Hamilton v Allied Domecq Plc
| Jurisdiction | Scotland |
| Judgment Date | 01 November 2005 |
| Date | 01 November 2005 |
| Docket Number | No 11 |
| Court | Court of Session (Inner House - Second Division) |
Court of Session Inner House Second Division
Lord Justice-Clerk (Gill), Lord Hamilton, Lord Marnoch
Process - Appeal - Whether appellate court entitled to reconsider first instance evidence on matters of fact
Contract - Misrepresentation - Negligent misrepresentation - Whether on the evidence the Lord Ordinary was entitled to find misrepresentation
The pursuers acquired the whole share capital of Gleneagles, a company owning premises in the village of Blackford in Perthshire and having certain water rights there. Associated with that acquisition were various arrangements including a water supply agreement with the proprietors of the adjacent Gleneagles estate on which were located certain springs which the pursuers conceived could provide a commercially viable supply of good quality spring water. Water from these sources had been marketed, but the quantity was relatively small. To develop the product successfully the pursuers required to put in place appropriate arrangements for its distribution. Negotiations and discussions took place between the parties and in November 1992 they entered into a subscription agreement under which a wholly-owned subsidiary of the defenders subscribed for and purchased shares in Gleneagles to the extent that they became the majority shareholder. In 1998 Gleneagles was put into administration. The pursuers raised an action of damages on the grounds of negligent misrepresentation. They claimed that the defenders had led them to believe that it was the defenders' from the outset to penetrate the on-trade market. They sought damages of approximately £3million, being the loss in value of their shareholding between 1992 and 1998. The Lord Ordinary granted decree in favour of the pursuers. The defenders reclaimed. They argued that there had been no evidence on which the Lord Ordinary was entitled to find that there had been a representation in the terms contended for by the pursuers.
Held that: (1) the evidence of well-known constraints on matters of fact to which an appellate court was subject did not absolve the court from its obligation to reconsider the evidence and determine whether the findings of the Lord Ordinary were justified (para 84); (2) if findings of fact were unsupported by the evidence and were critical to the decision of the case, it might be incumbent on the appellate court to reverse the decision made at first instance (para 85); (3) it was impossible to find any sufficient basis for a misrepresentation of the kind relied on (paras 2, 3, 93, 105, 126); and reclaiming motionallowed.
Observed that there could have been significant questions of fact and law on the issue of causation of loss and the related issue of mitigation of loss, but these were not raised in the pleadings and were not focused in the submissions made to the Lord Ordinary (paras 4, 34, 35, 109, 127).
John Stewart Hamilton and others brought an action in the Court of Session against Allied Domecq plc concluding for damages for negligent misrepresentation. The cause called before the Lord Ordinary (Lord Carloway) for a hearing on the procedure roll on 8 March 2001. At advising, on 30 March 2001, the Lord Ordinary allowed a proof before answer: 2001 SC 829. The cause called before the Lord Ordinary (Lord Abernethy) for a proof before answer on 28, 29, 30, 31 January and 4, 5, 6, 7, 11, 12, 13 and 14 February 2003. At advising, on 1 August 2003, the Lord Ordinary granted decree for damages. The defenders reclaimed.
Cases referred to:
Caledonia North Sea Ltd v London Bridge Engineering Ltd 2000 SLT 1123
Esso Petroleum Co Ltd v MardonELRWLRUNK [1976] 1 QB 801; [1976] 2 WLR 583; [1976] 2 All ER 5
McInerny v Lloyds BankUNK [1974] 1 Lloyd's Rep 246
Piglowska v PiglowskaWLRUNK [1999] 1 WLR 1360; [1999] 3 All ER 632
Simmons v British Steel plcUNKSCUNK [2004] UKHL 20; 2004 SC (HL) 94; 2004 SLT 595; 2004 SCLR 920
Smith New Court Securities v Citibank NAELRWLRUNK [1997] AC 254; [1996] 3 WLR 1051; [1996] 4 All ER 769
South Australia Asset Management Corp v York Montague LtdELRWLRUNK [1997] AC 191; [1996] 3 WLR 87; [1996] 3 All ER 365
Spice Girls Ltd v Aprilia World Service BVUNK [2002] EWCA Civ 15; [2002] EMLR 27
Thomas v ThomasSCELRUNK 1947 SC (HL) 45; 1948 SLT 2; 1947 AC 484; [1947] 1 All ER 582
Thomson v Kvaerner Govan LtdUNKSCUNK [2003] UKHL 45; 2004 SC (HL) 1; 2004 SLT 24; 2003 SCLR 765
The cause called before the Second Division, comprising the Lord Justice-Clerk (Gill), Lord Hamilton and Lord Marnoch, for a hearing on the summar roll, on 26, 27, 28, 29 October, and 2, 3, 4, 5 November 2004 and 3 and 4 May 2005.
