeed the whole
case finally turned on the question whether the respondent
owed a duty of care to the appellant, in particular, to inform
the appellant that there was a foreclosure proceeding
pending during the negotiation, a fact which was admittedly
known to the respondent.
To complete the narration of facts, the premises was
auctioned on 15 March 1989. The appellant purchased the
premises at the auction, and if I may say so, moved in as the
owner rather than a tenant.
Learned Sessions Court Judge, in a 25-page judgment made a
finding that the respondent was in breach of the duty of care
he owed to the appellant, in particular, in not informing the
appellant of the impending foreclosure proceeding. However,
he did not give judgment for the appellant. This is partly
because, at the end of the trial the appellant abandoned their

claims under the various heads except

(a) the refund of RM15,372; and
(b) general damages
Even as regards these two heads the learned Sessions Court
Judge did not give judgment in favour of the appellant. This
was because as regards (a), he was of the view that there
was no privity of contract between the appellant and the
respondent. The respondent, in his words "merely acted as a
conduit pipe for the landlord" The tenancy agreement was
signed between the appellant and the landlord. Payments
were "promptly handed over" by the respondent to the
landlord. The respondent was a mere agent of the landlord.
Therefore, the appellant should have proceeded against the
landlord.
As regards general damages, he held that there was
absolutely no evidence led by the appellant.
Before me, learned Counsel for the appellant made a further
concession. He abandoned the prayer for general damages
leaving only the refund of the RM15,372 (rental and deposit).
He argued that the cause of action against the respondent
was in tort not contract. Therefore as the learned Sessions
Court Judge had found that the respondent owed a duty of
care to the appellant and had acted in breach of it, at the
very least the rental and deposit paid by the appellant should
be refunded.
The argument of the learned Counsel for the respondent who
first argued the appeal was most interesting. He argued that
the loss of the appellant was purely an economic loss. He
argued that the Courts (in England) had "consistently
stressed the need for some control mechanism, narrower
than the concept of reasonable foreseeability to limit a

person's liability for purely economic loss" The learned

Counsel argued that Hedley Byrne & Co. Ltd. v. Heller &
Partners [1964] AC (HL) 465 was an exception to the
irrecoverability of pure economic loss for negligent
misstatement. He however argued that the principle
enunciated in Hedley Byrne's case is not applicable in this
case because unlike in that case where there was a positive
misstatement, in this case it is merely an omission.
The learned Counsel recognised that Anns v. London Borough
of Merton [1977] 2 ALL ER 492 (HL) enlarged the
recoverability of pure economic loss. However, subsequently,
there were a number of cases including Caparo Industries Plc
v. Dickman & Ors. [1990] 2 WLR 358 (HL) [1990] 2 WLR 358
(HL) and finally in Murphy v. Brentwood District [1990] 2 ALL
ER the House of Lords overruled Ann's. Thus Murphy, marked
a significant retreat concerning the scope of duty of care in
pure economic loss cases. He therefore submitted the twostage tests in Ann's was no longer applicable. The Court
should approach the matter as follows:
i) whether the imposition of a duty of care is, in all the
circumstances of the case, just and reasonable. (For this
proposition learned Counsel referred to Pacific Associates Inc.
& Anor. v. Baxter & Ors. [1990] 1 QB 993 (CA) @ 1009-1010.
ii) The actual nature of the damage is relevant to the
existence and extent of any duty to avoid or prevent the
damage. For this proposition he referred to Caparo's case.
I asked both learned Counsel about the position of the law in
Malaysia. In particular, I wanted to know whether Courts in
Malaysia, especially Courts superior to this Court, had
occasion to consider Hedley Byrne's case or Ann's case or the
retreat from Ann's cases. Even though I gave them time to
research, they both come back with the same answer, that

there was no decision by Courts in Malaysia on the point.

