Ng Kong Teck v Sia Kiok Kok and Another [1997] 1 SLR 296; [1996] SGHC 164

Agency – Estate Agents – Authority – Whether agent had express or implied
authority of vendors – Whether vendors entitled to restrict agent’s authority
to make representations – Whether s 3 of Misrepresentation Act affected
the principal’s right to limit agent’s authority

Land – Sale of Land – Representation on built-in area of property by property
agent – Whether misrepresentation – Whether misrepresentation material
– Whether purchaser acted and relied on misrepresentation – Whether misrepresentation
with implied authority of vendors – Whether purchasers entitled to rescind
contract

Land – Sale of Land – Option – Clause in option stipulating that no warranty
or representation was given or implied on vendor’s part – Whether void
under s 3 of Misrepresentation Act – Whether clause restricted authority
of property agent to make any representation as to built-in area

Case Summary

Facts

The defendants granted an option to the plaintiff to purchase a property.
The plaintiff exercised the option. The plaintiff then claimed that the
gross floor area was substantially less than that represented to him by
the defendants’ property agent before he exercised the option. The
plaintiff commenced an action for rescission of the contract. The defendants
issued a 21-day notice to complete before the action was heard. The plaintiff
completed the sale before the expiry of the notice and effected at the
same time a sub-sale to a company in which he had some interest. The parties
agreed that the following issues be tried at the hearing: (a) whether
the property agent made any of the representations alleged; (b) whether
the property agent had the authority of the defendants to make the alleged
representations; (c) whether the representations were material; (d) whether
the representations were relied on by the plaintiff; (e) the effect of
the representations; (f) whether cl 8 of the option, which provided that
the property was sold on an ‘as is and where is’ basis and
that no warranty or representation on the vendor’s part was given
or to be implied as to the area of the property among other things, was
of no effect under s 3 of the Misrepresentation Act and (g) whether the
plaintiff was entitled to any of the reliefs sought.

Held, dismissing the plaintiff’s application:

(1) On the evidence, the property agent did make the representation to
the plaintiff on the built-in area of the property.

(2) Without taking into account the terms of the option, the property
agent had the implied authority of the defendants to make such a representation.

(3) The representation was material and was of such a nature as would
be likely to induce a person to enter into the contract.

(4) The plaintiff had relied on the representation and was induced by
it to enter into the contract.

(5) The completion of the contract and the sub-sale did not deprive the
plaintiff of the remedy of rescission as the plaintiff reserved his rights
on completion and the sub-purchaser had agreed to rescind the sub-sale
if necessary.

(6) If the agent had no authority to make the representation the principal
was not bound by it and s 3 of the Misrepresentation Act did not qualify
the principal’s right to limit his agent’s authority.

(7) A principal should be entitled to limit his agent’s authority
to make representations and to inform any person dealing with the agent
as to the limitation. Such a limitation should not be less effective because
it had become a term of the contract.

(8) The property agent was employed to find a purchaser to enter into
a contract with the defendants containing a term such as cl 8. It was
unthinkable that the agent should have implied authority to make a representation
that an express term of the contract would say was not made. Clause 8
was inconsistent with any such implied authority and the property agent
therefore had no such authority. There was therefore no misrepresentation
because the property agent had no authority to make any representation
as to the built-in area and s 3 of the Misrepresentation Act did not apply.

(9) The plaintiff was therefore not entitled to any of the reliefs sought.

Case(s) referred to
Abram Steamship Co Ltd v Westville Shipping
Co Ltd [1923] AC 773 (folld)

Boyd & Forrest v Glasgow
& South Western Railway Co (1915) SC (HL) 20 (refd)

Collins v Howell-Jones (1981) 259 EG 331 (refd)

Cremdean
Properties Ltd & Anor v Nash & Ors (1977) 244 EG 547 (refd)

Mullens v Miller (1882) 22 Ch D 194 (folld)

Overbrooke
Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR 1335 (folld)

Smith v Chadwick (1882) 20 Ch D 27 (CA); [1884] 9 AC 187
(HL) (folld)

South Western General Property Co Ltd v Marton (1982) 263 EG 1090 (distd)

WB Anderson & Sons Ltd &
Ors v Rhodes (Liverpool) Ltd & Ors [1967] 2 All ER 850 (refd)

Judgment

[Please note that this case has not been edited in accordance
with the current Singapore Law Reports house style.]

Lim Teong Qwee JC:

1 This is an originating summons by which the plaintiff claims rescission
of a contract for the sale and purchase of 24A and 24B Dunbar Walk (collectively
the ‘property’) and the return of $512,000 the 10% deposit
paid by the plaintiff. Certain issues were agreed to be tried and I
heard the originating summons partly on oral evidence and partly on
affidavit evidence with cross-examination of the deponents and dismissed
it with costs. These are my grounds.

