Cramaso Llp V. Viscount Reidhaven's Trustees
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2010] CSOH 62 |
| Court | Court of Session |
| Published date | 11 May 2010 |
| Docket Number | CA72/08 |
| Date | 11 May 2010 |
| OUTER HOUSE, COURT OF SESSION [2010] CSOH 62 | |
| CA72/08 | OPINION OF LORD HODGE in the cause CRAMASO LLP Pursuer; against VISCOUNT REIDHAVEN'S TRUSTEES Defenders: ________________ |
Pursuer: C McNeill, Q.C.; Anderson Strathern LLP
Defender: Sandison, Q.C.; Brodies LLP
11 May 2010
[1] The estate of Castle Grant, which is located near Grantown-on-Spey and which for centuries has been the part of the Seafield estates, includes a grouse moor. The current owners of the estate are the trustees of Viscount Reidhaven's trust ("the trustees"). The grouse moor was very productive in the 1920s and in the early 1970s provided a substantial annual bag of grouse. In common with several other Scottish estates, the productivity of the moor at Castle Grant declined thereafter. The presence of ticks on the moor and the spread of louping ill virus was probably the cause of the decline of the grouse population. In an attempt to reverse the decline of Castle Grant as a grouse moor, the owners of the estate instituted a recovery programme in the late 1980s or early 1990s. This involved among other things placing a flock of sheep, whose coats were treated with a chemical fatal to ticks, on part of the estate for several years in the early 1990s and an attempt to cull wildlife, such as hares and deer, which provided a food source for the ticks.
[2] The estate's recovery programme had some success in improving the productivity of the moor. In the early years of this century there was evidence of a general increase in the size of the annual bag. The ten year annual average between 1970 and 1979 was 792 brace; between 1996 and 2005 it was 196 brace; but the five year average between 2001 and 2005 was 300 brace. Notwithstanding this improvement and a belief that the grouse moor was continuing to improve as a result of the recovery programme, the trustees recognised that there needed to be more significant investment in the moor to realise its potential. As the principal beneficiary of the trust did not shoot grouse and would not gain personal benefit from expenditure to improve the grouse moor, the trustees decided that it was appropriate to attract an outsider to make the needed investment by offering a fifteen-year lease of the moor.
[3] Mr Alastair Erskine, a successful businessman and a keen shot, decided to take on the lease of the grouse moor at Castle Grant. He and his wife established a limited liability partnership, Cramaso LLP ("Cramaso") as the vehicle for Mr Erskine's investment in the moor and Cramaso entered into a fifteen-year lease of the moor from the trustees with effect from 1 January 2007 in a formal lease which the parties signed in December 2006 and January 2007. The tenant under the lease was obliged to put and keep the moor in good condition. This involved major capital expenditure in the early years of the lease on rebuilding the butt lines, repairing and upgrading the moorland road system, providing fencing for a sheep flock on the moor, repairing and upgrading the lunch huts, game larder and equipment storage area on the moor, and completing the repair and refurbishment of the cottages and farm buildings. The tenant was obliged "to manage the moor throughout the period of [the] lease in a manner fully commensurate with the operation of a top quality driven grouse moor in the district". The lease also obliged the tenant to employ a third gamekeeper on the estate in addition to the two whom the trustees had employed. It was, in short, an improving lease in terms of which the tenant had to invest heavily in the early years to improve the moor and could enjoy the benefits of those improvements during the currency of the lease before returning possession of the improved moor to the landlords on the expiry of the lease.
[4] Mr Erskine invested large sums in Cramaso to fund the undertaking. Cramaso aver that they incurred overheads and capital expenditure amounting to £530,859 since entering into the lease. Cramaso were disappointed by the small numbers of grouse which they found on the moor after taking possession of it in 2007. They claim that they were induced to enter into the lease as a result of fraudulent or at least negligent misrepresentations by an employee of the trustees, namely Mr Sandy Lewis, the chief executive of the trust and of other Seafield family estates and entities. They therefore seek to reduce the lease and claim damages for loss which they aver resulted from those misrepresentations.
[5] I heard a proof on the issues: (i) whether there had been a fraudulent or negligent misrepresentation and (ii) whether that misrepresentation induced Cramaso to enter into the lease. Questions of remedy and quantum, if relevant, were reserved for a later hearing.