My own limited research was not much better. However I
came across four cases in which Hedley Byrne's 465 Lt case
was mentioned. They are Mooney & Ors v. Peat Marwick,
Mitchell & Co. & Anor [1967] 1 MLJ 87; Bank Bumiputra Malaysia
Bhd. v. Yeoh Ho Huat[1977] 1 LNS 11; Neogh Soo On & Ors. v. G.
Rethinasamy 1983 CLJ 663[1984] 1 MLJ 126 dan Chin Sin Motor
Works Sdn. Bhd. & Anor. v. Arosa Development Sdn. Bhd. &
Anor. [1992] 1 CLJ 102;[1992] 1 MLJ 23.
However that was not the end of the problem. As I began to
prepare my decision, another point crossed my mind, i.e.,
what is the effect of the provisions of s. 3 of the Civil Law Act
1956? For ease of reference, I reproduce here the relevant
part.
3. (1) Save so far as other provision has been made or
may hereafter be made by any written law in force in
Malaysia, the Court shall(a) in West Malaysia or any part thereof, apply the
common law of England and the rules of equity as
administered in England on 7 April 1956,
(b)......
(c)......
Provided always that the said common law, rules of
equity and statutes of general application shall be
applied so far only as the circumstances of the States of
Malaysia and their respective inhabitants permit and
subject to such qualifications as local circumstances
render necessary
Before going any further I think I should discuss this provision
first. Many articles have been written on this provision. Many
seminars have discussed this provision. There have been
calls for the provision to be amended in order to allow our law
to progress with the development of common law in England,

or, to enable our Courts to look somewhere else also,

including Islamic Law and local customs, for source of law.
However, the provision remains in our statute book though
rarely referred to by lawyers or judges in their submissions of
judgments, respectively. More often than not, and this case is
a good example, Counsel refer to English authorities as if the
common law of England applies in toto in Malaysia. I must
however point out that there is a decision of the High Court in
Ipoh in which the learned Judge categorically relied on the
proviso to s. 3(1) of the Civil Law Act 1956 in refusing to follow
English authorities but instead followed a decision of the High
Court of Brunei Darussalam which was reversed on appeal to
Brunei's Court of Appeal.
In that case, Syarikat Batu Sinar Sdn. Bhd. & 2 Ors. v. UMBC
Finance Bhd. 2 Ors [1990] 2 CLJ 691 (foll), Peh Swee Chin J (as he
then was) referring to the provsio to s. 3(1) of the Civil Law Act
1956 had this to say:
We have to develop our own common law just like what
Australia has been doing by directing our mind to the
"local circumstances" or "local inhabitants"
I agree entirely with his view and attitude.
I must also mention the decision of our Supreme Court
in Commonwealth of Australia v. Mindford (Malaysia) Sdn. Bhd. &
Anor. [1990] 1 CLJ 77. [1990] 1 MLJ 878. The issue in that case
was the question of sovereign immunity and the jurisdiction
of the Courts in Malaysia. In the Judgment written by Gunn
Chit Tuan, SCJ (as he then was), the learned Judge said,
regarding section 3 of the Civil Law Act 1956:
Section 3 of the Civil Law Act 1956 only requires any Court
in West Malaysia to apply the common law and the rules
of equity as administered in England on 7 April 1956.
That does not mean that the common law and rules of
equity as applied in this country must remain static and