2 On the night of 3 May 1995 the defendants signed an option in writing
granting an option to the plaintiff and/or his nominees to purchase
the property for $5.12m. Although described as one property it really
comprises an adjoining pair of semi-detached bungalows held under two
separate certificates of title but nothing turns on this. The option
was handed to Mr Joseph Foo in exchange for two cheques for the total
of $51,200. The plaintiff himself was not present during the exchange
but a Mr Quek was. The next morning Mr Foo handed the option to the
plaintiff. On 17 May 1995 the plaintiff exercised the option in accordance
with its terms and his solicitors delivered the signed acceptance copy
of the option with a cheque for the balance of the 10% deposit. The
completion date was 16 August 1995.

3 In their letter of 17 May 1995 the plaintiff’s solicitors wrote:

We are instructed that the properties are newly built and as such we
shall be obliged to receive from you:
(1) copy of TOP
(2) evidence of numbering in relation to the properties.

In reply the defendants’ solicitors wrote on 18 May 1995 to say
that they were instructed that the premises ‘only underwent renovation
and not rebuilt’. They also enclosed copies of the two relevant
certificates of statutory completion of additions and alterations to
the existing bungalows dated 4 October 1994 for 24A and 10 September
1994 for 24B.

4 On 23 June 1995 the plaintiff’s solicitors wrote to the defendants’
solicitors and part of the letter says:
We are also instructed that your clients have told our client through
their agent that the built in area is 3,500 sq ft. Kindly confirm the
same.

On 29 June 1995 the defendants’ solicitors replied saying:
We are also instructed that the overall new gross floor area (GFA) is
267.41 sq m.

On 30 June 1995 the plaintiff’s solicitors came back with this
letter:
We refer to your letter dated 29 June 1995 and note that your clients
now admit that the overall new gross floor area (GFA) is 267.41 sq m
when they had earlier, on several occasions before and after our client
had executed the option to purchase, informed our client that the GFA
was 3,500 sq ft. You will note that the discrepancy is substantial,
and the GFA was material to our client.
Kindly note that our client reserves his rights in the matter. We shall
take his instructions and revert.

By their letter dated 5 July 1995 the defendants’ solicitors denied
that their clients had ever represented to the plaintiff that the gross
floor area was 3,500 sq ft. ‘Gross Floor Area’ or ‘GFA’
is a commonly used expression meaning the ‘floor area’ as
defined in the Planning (Development Charges) Rules. The ‘floor
area’ is the gross area of floor space within a building measured
between party walls including the thickness of external walls and excludes
certain areas such as uncovered verandahs or terraces and any area used
as a covered main entrance. The GFA may well be different from the ‘built-in’
area. 3,500 sq ft is approximately 325.15 sq m which is 57.74 sq m or
approximately 21.6% more than the GFA of 267.41 sq m. However it is
not in dispute that if there was a representation that the built-in
area was 3,500 sq ft then the representation was false and in the circumstances
of this case there may be little doubt about it.

5 On 18 July 1995 this originating summons was issued and on 17 August
1995, the day after the date fixed for completion, the defendants’
solicitors served a notice to complete within 21 days. Shortly before
the expiry of the notice the sale and purchase was completed by a sale
to the plaintiff and a sub-sale by him to Asia Sky Properties Pte Ltd
(Asia Sky Properties) a company of which he and Mr Spenser Chan were
the only directors. He and Mr Spenser Chan held one share each of $1
and Asia Sky Holdings Pte Ltd (Asia Sky Holdings) held the remaining
1,199,998 shares of $1 each. The plaintiff and Mr Spenser Chan were
two of the three directors of Asia Sky Holdings and the plaintiff held
one share of $1 and Mr Spenser Chan the remaining 144,999 shares of
$1 each. The plaintiff said that Mr Spenser Chan had agreed with him
to ‘set aside or terminate the written agreement’ for the
sub-sale if he succeeded in his claim for rescission against the defendants.

6 Certain issues had been agreed to be tried and directions were accordingly
given but at the hearing I was informed that the parties had agreed
that the seven issues set out in the plaintiff’s solicitors’
letter of 7 September 1995 be tried instead and I made an order accordingly.
These are the issues and my decision on each of them.

The issues

Whether Joseph Foo made any of the representations as alleged

7 The plaintiff said in his first affidavit that some time in April
1995 he came to know Mr Foo as a property agent in the employ of Rolf
Associates Pte Ltd (Rolf Associates) an estate or property agency when
he or his employer Rolf Associates ‘handled’ the sale of
one of Mr Spenser Chan’s properties. He informed Mr Foo that he
was interested in buying a property and he said about two weeks later
Mr Foo:
(a) “informed me that there were two newly built Semi-Ds at Dunbar
Walk, Frankel Estate available’; and also
(b) ‘mentioned that each Semi-D stands on a land area of 4,200
sq ft with a built-in area of 3,500 sq ft’.