The factual background
(i) The trustees' expert advice and the particulars of let
[6] In 2006 the trustees employed Mr Jonathan Kennedy, a chartered surveyor and a director of CKD Kennedy Macpherson, to advise them on the possible letting of their grouse moors at Castle Grant and Kinveachy. Mr Kennedy advised them that it was appropriate for him to obtain expert advice from a specialist in the management of grouse moors and, with their consent, he engaged Mr Nick Baikie to visit the two grouse moors and to advise.
[7] On 12 May 2006 Mr Kennedy wrote to Mr Sandy Lewis. He advised that Kinveachy was not in a suitable state to be leased under an improving lease but that Castle Grant offered an opportunity for a tenant to revive the grouse moor. He informed Mr Lewis that the tenant would require to have financial resources and that prospective tenants were likely to be self-made individuals with varying degrees of understanding of how grouse moors work. He suggested that it was important that a prospective tenant should take the right advice and that he would encourage the involvement of Mr Baikie. He expressed the view that it would take between £400,000 and £500,000 in capital investment and running costs in the early years of a lease when no grouse were shot before there would be the prospect of "meaningful driven grouse shooting." He recommended that the trustees should consider granting a twenty one year lease at £1,000 per year for the first ten years with reviews to one-half of market value at years ten and fifteen and that there should be a premium of £50,000.
[8] On 24 May 2006 Mr Baikie wrote to Mr Kennedy, giving his advice on the grouse moors at Kinveachy and Castle Grant. He discussed the effect on Castle Grant of the surrounding estates of Tulchan to the east, Dunphail and Braemoray to the north and Lochindorb to the west. Of those estates only Lochindorb had controlled its tick population and as a result of that and good keepering practice had produced significant quantities of grouse in recent years. Forestry to the south of Castle Grant required keepers to control vermin which predated the grouse. He advised as follows:
"We strongly believe that a tenant should be offered as long a lease as possible on Castle Grant (21 years) in order to realise his commitment/investment. We would forecast minimal returns in the first five years of the project which will depend on the infestations of tick and the prevalence of louping ill. We recommend that you set the employee parameter at three full-time hill keepers."
Mr Baikie explained in his evidence that he had recommended a 21-year lease as he thought that it would take a tenant at least 8 years to establish proper grouse shooting on the moor.
[9] On 22 May Mr Lewis reported to the trustees on the advice which Mr Kennedy had given, pointing out that it did not support the wish, which the trustees had expressed in February 2006, to obtain an annual income stream of £25,000 for the let. He pointed out that the trust was making losses on Castle Grant moor of about £30,000 per year and that, while future beneficiaries of the trust would be denied immediate personal enjoyment of the moor during the currency of a lease, a resourceful tenant could enhance the quality of the moor in the medium term. He therefore recommended that the trustees instruct Mr Kennedy to find a grouse tenant for Castle Grant on the best terms that could be agreed. The trustees considered his recommendation and decided (a) that they were not prepared to let the moors for more than fifteen years and (b) that they wished to receive an annual rent of £25,000.
[10] Mr Erskine had been interested in grouse shooting for over twenty years. Since the 1990s he had been tenant of a week's shooting on Invermark estate and, before he became interested in Castle Grant, he had attempted unsuccessfully to purchase the Gannochy estate and Kinrara estate. He had employed CKD Galbraith, which is an associate firm of CKD Kennedy Macpherson, to advise him on those transactions. In April 2006 Mr Tim Kirkwood, the managing partner of CKD Galbraith, approached Mr Erskine and informed him of the possibility that the trustees might be marketing a lease of the Castle Grant grouse moor. He informed him that Mr Baikie had expressed the view that the grouse moor had the potential to be very successful and advised him to contact Mr Kennedy. Mr Erskine met Mr Kennedy in May 2006. Mr Kennedy advised him that the estate wanted a fifteen-year lease and a rent of £25,000 for Castle Grant. He and Mr Erskine discussed grouse moor management and he accepted Mr Erskine's position that the estate would have to allow the tenant to manage the grouse moor.
[11] On 7 June 2006 Mr Kennedy sent Mr Erskine the letting particulars and stated that he had been instructed to let the moor for 15 years. In a note entitled "Offer for lease" he described the grouse moor and its neighbouring estates. He gave the annual bag records from 1969 to 2005, and recorded the ten-year average between 1970-1979 and 1996-2005 as well as the five-year average from 2001-2005. The latter was 300 brace. In the period 2001-2005 in only one year did the estate shoot...
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