do not develop. We have not been referred to any cases

decided by the former Court of Appeal or the Federal
Court after 7 April 1956, on the subject of sovereign
immunity nor have we discovered any such cases
decided after that date. It is correct, as pointed out, that
the law in England on sovereign immunity on 7 April
1956, was as declared in cases such as the The
Parlement Belge[1880] (5) PD197 (supra). That is, at
that time a foreign sovereign could not be sued in
personam in our Courts. But when the judgment in The
Philippine Admiral [1977] AC 373 (supra) was delivered
by the Privy Council in November 1975, it was binding
authority in so far as our Courts are concerned.
Therefore, by that time the common law position on
sovereign immunity in this country would be that the
absolute theory applied in all actions in personam but
the restrictive view applied in actions in rem. When
the Trendex (supra) case was decided by the UK Court
of Appeal in 1977 it was of course for us only a
persuasive authority, but we see no reason why our
Courts ought not to agree with that decision and rule
that under the common law in this country the doctrine
of restrictive immunity should also apply.
That is more so in view of the very strong persuasive
authority in The I. Congreso Del Partido [1983] AC 244
case (supra) in which the House of Lords had in July
1981, unanimously held that the restrictive doctrine
applied at common law in respect of actions over
trading vessels regardless of whether the actions
were in rem or in personam. We are therefore of the
view that the restrictive doctrine should apply here
although the common law position of this country could
well be superseded and changed by an Act of
Parliament later on should our Legislature decide to
define and embody in a statute the limits and extent of
sovereign immunity in this country.

The first two sentences of the paragraphs pose no problem.

Indeed that is what it should be. The problem arises with
what follows:
First, on the question whether the The Philippine
Admiral [1977] AC 373 is a "binding authority in so far as our
Courts are concerned." The Philippine Admiral is a decision of
the Privy Council in an appeal from Hong Kong. It does not
concern an interpretation of a statute which is in pari
materia with a Malaysian statute as in the case of Khalid
Panjang & Ors. v. PP (No. 2) [1963] 1 LNS 53 [1964] MLJ 108 FC.
Did the Supreme Court intend to extend the principle to cover
all decisions of the Privy Council regardless from where the
appeal comes? I do not think so because the Privy Council
has to decide a case according to the law of the country from
which the appeal comes, which may be different from the law
in Malaysia.
Secondly having said that only the common law of England as
on 7 April 1956 was applicable to Malaysia, having said that
"the law in England on sovereign immunity" on 7 April 1956
was as declared in cases such as The Parlement Belge [1880]
(5) PD 197), the Court went on to say that the Privy Council
decision in The Philippine Admiral [1977] AC 373 was binding
on Malaysian Courts. Having said all that the Court went on to
apply the persuasive authority of UK Court of Appeal
in Trendex Trading Corporation v. Central Bank of
Nigeria [1977] 2 WLR 356) and the "very strong persuasive
authority" of the House of Lords decision in the The I.
Congreso Del Partido [1983] AC 244.
With greatest of respect, I would have thought that if the
common law of England on 7 April 1956 was as was declared
in The Parlement Belge, then by virtue of the provisions of s.
3 of the Civil Law Act, that law applies in Malaysia, unless it falls
within the proviso to that section. Secondly, I would have
thought that if the Privy Council decision in The Philippine

Admiral's case was binding on Malaysian Courts, then

Malaysian Courts would have no choice but to apply it. If that
be the case, then it would not be necessary to
consider Trendex or The I. Congreso Del Partido.
My humble view is that the provision of s. 3 of the Civil Law Act
1956 as it stands today, is the law of Malaysia. Courts in
Malaysia have no choice but to apply it.
So, I will have to consider the provision of s. 3(1) of the Civil Law
Act 1956. That section says clearly that save so far as other
provision has been made prior to or may be made after 7
April 1956 by any written law in force in Malaysia, the Court
shall, in West Malaysia or any part thereof, apply the common
law of England and the rules of equity as administered in
England on 7 April 1956. However, the said common law and
the rules of equity shall be applied so far only as the
circumstances of the States of Malaysia and their respective
inhabitants permit and subject to such qualifications as local
circumstances render necessary.
In my view the approach that the Court should take is first to
determine whether there is any written law in force in
Malaysia. If there is, the Court need not look anywhere else. If
there is none, then the Court should determine what is the
common law of, and the rules of equity as administered in,
England on 7 April 1956. Having done that the Court should
consider
whether
"local
circumstances"
and
"local
inhabitants" permit its application, as such. If it is
"permissible" the Court should apply it. If not, I am of the
view that, the Court is free to reject it totally or adopt any
part which is "permissible", with or without qualification.
Where the Court rejects it totally or in part, then there being
no written law in force in Malaysia, the Court is free to
formulate Malaysia's own common law. In so doing, the Court
is at liberty to look at any source of law, local or otherwise, be
it common law of, or the rules of equity as administered in