He said Mr Foo brought him to 24A and 24B Dunbar Walk and he was accompanied
by Mr Spenser Chan. He said he asked for the built-in area and Mr Foo
replied that it was 3,500 sq ft. Under cross-examination the plaintiff
said:
Q: You asked for [Mr Spenser Chan’s] opinion?
A: Yes.
Q: His reply?
A: Said if brand new if built-in 3,500 as told by Joseph Foo and as
told by Joseph Foo about transacted prices for other properties at 24,
24A Coldstream Avenue $2.95m and $3.05m then this good buy.

8 Mr Spenser Chan said in his affidavit that he accompanied the plaintiff
to view the property and that when the plaintiff asked Mr Foo the built-in
area Mr Foo said it was 3,500 sq ft. He also said that Mr Foo said the
property was newly built. Under cross-examination he said:\
Q: You and plaintiff discussed properties 24A, 24B Dunbar Walk before
viewing?
A: No.
Q: Discussed after?
A: On site I did. I was asked question. I made comment.
Q: What he asked?
A: Whether worth considering for purchase.
Q: Your answer?
A: I wanted to know size of property and whether newly built.
Q: At all told him good buy?
A: No.

He denied telling the plaintiff that it was a good buy which is not
what the plaintiff said. He also wanted to know the size of the property
and if it was newly built but he had said in his affidavit that Mr Foo
had told the plaintiff that and the plaintiff’s evidence is that
he had said it was a good buy if it was brand new and if the builtin
area was 3,500 sq ft as told by Mr Foo among other things.

9 Mr Foo said in his evidence that on the morning of 3 May 1995 he spoke
to the plaintiff on the telephone and told him that the built-in area
was 3,500 sq ft. He said he obtained the information on the built-in
area from the computer database at Rolf Associates but he did not provide
the information for the database. He did not obtain it from the defendants.
He said the information from the database also included a statement
that the two bungalows were a retrofitted pair. By that he understood
that only 70% of the construction was new. If it was 100% it would be
‘brand new’ or ‘newly built’. He said he met
the plaintiff and Mr Spenser Chan at the site and he told them that
the built-in area of each bungalow was 3,500 sq ft and that they were
retrofitted. Under cross-examination he said he did not at any time
communicate with the defendants and he did not tell either of them that
he had told the plaintiff the built-in area was 3,500 sq ft. He produced
printouts from the database. These did not show that the bungalows were
retrofitted but in respect of 24B it stated that it was 15 years old.
He said that from the printouts the information was first entered in
the database on 16 January 1992 and updated on 16 August 1992. The first
defendant said he bought 24B in January 1992 and 24A in November 1992
and the renovations were completed in September 1994 and October 1994.

10 On the evidence before me I find that Mr Foo made the representation
to the plaintiff that the built-in area was 3,500 sq ft in respect of
each bungalow. I also find that he did not represent that the bungalows
were new or newly built. The answer on the issue is ‘yes’
as to the built-in area.

Whether Joseph Foo, Quek or Rolf Associates Pte Ltd had the authority
of the defendants or any one of them to make the alleged representations

11 The first defendant said that he instructed Mr Quek ‘to act
for [him] in searching for a prospective buyer’ for the property.
He was informed by Mr Quek that he was an employee of Rolf Associates.
He denied having authorised either Mr Foo or Rolf Associates to represent
to prospective buyers that the property was newly built or that the
built-in area of each bungalow was 3,500 sq ft. He said he and Mr Quek
had advertised the property for sale on several occasions but at no
time had the built-in area been stated. He produced six advertisements
in both the English and Chinese press between 12 February 1995 and 26
February 1995 and these did not give the built-in area although the
land area was stated. The second defendant is the first defendant’s
wife and she said that she left all matters to her husband.

12 Mr Quek did not testify but Mr Foo did. He said he did not at any
time communicate with the defendants. Mr Chan has not suggested that
either of the defendants expressly authorised Mr Foo or Rolf Associates
to make any representation as to the built-in area of either of the
bungalows and it is clear that neither Mr Foo nor Rolf Associates nor
anyone else had any actual express authority to make any such representation.
The plaintiff’s case is that Rolf Associates was the defendants’
agent and as such agent it was impliedly authorised to make such representation
and its employee Mr Foo was similarly authorised.

13 In Mullens v Miller (1882) 22 Ch D 194 the vendors employed an agent
to find a purchaser for a leasehold warehouse. The agent made a number
of representations as to the property although he was not expressly
authorised to do so. Bacon VC said at p 199:

A man employs an agent to let a house for him; that authority, in my
opinion, contains also an authority to describe the property truly,
to represent its actual situation, and, if he thinks fit, to represent
its value. That is within the scope of the agent’s authority;
and when the authority is changed, and instead of being an authority
to let it becomes an authority to find a purchaser, I think the authority
is just the same. I think the principal does thereby authorize his agent
to describe, and binds him to describe truly, the property which is
to be the subject disposed of; he authorizes the agent to state any
fact or circumstance which may relate to the value of the property.

