Cramaso LLP v Ogilvie-Grant

JurisdictionScotland
CourtSupreme Court (Scotland)
JudgeLord Reed,Lord Mance,Lord Clarke,Lord Carnwath,Lord Toulson
Judgment Date12 February 2014
Neutral Citation[2014] UKSC 9
Docket NumberNo 7
Date12 February 2014

[2014] UKSC 9

THE SUPREME COURT

Hilary Term

On appeal from: [2011] CSIH 81

before

Lord Mance

Lord Clarke

Lord Reed

Lord Carnwath

Lord Toulson

Cramaso LLP
(Appellant)
and
Ogilvie-Grant, Earl of Seafield and Others
(Respondents) (Scotland)
Heard on 18 and 19 November 2013
Lord Reed ( with whom Lord Mance , Lord Clarke , Lord Carnwath and Lord Toulson agree)
1

The appellant is a limited partnership formed by Mr Alistair Erskine and his wife as a vehicle for entering into a commercial contract with the respondents. These proceedings were brought by the appellant on the basis that it was induced to enter into the contract by a misrepresentation which was fraudulent or in any event negligent. The appellant sought the reduction of the contract and damages. After proof the Lord Ordinary, Lord Hodge, found that Mr Erskine was the directing mind of the appellant, and that he had decided to enter into the contract in reliance upon a negligent misrepresentation contained in an email sent to him some weeks before the appellant was formed. The allegation of fraud was found not to have been established: [2010] CSOH 62. The latter point has not been pursued further. Nor has the present appeal concerned the question whether the remedy of reduction may be available. The issue with which we are concerned is whether the appellant was induced to enter into the contract by a negligent misrepresentation and, if so, is in principle entitled to recover damages.

2

The Lord Ordinary focused upon the legal situation as at the time when the email in question was sent. He approached the case as one where A (the appellant, through Mr Erskine acting as its agent) had relied upon a representation made by B (the respondents) to C (Mr Erskine acting as an individual), and where the question was whether B had owed a duty of care to A at the time when the representation was made to C. Applying the principles set out in Caparo Industries plc v Dickman [1990] 2 AC 605, the Lord Ordinary held that the appellant could not recover damages because it had not been in existence at the time when the email was sent. Although the respondents had owed a duty of care to Mr Erskine, no such duty could in his view have been owed at that time to the appellant, since a non-existent entity could not hold any right or be owed any duty.

3

Both parties appealed against the Lord Ordinary's decision. Before the Inner House, it was conceded on behalf of the respondents that the Lord Ordinary had erred in considering that the non-existence of the appellant at the time when the email was sent was necessarily an insuperable obstacle to the existence of a duty of care: it was accepted that in appropriate circumstances a duty of care could be owed to a class of persons, some of whom might not then be in existence. In the present case however, it was submitted, at the time when the email was sent there was no-one other than Mr Erskine whose reliance upon it could reasonably have been foreseen. In those circumstances, there had therefore been no proximity between the appellant and the respondents. It followed, applying Caparo 2012 SC 240, that no duty of care had been owed by the respondents to the appellant. Those submissions were accepted by the Second Division: [2011] CSIH 81; 2012 SC 240. Their discussion of the case again proceeded on the assumption that the relevant question was whether, at the time when the email was sent to Mr Erskine, the respondents had owed a duty of care to the appellant. Their Lordships did not address the respondents' cross-appeal, which challenged the Lord Ordinary's finding that a duty of care had been owed to Mr Erskine.

4

In the present appeal, the issues were identified by the parties as being, first, whether, on the assumption that the respondents owed a duty of care in negligence to Mr Erskine, such a duty of care was owed to the appellant; and secondly, whether the assumption upon which the first issue proceeded was correct. The case was again approached as one where A had relied upon a representation made by B to C, and where the relevant question was whether B had owed a duty of care to A. It was again assumed that that question had to be answered as at the time when the email was sent to Mr Erskine. The authorities relied upon were again Caparo and more recent English and Commonwealth authorities in which the Caparo principles were applied. The question focused in the printed cases, put shortly, was whether the Caparo principles could be regarded as satisfied as at the time when the email was sent, on the basis that the appellant was the alter ego of Mr Erskine, and the contract between the appellant and the respondents was the same as the contract which the respondents had had in contemplation when they made the statement to Mr Erskine.

