Pt Royal Bali Leisure & Anor v Hutchinson & Co Trust Company Ltd

A trustee promoting a timeshare protection scheme may owe a duty of care to marketers as well as purchasers. Where it knows that marketing has begun under its scheme, and its materials represent that it has checked the developer’s title, silence may amount to an assumption of responsibility requiring a warning if the title is inadequate. A contractual trustee duty is directed to achieving effective protection under the applicable local law; it does not necessarily require the legal title itself to be transferred if equivalent rights provide the required protection. Negligent misrepresentation may cause recoverable economic loss, but a claim in negligence does not attract general damages for reputation in the manner of defamation.

The claimants developed and marketed timeshare resorts in Bali. They alleged that Hutchinson & Co Trust Company Ltd, appointed trustee for the developments, had represented that its trust structure protected purchasers and marketers and had failed to ensure that the developers held sufficient tenure for the 25-year timeshares marketed at Villa Lalu.

PMI claimed damages in negligence for losses caused by the Villa Lalu marketing. RBL claimed damages for breach of contract and misrepresentation, alleging that the trust structure for the Peninsula resort was ineffective under Indonesian law because the English title company could not hold the relevant Indonesian land right. The principal issues were duty and breach, the effectiveness of the transfer of rights, and recoverable loss.

1. PMI’s negligence claim. The claim based on HTC’s fax to Interval International failed on the facts. The statement that the project documentation was in place did not represent that the leases had been transferred or that they supported 25-year timeshares, and it was not shown to have caused the marketing to begin.
2. HTC nevertheless owed PMI a duty of care in relation to the continuing representation created by its conduct. The promotional materials represented that HTC protected marketers and purchasers by ensuring good title. HTC knew or ought to have known that marketing had begun under its scheme, that its materials were being used, and that PMI would rely on HTC having checked the developer’s title. Foreseeability, proximity, reliance and assumption of responsibility were established. HTC’s silence, in the context of its role as trustee and its knowledge of the marketing, was capable of amounting to assent that the timeshares were safe to market.
3. HTC breached that duty by failing to warn PMI that the existing leases did not support 25-year timeshares and by accepting the developer’s assurances about proposed extensions without checking the underlying agreements. PMI’s reasonable mitigation losses were recoverable, but lost profits on sales which would never have occurred if marketing had been stopped were not.
4. RBL’s contractual and misrepresentation claims. HTC’s contractual responsibility was to establish rights in the title company sufficient to protect timeshare owners’ occupation rights. The contract did not require the lease itself to be vested in the title company if an effective transfer of other rights achieved that purpose.
5. Under the Basic Agrarian Act, the relevant hak sewa was a land title subject to restrictions on foreign ownership. The Transfer purported to transfer that right to a foreign company without an Indonesian representative office. It therefore fell within the statutory restrictions and was ineffective. HTC consequently breached the central purpose of its appointment. The promotional statements were also an actionable misrepresentation of Indonesian law, although contractual damages provided complete relief.
6. PMI’s claim for loss of reputation or general damages based on defamation principles failed. Its recoverable negligence claim was confined to proved economic loss within the scope of the duty.

Judgment was therefore given for RBL and PMI on the liability issues, subject to the limitations on PMI’s recoverable losses. Damages were awarded for the proved heads of loss.