Mr Chan submitted that Rolf Associates had authority to make the representation
and the defendants were bound by the representation made by its employee
Mr Foo. He referred to WB Anderson & Sons Ltd & Ors v Rhodes
(Liverpool) Ltd & Ors [1967] 2 All ER 850.

14 The first defendant employed Mr Quek to find a purchaser but he knew
that Mr Quek was employed by Rolf Associates. Mr Quek himself told him
that. It was when he purchased some property at Lor G through him. That
was in the early part of 1993. The advertisements in the Chinese press
he produced gave the contact as ‘Rolf’. When asked about
payment of a commission on the sale of the Dunbar Walk property he said
he signed a document to the effect that a commission of 1% would be
paid to Rolf Associates. It is clear that it was Rolf Associates that
was employed by the defendants to find a purchaser for the property.
It is also clear that Rolf Associates was a company carrying on the
business of finding purchasers for properties for its clients for a
fee or commission.

15 There was a document signed by the first defendant relating to the
employment of Rolf Associates but the document was not before me and
apart from the payment of a commission there is no evidence of any of
the terms of the employment contained in it. What is known is that the
defendants employed Rolf Associates to find a purchaser for the property
and agreed to pay a commission of 1%. The property comprised two recently
retrofitted adjoining semi-detached bungalows. The advertisements mentioned
a price of $5.5m and that it was negotiable. When Mr Foo introduced
the property to the plaintiff he invited him to make an offer and he
conveyed the offer to Mr Quek with a request that the offer be passed
on to the defendants and eventually a price above the plaintiff’s
original offer was agreed upon. So for a fee Rolf Associates was to
find a purchaser at a price to be agreed by the defendants. Rolf Associates
clearly had actual express authority to find a purchaser. That was what
it was employed to do. It would have implied authority to do a range
of other things.

16 Bowstead & Reynolds on Agency (16th Ed) has this statement at
p 126:
An agent who is authorised to do any act in the course of his trade,
profession or business as an agent has implied authority to do whatever
is normally incidental, in the ordinary course of such trade, profession
or business, to the execution of his express authority, but not to do
anything which is unusual in such trade, profession or business, or
which is neither necessary for nor incidental to the execution of his
express authority.

Expert evidence as to the business of estate agents or estate agents
of the class of which Rolf Associates was a member would have been of
considerable assistance but that is not before me. The course of business
between the defendants and Rolf Associates would also be relevant but
again there is no evidence of that except for the use of the standard
form of option.

17 I will leave aside for the moment the use of the standard form of
option. Having regard to the other terms of the employment and the nature
of the property it seems to me that the scope of the authority of Rolf
Associates would extend to describing the property for a purchaser to
be found to make an offer. When asked if he thought prospective purchasers
would be interested in the land area and the built-in area Mr Foo said
that for land the area was very important but it was ‘not so much’
for the built-in area. It may not be so very important but I should
think that having regard to what he said it is of no little consequence
to a prospective purchaser to know the built-in area particularly in
the case of a recently retrofitted adjoining pair of semi-detached bungalows.
I think the scope of Rolf Associates’ authority would include
implied authority to state the built-in area or the GFA. I think that
making such a statement would be normally incidental to its express
authority. Mullens v Miller was decided more than 100 years ago and
I doubt if I should incline so far as to say that an agent employed
to find a purchaser for a house would have implied authority to state
any fact or circumstance which may relate to the value of the property.
In the circumstances of this case I would be satisfied with a statement
of the built-in area or GFA.

18 Rolf Associates was (and no doubt still is) a company incorporated
under the Companies Act and of course it can only act by its servants
or agents. Any authority it had from its clients such as the defendants
could be exercised by any of its servants acting in the course of their
employment and within the scope of their authority as its servants.
Mr Foo was a property executive employed by Rolf Associates for three
years when he testified and he had ‘handled’ the sale of
some property for Mr Spenser Chan before introducing the Dunbar Walk
property to the plaintiff. He was introduced to the defendants by Mr
Quek on the night they signed the option. There was nothing unusual
about him performing the tasks associated with finding a purchaser for
the property. I think he was acting in the course of his employment
and it was within the scope of his authority as a servant of Rolf Associates
to make the representation. I think Mr Foo had the implied authority
of the defendants to make the representation as to the built-in area
of the bungalows. The answer on this issue is ‘yes’ as to
both Rolf Associates and Mr Foo but this is before taking into account
the standard form of option used and in particular the effect of cl
8 of the option to purchase which will be considered later. Since it
is not alleged that Mr Quek made any representation it is unnecessary
to come to any decision as to whether he had any authority.