At advising, on 1 November 2005-
Lord Justice-Clerk (Gill)- [1] I agree with the opinions that are to be delivered by Lord Hamilton and Lord Marnoch.
[2] When a claim for damages is based upon the making of a misrepresentation, it is incumbent on the pursuer, in my view, to provide clear evidence as to the terms of the misrepresentation, the time and place at which it was made and the context in which it was made. The first respondent's evidence is critical to the respondents' case. I cannot see how it provides a proper basis for the Lord Ordinary's finding as to the terms of the misrepresentation which he holds Mr Beatty to have made at the Blackford meeting. I have the impression that in the pre-contract negotiations the first respondent did not give to his on-trade strategy the importance that he gave to it at the proof. It seems to me that if he had then given his strategy that degree of importance, he would have insisted that the pursuance of it should be a condition of the agreement. Furthermore, when he was asked to identify the causes of the company's failure, he did not cite the reclaimer's marketing strategy as one of them. He merely said that the failure to penetrate the Britvic network had been a matter that caused him 'concern'.
[3] At all events, I am satisfied that the respondents have failed to substantiate the making of the misrepresentation on which the whole action is founded. The reasons that Lord Hamilton and Lord Marnoch give for granting the reclaiming motion are sufficient to dispose of this case.
[4] The further question whether the respondents have proved a causal connection between the misrepresentation alleged and the losses on which they found does not arise. I have the impression that that question was not explored on behalf of the reclaimers as fully as it might have been.
[5] There is no material dispute as to the history of events from the date of the agreement down to the demise of Gleneagles. On the date of the agreement the first respondent was appointed managing director of Gleneagles, and was joined on the board by two directors of Lyons Tetley Ltd. Soon after, the respondents had an information memorandum issued with a view to the sale of 12 per cent of the second respondent's shareholding. The sale did not go ahead, for reasons that were not brought out at the proof.
[6] In February 1993, about three months after the agreement, Mr Beatty retired. In the same month, the reclaimers, through another subsidiary, bought Ballygowan, the leading brand in the Irish water market. Ballygowan had 70 per cent of the Irish market and 3 per cent of the much larger UK market. In the UK market it was particularly strong in the on-trade where it already had an exclusive distribution arrangement with Britvic. At this stage, Gleneagles was still about a year away from commercial production and marketing.
[7] In about August 1993, David Potter was seconded to Gleneagles from Lyons Tetley as commercial manager. His brief was to promote the product mainly in the off-trade initially. The on-trade was to wait until volume had been built up in the off-trade. This was contrary to the first respondent's strategy. He wished to get access to the on-trade through Britvic and expected the reclaimers to help in achieving that.
[8] In 1994 the reclaimers decided to focus on their spirits and retail activities and thereafter sold all their UK businesses in the food manufacturing sector other than Gleneagles. An internal document dated January 1994, containing a proposal that Gleneagles, Ballygowan and Highland Spring should be combined, questioned whether Mr Beatty's enthusiasm for the Gleneagles project had survived his retirement.
[9] It was not until March 1994 that Gleneagles was available on the market. In about July 1994, Mr Potter succeeded in obtaining Marks & Spencer as the first major customer. Shortly thereafter, he returned to Lyons Tetley.
[10] Mr Potter was succeeded by Lawrence Dall. Mr Dall obtained agreements with a number of off-trade outlets. In June 1995 there was a test launch of Gleneagles in the south of England backed by a television advertising campaign. The results were disappointing. They did not justify further advertising of that kind.
[11] Own-label sales of Gleneagles were virtually non-existent. The Lyons Tetley directors were not in favour of developing own-label business for fear that the supermarkets would demand own-label business in Lyons Tetley's tea products. Any own-label business therefore was to be secondary and only to use up any surplus capacity.
[12] Meanwhile, all attempts by the first respondent, Mr Potter and Mr Dall to gain access to Britvic's distribution network, or any other route to the on-trade, came to nothing. One contract for distribution to small convenience outlets proved uneconomic.
[13] In the period from January to May 1995 the first respondent repeatedly raised the question of Britvic at board meetings with particular reference to the exclusivity arrangement between Britvic and Ballygowan that prevented Britvic from distributing Gleneagles. During that period the reclaimers were undergoing a major reorganisation.
[14] By late summer 1995, sales abroad had had limited success, but trading losses continued to mount. In the 18 months to 19 August...
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