5

There is however a question as to whether the basis upon which the case has been approached by the courts below, and by the parties in their printed cases, is correct. Is this truly a case in which A relied upon a representation made by B to C? Was the representation made only at the time when the email was sent? Or is this a case where, as was argued before the Lord Ordinary, there was a continuing representation, which was capable of remaining in effect until a contract was concluded? If so, in the circumstances of this case, was the contract concluded between the parties on the basis of a continuing representation made by the respondents to the appellant? If so, did the respondents assume a responsibility towards the appellant for the accuracy of the representation?

6

If these questions are answered affirmatively, then the case is not concerned with the circumstances in which a third party may sue in damages for economic loss suffered as a result of relying upon a representation of which it was not the addressee, but with the recovery of damages where a party to a contract was induced to enter into it by a negligent misrepresentation made to it by the other party to the contract. In Scots law, that involves a consideration of section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 ("the 1985 Act") and of the authorities in which that provision has been discussed.

7

The questions which I have posed in para 5, and the area of the law which I have mentioned in para 6, were not discussed by the courts below or by the parties in their printed cases, but were raised during the hearing of the present appeal. Counsel for the respondents accepted that there would be no unfairness in the court's considering these matters; and, in the circumstances, the parties were permitted to make additional submissions in writing.

8

Before addressing these matters, it is necessary first to consider the relevant facts as found by the Lord Ordinary.

The relevant facts
9

The respondents are the owners of a grouse moor at Castle Grant, near Grantown-on-Spey, over which commercial shooting takes place. Recognising that there required to be substantial investment in the moor in order to increase the number of grouse, and being unwilling to undertake that investment themselves, they sought to attract a tenant. The matter was taken forward by their employee and chief executive, Mr Sandy Lewis, and by a chartered surveyor, Mr Jonathan Kennedy, who was engaged to advise them. In May 2006 Mr Erskine learned that a lease of the moor might be available, and entered into discussions with Mr Kennedy. He was sent the proposed terms of a lease. He did not however pursue his interest.

10

The respondents then entered into discussions with another prospective tenant, Mr Paddy McNally. In the course of those discussions, Mr McNally expressed concern about possible over-shooting of the moor during the 2006 season. In order to reassure Mr McNally that the respondents had considered the capacity of the moor to bear the shooting planned for that season, Mr Lewis sent his adviser an email dated 4 August 2006, in which he gave information about the grouse counts carried out on the moor earlier that year and the estimated grouse population of the moor, extrapolated from the counts. The areas of the moor in which the counts were carried out were not however representative of the moor as a whole, but were the parts of the moor which were considered to be the most heavily populated by grouse. As a result, the estimated grouse population, as stated in the email, was well in excess of the actual population. In the event, Mr McNally decided not to proceed with the transaction.

11

On Mr McNally's withdrawal, Mr Kennedy contacted Mr Erskine in early September 2006 in order to pursue the possibility of his taking a lease of the moor. After taking part in a shoot and making a further visit to the moor, Mr Erskine became concerned that the shooting planned for that season would leave an inadequate breeding population on the moor. He expressed his concern in an email to Mr Kennedy, in which he said that he was not qualified to quantify the damage which the shooting was doing to the grouse stocks but thought that it was not insignificant. Mr Kennedy forwarded the email to Mr Lewis, stating in his covering message that there was no doubt in his mind that the estate had been overshot, and that this had undoubtedly had an effect on the letting of the moor and might have made it impossible.

12

Mr Lewis replied by email on 29 September, stating:

"I have sent a separate email re the grouse programme which you may wish to pass on to Alastair Erskine."

The separate email sent by Mr Lewis to Mr Kennedy, which I will refer to as the critical email, did not form part of the chain of messages initiated by Mr Erskine's email, and did not have the appearance of responding to any concern expressed about over-shooting. Its subject was "Grouse Bags", and it began by stating:

"Now that we are well through with the grouse season, I thought it may...

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