Whether the representations were material

19 In Smith v Chadwick (1884) 9 AC 187 Lord Blackburn said
at p 196:

I think that if it is proved that the defendants with a view to induce
the plaintiff to enter into a contract made a statement to the plaintiff
of such a nature as would be likely to induce a person to enter into
a contract [emphasis added], and it is proved that the plaintiff did
enter into the contract, it is a fair inference of fact that he was
induced to do so by the statement.

Lord Blackburn was referring to that part of the judgment of Jessel
MR in the Court of Appeal in (1882) 20 Ch D 27 where he said at
p 44:

Again, on the question of the materiality of the statement, if the court
sees on the face of it that it is of such a nature as would induce a
person to enter into the contract, or would tend to induce him to do
so [emphasis added], or that it would be a part of the inducement, to
enter into the contract, the inference is, if he entered into the contract,
that he acted on the inducement so held out, …

See also Spencer Bower and Turner, The Law of Actionable Misrepresentation
(3rd Ed) which has this statement at p 144:

A representation is material when its tendency, or its natural and probable
result, is to induce the representee to enter into the contract or transaction
which in fact he did enter into, or otherwise to alter his position
in the manner in which he did in fact alter it.

I have referred to the evidence that the bungalows in question were
recently retrofitted and that it was important for a prospective purchaser
to know the builtin area although it was not as important as the land
area. It seems to me that the representation as to the built-in area
of the bungalows was of such a nature as would be likely to induce a
person to enter into the contract to purchase them which the plaintiff
did. I think the representation was material and the answer on this
issue is ‘yes’.

Whether the representations were relied on by the plaintiff

20 Mr Foo said in evidence:
Q: Ever compare [24A and 24B Dunbar Walk] with other properties in vicinity?
A: Informed plaintiff nearby pair of semi-D. Land 4,400 sf and built-in
4,500 each. Coldstream Avenue.
Q: Anything else about it?
A: Told them 24A, 24B Coldstream Avenue transacted about $6m. Both properties
$3m each.
Q: Told them Dunbar Walk properties good buy?
A: Yes. Told them indeed good buy.
Q: Why good buy?
A: Based on land at Coldstream Avenue. 4,400 sf each. Dunbar Walk 4,200
sf each. Coldstream Avenue at $6m. Dunbar Walk only $5.2m negotiable.

I think the representation as to the built-in area was made to induce
the plaintiff to purchase the property. It was a material representation.
The plaintiff did enter into the contract to purchase it shortly after.
I would have thought that he must have acted on the inducement so held
out.

21 The plaintiff said in his affidavit that he relied on Mr Foo’s
words in relation to the built-in area and certain other matters. He
instructed Mr Foo to try to secure the option to purchase. Later that
night Mr Foo showed him a document which was the option except that
it did not have the particulars of the cheques for the payment of the
option money and it had not been signed by the defendants yet. He read
it. Clause 8 of the option said:

The property is sold in a ‘as is and where is’ basis and
the purchaser shall be deemed to have inspected the property on or before
accepting this option and is satisfied with the same and shall not [be]
entitled to make or raise any enquiry requisition objection whatsoever
in respect thereof. No warranty or representation on the vendor’s
part is given or to be implied as to the state condition quality area
or description thereof.

He said he understood it and under cross-examination he said:
Q: Asked [Mr Foo] about it?
A: Not comfortable because built-in area not written in. I asked Joseph
Foo. If discrepancy I would have no recourse.
Q: Asked him to delete cl 8 or any part of it?
A: Suggested to him. Said not comfortable with clause. He said standard
agreement.
Q: If built-in area of great concern could have been handwritten in
this copy of option?
A: Yes.

It was submitted for the defendants that the plaintiff did not rely
on the representation as to the built-in area.

22 I shall consider the effect of cl 8 later and shall confine myself
for the moment to the argument that if the plaintiff had relied on the
representation he would have had it written into the option or had cl
8 or part of it deleted. He had the representation made to him. He viewed
the property. He had the representation made to him again. He was told
it was a good buy. He asked for an option. He negotiated the price and
when it was agreed Mr Foo produced a form. All this took place in the
space of one day. I think he was anxious to conclude the deal. The form
that Mr Foo produced was said to be a standard form. If he had attempted
to have the statement as to the built-in area written in or to delete
any part of cl 8 there might well have been some delay. I think he had
a reasonable explanation for accepting the option in that form without
any variation or proposing one. I think the inference is still that
he relied on the representation and was induced by it to enter into
the contract to purchase the property. The answer on this issue is ‘yes’
as regards the built-in area.

What is the effect of the representations

23 I have found that there was a representation as to the built-in area
and it was not in dispute that the representation was false. It was
material and the plaintiff was induced by it to enter into the contract
to purchase the property. The contract was completed before the hearing
of this action and what I have to decide is whether completion of the
contract by transfer on a sale to the plaintiff and a subsale by him
to Asia Sky Properties deprived the plaintiff of the remedy of rescission
if he was otherwise entitled.