England after 7 April 1956, principles of common law in other

countries, Islamic law of common application or common
customs of the people of Malaysia. Under the provision of s. 3
of the Civil Law Act, 1956, I think, that it is the way the
Malaysian common law should develop.
In taking this approach I find that the most difficult thing to
do is to determine what is the common law of England on 7
April 1956 on negligent misstatement or omission.
Take Hedley Byrne case as an example. It appears from the
report that it was decided in 1963. If we say that that was the
day when the principle was "born", it is clearly after 7 April
1956. But, in deciding Hedley Bryne case, their lordships
referred to numerous cases including those decided in the
19th century. In fact one of the cases referred to was the case
of Coggs v. Bernard which was reported in [1703] 2 Ld. Rayon
909 - see [1664] AC @ 526. It appears to me that their
lordships in Hedley Byrne applied the principle laid down
in Nocton v. Lord Ashburton [1914] AC 932,), a decision made
over 40 years prior to 7 April 1956. Does it mean that we can
follow the Nocton but not Hedley Byrne ?
Anyway, I shall try to ascertain the position of the law in
England on careless misstatement. In doing so, I shall rely
on Clerk & Lindsell on Torts, 14th Edn. [1975] supplied to
me by learned Counsel for the respondent. (This Court Library
only has the 13th Edn. [1969]. But it does not matter because
we are now looking at the earlier period). In paragraph 866
beginning from p. 481, the learned author says:
Careless false statements. The development of the law
as to loss resulting from reliance on careless
misstatements is an example of the progressive
recognition of wider areas of liability for carelessness.
The House of Lords decided in Derry v. Peek [1889] 14
App. Cas. 337. (For Deceit, see Chap. 22, especially #

1632) that a careless misstatement of fact resulting in

pecuniary loss did not constitute deceit. Their Lordships
did not decide the question whether such a statement
might be actionable on the alternative ground of
negligence. This point was subsequently decided by the
Court of Appeal in Le Lievre v. Gould [1893] a QB 491,
which
was followed by a majority of the same tribunal
in Candler v. Crane, Christmas & Co. [1951] 2 KB 164 in
both of which it was held that pecuniary loss inflicted by
careless misstatements was not suable in negligence
either.
The same point was the basis of the decision in Old
Gate Estates Ltd. v. Toplis [1939] 3 All ER 209, 216, per
Wrottesley J where it was stated that the principle
of Donoghue v. Stevenson [1972] 3 AC 562 was
"confined to negligence which results in danger to life,
danger to limb or danger to health"; and in Heskell v.
Continental Express Ltd., [1950] 1 All ER 1033, 1042,
per Devlin J; but he repudiated his own dictum later
in Hedley Byrne & Co. Ltd. v. Heller & Partners. [1964]
AC 465, 532 where it was stated that "negligent
misstatements can never give rise to a cause of action.
However, it was not long after the original decision that
modifications were introduced into an apparently wide
principle of non-liability, there was, in other words, piecemeal
recognition of the infliction of damage, pecuniary and
otherwise, by means of careless false statements, Parliament
intervened immediately after Derry v. Peek to nullify its
effect. That case concerned careless misstatements in a
Company prospectus, and statute imposed liability in such
cases. (See now Companies Act 1948, s. 43(1)). There were also
developments in equity that created exceptions.
Long before Derry v. Peek there had developed the rule
that negligent statements could found an estoppel