24 On 29 June 1995 the plaintiff became aware that the representation
as to the built-in area was false and on 30 June 1995 his solicitors
wrote to the defendants’ solicitors reserving his rights. On 18
July 1995 this originating summons was issued. On 27 July 1995 the defendants
entered appearance and on 10 August 1995 the defendants filed an affidavit
by the first defendant denying the misrepresentation alleged and the
plaintiff’s claim for rescission. On 14 August 1995 directions
were given for the hearing. On 17 August 1995 the defendants gave written
notice to complete making time of the essence of the contract with the
usual consequences for non-compliance. Shortly before the expiry of
the notice the contract was completed but the plaintiff by his solicitors’
letter of 5 September 1995 reserved his rights. Mr Rai has not submitted
that this amounted to a waiver and I think in the circumstances it would
not have been open to him to do so. The action was pending and the defendants
were resisting the claim and I think the plaintiff did his best by reserving
his rights and completing on that basis. Such conduct is certainly not
consistent with affirming the contract unless he has put it beyond his
power to restore the property to the defendants should he be held otherwise
entitled to rescission of the contract. The real question is whether
by the sub-sale and transfer to Asia Sky Properties he has done so.

25 In Abram Steamship Co Ltd & Anor v Westville Shipping Co
Ltd & Anor [1923] AC 773 AS Co which had contracted with a
shipyard for the construction of a vessel assigned the contract to WS
Co on representations which were false but not fraudulent. WS Co assigned
the contract to B Co and innocently passed on the representations made
to them. B Co repudiated their contract with WS Co and WS Co repudiated
their contract with AS Co. B Co brought an action in England against
WS Co for rescission and while the English action was pending WS Co
brought a similar action in Scotland against AS Co. While the Scottish
action was pending judgment was entered by consent for B Co in the English
action. Lord Dunedin said at p 780:

The sub-contract, which was ex hypothesi the only obstacle, has been
completely swept away. [WS Co] have been put back into their original
position — ie as purchasers under the contract with [AS Co]. Why,
then, should they not reduce that contract if they have relevant grounds
to do so?

Lord Atkinson put it quite simply and accurately when he said at p 789:
When the [sub-contract] was rescinded and thus got out of the way, I
think there was nothing to prevent [WS Co] from enforcing their rights
against [AS Co].

Although the circumstances were different in that the sub-contract was
actually rescinded I think the principle equally applies. The only obstacle
to rescission between the plaintiff and the defendants is the sub-sale
but there is no doubt that it can be put out of the way if and when
the time comes. The sub-purchaser was a company controlled by Mr Spenser
Chan and he and the plaintiff are the only directors and Mr Spenser
Chan has agreed with him for the sub-sale to be rescinded. The answer
then on this issue is ‘rescission and/or damages’.

Whether cl 8 or any part of it is of no effect under s 3 of the Misrepresentation
Act 1967

26 Section 3 of the Misrepresentation Act provides:
If a contract contains a term which would exclude or restrict —
(a) any liability to which a party to a contract may be subject by reason
of any misrepresentation made by him before the contract was made; or
(b) any remedy available to another party to the contract by reason
of such a misrepresentation,
that term shall be of no effect except in so far as it satisfies the
requirement of reasonableness as stated in section 11(1) of the Unfair
Contract Terms Act, and it is for those claiming that the term satisfies
that requirement to show that it does.

This provision is in pari materia with s 3 of the Misrepresentation
Act 1967 (England). Before the enactment of the Act of 1967 parties
were free to contract out of liability for misrepresentation unless
it could be shown to be fraudulent. See Boyd & Forrest v Glasgow
& South Western Railway Co (1915) SC (HL) 20 at pp 35, 36 per Lord
Shaw. Section 3 applies to a term of a contract which would exclude
or restrict any liability for misrepresentation or any remedy for misrepresentation.
Such a term would still be of no effect in regard to fraudulent misrepresentation
even if it can satisfy the requirement of reasonableness.

27 In Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 1 WLR
1335 a firm of auctioneers instructed to sell a property issued a catalogue
which set out the particulars of the property and the conditions of
sale. Condition R(b) stated:

The vendors do not make or give and neither the auctioneers nor any
person in the employment of the auctioneers has any authority to make
or give any representation or warranty in relation to these properties.

The property was sold to the purchasers which later declined to proceed
with their purchase alleging misrepresentations made to them by the
auctioneers. The vendors brought an action for specific performance.
Brightman J said at p 1341:

… it is not, in my judgment, possible for the [purchasers] to
assert that [the auctioneers] had ostensible authority to make the representations
said to have been made by them, for these reasons — before any
contract was made and, indeed before any representation was made, the
[purchasers] were obviously in possession of a document which, in terms,
negatived any such authority. … It seems to me that it must be
open to a principal to draw the attention of the public to the limits
which he places upon the authority of his agent and that this must be
so whether the agent is a person who has or has not any ostensible authority.

and later at p 1342 he said:

In my view [s 3 of the Misrepresentation Act] only applies to a provision
which would exclude or restrict liability for a misrepresentation made
by a party or his duly authorised agent, including of course an agent
with ostensible authority. The section does not, in my judgment, in
any way qualify the right of a principal publicly to limit the otherwise
ostensible authority of his agent.

In Collins v Howell-Jones & Anor (1981) 259 EG 331 the
exclusion clause was in the same terms as in the Overbrooke Estates
case. Waller LJ referred to the judgment of Brightman J and came to
the conclusion that responsibility for the misrepresentation made by
the agent was effectively avoided by reason of the exclusion clause.
See also Cremdean Properties Ltd & Anor v Nash & Ors (1977)
244 EG 547 where Bridge LJ expressly agreed with the reasoning of Brightman
J.

28 Mr Chan submitted that Overbrooke Estates Ltd v Glencombe Properties
Ltd is distinguished on the facts. In that case the exclusion clause
was brought to the notice of the purchasers before the property was
sold to them at the auction and also before the representation was made.
In the case before me the exclusion clause was seen by the plaintiff
after the representation was made although the plaintiff only altered
his position by paying for the option subsequently. In both cases the
exclusion clause was brought to the purchaser’s notice before
the contract.

29 In Overbrooke Estates Ltd v Glencombe Properties Ltd the
representees sought to rely on the ostensible authority of the auctioneers
to make the representation but I do not see that it made any difference
to the judgment whether the exclusion clause was seen by the representees
before or after the representation was made. The way Brightman J expressed
himself at p 1341 it is clear that the exclusion clause protected the
principal because before the representee altered his position he had
notice of the agent’s limited authority. I think this is right.
It is the same with the point of time by reference to which the truth
or falsity of a representation has to be tested. A representation that
is true at the time it is made but false when the representee alters
his position is a false representation and conversely one that is false
when made but true when acted on is not a false representation. Until
the representation is acted on the principal can withdraw it or when
it has been made by a person with ostensible authority the principal
can give notice to the representee that the agent had no authority to
make it.

30 In Overbrooke Estates Ltd v Glencombe Properties Ltd the
court was concerned with ostensible authority. The report of the judgment
is not quite clear but it appears that the principals must have held
the auctioneers out as their agents. Ostensible authority was what the
purchasers knew about and Brightman J in his judgment specifically addressed
it. I do not think there is any question of ostensible authority in
the case before me. The plaintiff can rely on no word spoken or otherwise
or any conduct on the part of either of the defendants or of any person
authorised for this purpose other than Mr Foo himself if at all and
of course the supposed agent cannot hold himself out as an agent so
as to bind his supposed prinicipal. The plaintiff cannot rely on ostensible
authority. What he can rely on is actual implied authority. I have said
that both Rolf Associates and Mr Foo would have such authority to make
the representation but this is before taking into consideration the
standard form of option used and in particular the effect of cl 8.

31 Collins v Howell-Jones & Anor was a case in which the
representee relied on actual express authority and the point made by
counsel was that such authority could not be excluded by the exclusion
clause. Waller LJ said at p 332:
Mr Spens sought to differentiate that case on the grounds that while
in that case the authority which was being excluded was ostensible authority,
in this particular case it was express authority. In the Overbrooke
Estates case, however, Brightman J says at p 1341:

‘It seems to me that it must be open to a principal to draw the
attention of the public to the limits which he places on the authority
of his agent and that this must be so whether the agent is a person
who has or has not any ostensible authority. If an agent has prima facie
some ostensible authority that authority is inevitably diminished to
the extent of the publicised limits that are placed on it.’
There is a fallacy in Mr Spens’ argument. Ostensible authority
is what matters, because that is all the other party knows about. But
if express authority specifically forbids any representation being made,
then any representation in fact made is outside the authority given.

In my judgment there is no warrant for the submission that where the
authority is direct, any different conclusion should be arrived at.
The principal announces to those who are dealing with his agent what
are the limits of that agent’s authority.
I agree that there is no difference whether the authority relied on
is ostensible authority or actual authority and if actual authority
whether express or implied. If the agent had no authority to make the
representation the principal is not bound by it and s 3 of the Misrepresentation
Act does not qualify the principal’s right to limit his agent’s
authority. This is what Overbrooke Estates Ltd v Glencombe Properties
Ltd decided. The distinction drawn by Mr Chan is one without any
difference really.

32 Mr Chan submitted that I should follow South Western General
Property Co Ltd v Marton (1982) 263 EG 1090 where one of the conditions
of sale, namely, condition 13(b) was in the same terms as that in the
Overbrooke Estates case. The purchaser alleged that the vendors’
agents had made representations which were false although innocent.
Croom-Johnson J said at p 1091:

… it is quite clear and it is not contested that the three general
conditions are sufficient in one way or another to exclude liability
for the representation which I have found was made, unless those conditions
are to be avoided by s 3 of the Misrepresentation Act 1967.