though not a right of action, and the rule was continued

thereafter. (Burrowes v. Lock [1805] 10 Ves. 470, as
explained in Low v. Bouverie [1891] 3 Ch. 82, 101, 102103; Nocton v. Lord Ashburton [1914] AC 932,
952. C.f. the dubious explanations in Brownlie v.
Campbell [1880] 5 App. Cas 925, 935, 936, 953; Derry
v. Peek [1889] 14 App. Cas. 337, 360; Candler v. Crane,
Christmas & Co. [1951] 2 KB 164, 191). Then the House
of Lords itself in Nocton v. Lord Ashburton ([1914] AC
932. See also Woods v. Martins Bank Ltd. [1959] 1 QB
55, 72 (which is preferable to the reports in [1958] 1
WLR 1018, and [1958] 3 All ER 166). The case was
approved in Hedley Byrne & Co. Ltd. v. Heller and
Partners Ltd. [1964] AC 465. See also Boyd v.
Ackley [1962] 32 DLR (2d) 77) recognised the existence
in equity of a duty of care in what came to be
understood as "fiduciary relations." Where these existed
liability for careless misstatements was introduced
under the umbrella of "constructive fraud," which was a
more extended meaning of "fraud" than that employed
at common law. (Nocton v. Lord Ashburton[1914] AC
932, 951, 952; Lancashire Loans Ltd. v. Black Equity.
The word "fraud" in the Limitation Act 1939, s. 26(b)
(amended by the Limitation Act 1963, s. 4(3) is likewise
wider than at common law; Beaman v. ARTS [1949] 1 KB
550; Kitchen v. RAF Assn. [1958] 1 WLR 563; Clark
v.Woor [1965] 1 WLR 650)...
This development towards the wider recognition of liability for
careless misstatements was given added momentum by the
decision of the House of Lords in Hedley Byrne & Co. Ltd. v.
Heller & Partners Ltd., ([1964] AC 465; on which see
McKerron, 80 SALJ 483; Stevens, 27 MLR 121; 98 ILT 215;
Walker, 3 Osgoode Hall LJ 89; Norton [1964] JBL 231;
Goodhart, 74 Yale LJ 286; Honore, 8 JSPTL (NS) 284; Atiyah,
83 LQR 248; Coote, 2 NZULR 263.), upon which the law as to
liability for pecuniary loss caused by careless misstatements

will in future rest. It has dispelled the idea that Derry v.

Peek decided not merely that a careless misstatement does
not amount to deceit but also, a silentio, that it is not
actionable negligence either. This last proposition had been
the basis of the decision in Le Lievre v.Gould and Candler v.
Crane, Christmas & Co., and in rejecting it the House of Lords
has declared that these two cases were wrongly decided.
Once liability for careless misstatements is admitted,
the question arises as to how far responsibility should
extend.
So, it appears to me that prior to 7 April 1956, Nocton's case
was the highest watermark on the subject. Perhaps I should
mention that in Nocton's case, a mortgagee brought an
action against his solicitor, claiming to be indemnified against
the loss which he had sustained by having been improperly
advised and induced by the defendant, acting as his
confidential solicitor, to release a part of a mortgage security,
whereby the security had become insufficient. The statement
of claim alleged that the defendant, when he gave the
advice, well knew that the security would be merely rendered
insufficient and that the advice was not given in good faith,
but in the defendant's own interest. It was held, inter
alia, that the plaintiff was not precluded by the form of his
pleadings from claiming relief on the footing of breach of duty
arising from fiduciary relationship and that he was entitled to
relief on that footing.
And, in the words of the learned author, in Hedley Byrne (post
1956), the House of Lords had recognised the existence in
equity of a duty of care arising from fiduciary relationship as
in the case of a solicitor and his client, for misrepresentation.
However, I must admit that is a far cry from the facts in this
case. Because, here, while I have no doubt that a fiduciary
relationship between appellant and the respondent did exist,