After citing the statutory provisions he went on to say at p 1092:

The question therefore is: Were these conditions fair and reasonable
to be included under sub-s (1) of s 11?

33 In South Western General Property Co Ltd v Marton the representation
was made in the auctioneers’ catalogue which also contained the
conditions of sale. The vendors did not deny the auctioneers’
authority to make the representation. That was not their case. Their
case in respect of condition 13(b) was that the conditions of sale precluded
the purchaser from relying on any representations even if they were
false. It was also accepted that condition 13(b) would exclude liability
for misrepresentation. There was no occasion to consider Overbrooke
Estates Ltd v Glencombe Properties Ltd. In the case before me the
authority of the agent is very much in issue. Apart from authority it
must be right that a principal should be entitled to limit his agent’s
authority to make representations which would otherwise be binding on
him and to inform any person who may be minded to deal with the agent
as to the limitation of the agent’s authority. I can see no reason
why such a limitation should be the less effective because it has become
a term of the contract. There is nothing in the Misrepresentation Act
that affects the principal’s right to limit his agent’s
authority in any way. For these reasons I decline to follow South
Western General Property Co Ltd v Marton.

34 I turn now to the question of the authority of Rolf Associates. The
defendants did not expressly authorise it to make any representation
as to the built-in area. The property was advertised by the defendants
and Mr Quek and the built-in area was not stated. The defendants did
not say why it was not stated and Mr Quek did not testify. On the other
hand they did not say that they expressly forbade Rolf Associates or
Mr Quek or anyone else from making any such representation. It was Mr
Foo who found a purchaser in the plaintiff and when a price had been
agreed upon he showed the plaintiff a form of the option. It was a standard
form. Mr Foo did not say so but it can be inferred that it was a form
that was used in the ordinary course of business of Rolf Associates.
It was a form used by Rolf Associates. There is no evidence that any
other form of option was to be used for the purpose of the sale of the
defendants’ property. There is no evidence that Rolf Associates
used any other form of option in the ordinary course of its business.
When the plaintiff was satisfied with the option Mr Foo arranged for
the defendants to sign it. They did and Mr Foo took it in exchange for
the option money. The option was then given to the plaintiff. That was
the way Rolf Associates did business. It was employed by the defendants
to find a purchaser and when a purchaser had been found and the price
agreed upon an option in the standard form used by Rolf Associates in
the ordinary course of its business would be given by the defendants
to the purchaser. In these circumstances I think that the standard form
of option is part of the terms of its employment by the defendants.

35 I have earlier referred to cl 8. It is in at least two parts. The
first part says that the property is sold ‘as is and where is’.
It goes on to say that the purchaser is deemed to have inspected it
and to be satisfied with it and will not be entitled to make or raise
any enquiry, requisition or objection. I do not think anything much
turns on the first part directly but it does go a long way to underscore
the second part. The second part says that no warranty or representation
on the vendor’s part is given or to be implied as to the area
of the property among other things. Rolf Associates was employed to
find a purchaser who was to enter into a contract with the defendants
containing such a term. It is unthinkable that it should have implied
authority to make a representation that an express term of the contract
would say was not made. The second part of cl 8 is wholly inconsistent
with any such implied authority. In my opinion Rolf Associates had no
such authority and Mr Foo likewise had no such authority.

36 The issue before me is whether the second part of cl 8 is of no effect
under s 3 of the Misrepresentation Act. On my analysis of what I think
are the real issues there is no easy answer. As between the defendants
and Rolf Associates it had the effect of limiting the authority of the
agent to make representations but the Misrepresentation Act has nothing
to do with this. As between the defendants and the plaintiff this may
or may not be a term that would exclude liability for misrepresentation
but if there is no misrepresentation again the Misrepresentation Act
has nothing to do with it. There is no misrepresentation because Rolf
Associates and Mr Foo had no authority to make any representation as
to the built-in area. In the event I answered the issue by saying that
s 3 of the Act did not apply. I have not had the advantage of hearing
full arguments from counsel as to whether or not the second part of
cl 8 is a term that would exclude liability for misrepresentation and
I do not propose to express an opinion on it. On a strict view it does
not appear to be but see the judgment of Bridge LJ in Cremdean Properties
Ltd & Anor v Nash & Ors.

Whether the plaintiff is entitled to any of the reliefs sought

37 The answer is ‘no’. The representation as to the built-in
area was made by Mr Foo, an employee of Rolf Associates and neither
Mr Foo nor Rolf Associates had any actual authority express or implied
or any ostensible authority to make such representation. I dismissed
the plaintiff’s claim with costs.

Plaintiff’s claim dismissed.

Reported by Chou Sean Yu