what happened here was not an active misrepresentation,

not even a careless misstatement as in Hedley Byrne 's case.
Here it was non-disclosure.
However, I do not think I should stop there. I think I am
entitled to go on and consider whether local circumstances
would require some "modification" to extend the concept of
the duty of care to an omission as in this case. As I have said,
I think the proviso to s. 3 of the Civil Law Act 1956 allows me to
do so if local circumstances so require. Indeed the same thing
was done by Peh J in Batu Sinar 's case. In fact it can be said
that the Supreme Court in Commonwealth of Australia's case
did just that when it applied the post 1956 decisions of the
English Courts, even though the judgment did not say so.
How else could that judgment be justified in the light of the
provisions of s. 3 of the Civil Law Act 1956?
I therefore ask the question whether local circumstances
would require the respondent, an estate agent, a professional
who advertised premises for rent, who knew that the
premises was a subject matter of a pending foreclosure
action, to owe a duty of care to the appellant, who answered
to the advertisement and subsequently entered into a
tenancy agreement for a period of two years, to disclose the
fact that the premises was subject to a pending foreclosure
action?
I do not have the slightest doubt that the answer should be in
the affirmative.
This is not a case of a friend telling another friend that there
is a house for rent. This is a case of a professional firm,
holding out to be a professional with expertise in its field,
earning its income as such professional. They know that
people like the appellant would act on their advice. Indeed, I
have no doubt that they would hold out to be experts in the
field and are reliable. It would be a sad day if the law of this

country recognises that such a firm, in that kind of

relationship, owes no duty of care to its client yet may charge
fees for their expert services.
In the circumstances, I think I am fully justified in taking the
view that the defendant in this case owed a duty to the
plaintiff to disclose that there was a foreclosure proceeding
pending I think the provision of s. 3 of the Civil Law Act 1956,
especially the proviso thereto, allows me to do so.
Learned Counsel for the respondent, referring to numerous
texts and authorities, stressed the need for some control
mechanism narrower than the concept of reasonable
foreseeability to limit a person's liability for pure economic
loss. He argued, correctly I must say, that subsequent
to Anns 's
case
there
are
a
number
of
cases,
including Caparo which steered clear of it and were termed as
the "retreat from Ann's cases."
First, I must say that I agree with him that the claim in the
present case (for the refund of the deposit paid) is for pure
economic loss. It is not for an injury to person or property.
Secondly, generally speaking, I also agree that there is a
need to limit recoverability of damages for pure economic
loss.
The reasons for judicial reluctance to impose liability in such
cases are conveniently listed by R.P. Balkin and J.L.R. Davis in
the Law of Tortsfrom pp. 421 to 424. These are:
(i) the fear of indeterminate liability;
(ii) disproportion between defendant's blameworthiness and
the extent of his liability;
(iii) interrelationship between liability in tort and contract;

(iv) the need for certainty; and

(v) the effect of insurance.
Considering these factors, it is a wise policy to limit liability in
pure economic loss cases, generally speaking.
However, I am of the view that such fears do not arise in this
case. Here the amount claimed is definite. It is a definite
amount which had been paid by the appellant. It is that
amount only which the appellant now seeks to recover. So,
even using the two tests which learned Counsel for the
respondent urged me to apply, I think, on the facts of this
case, the respondent is liable.
As I have stated earlier, the only claim the appellant is
seeking now is for the amount RM15,372 which is the amount
paid by the appellant. The learned Sessions Court Judge did
not allow this claim on the ground that there was no privity of
contract between the appellant and the respondent.
With respect, I think he was misconceived there. The action is
founded in tort not contract. As he himself had, after a
lengthy discussion of authorities, come to the conclusion that
the respondent had breached a duty of care owed by them to
the appellant, though taking a different approach, and since
the payment of that amount was never in dispute, he should
have ordered that that amount be paid by the respondent to
the appellant as damages. I also do not think that the
damage can be said to be too remote.
The appeal is allowed. The respondent is ordered to pay the
appellant a sum of RM15,372 with interest at 8% from today
till the date of realisation. The respondent shall also pay the
appellant costs of this appeal and costs in the Court below.
The deposit is to be refunded to the appellant.