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Cramaso LLP v Ogilvie- Grant, Earl of Seafield & Ors (Scotland)
Factual and Procedural Background
The Appellant, a limited liability partnership created by Plaintiff and his spouse, entered negotiations with the Respondents, owners of a grouse moor, for a long-term lease. During negotiations an employee of the Respondents (Employee) emailed population figures for grouse on the moor that were materially overstated because the underlying counts were taken from unrepresentative areas.
Relying on this email, Plaintiff decided to proceed with the lease. He subsequently incorporated the Appellant as the contracting vehicle. The lease was executed between December 2006 and January 2007. After discovering the true grouse numbers, the Appellant sued, alleging fraudulent or negligent misrepresentation, seeking reduction of the contract and damages.
At first instance, Judge Hodge (Outer House) found the misrepresentation negligent but held that no duty of care was owed to the Appellant because it did not yet exist when the email was sent. The Inner House accepted that a duty could in theory be owed to future entities, but concluded that no such duty arose on the facts and dismissed both the principal appeal and cross-appeal. The Supreme Court now addresses whether the negligent misrepresentation can ground damages in favour of the Appellant.
Legal Issues Presented
- Whether a negligent misrepresentation made before the Appellant existed can nonetheless give rise to a duty of care owed to the Appellant.
- Whether the email constituted a “continuing representation” that persisted until the lease was executed, thereby inducing the Appellant to contract.
- Whether, under section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, the Appellant may recover damages for negligent misrepresentation made by the Respondents.
Arguments of the Parties
Appellant's Arguments
- The email was a continuing representation that remained operative throughout negotiations and induced the Appellant to execute the lease.
- By carrying negotiations forward without correcting the statement, the Respondents assumed responsibility to the Appellant for its accuracy.
- Section 10 of the 1985 Act removes the historical bar on recovering damages for non-fraudulent misrepresentation between contracting parties; a common-law duty of care therefore arose.
Respondents' Arguments
- No duty of care existed when the email was sent because the Appellant was not yet in existence, defeating the proximity requirement under Caparo v Dickman.
- Even if a duty were owed to Plaintiff personally, that duty could not extend to the subsequently formed Appellant.
- The representation was made once, not continuously; any reliance by the Appellant was therefore indirect and too remote.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Caparo Industries plc v Dickman [1990] 2 AC 605 | Tripartite test for duty of care (foreseeability, proximity, and fairness). | Lower courts applied Caparo to hold no duty; Supreme Court distinguishes its relevance where parties are in direct contractual negotiation. |
| Smith v Kay (1859) 7 HL Cas 750 | Representations can be continuing up to contract conclusion. | Cited to support treating the email as a continuing representation. |
| With v O’Flanagan [1936] Ch 575 | Pre-contractual statements may continue and must be corrected if circumstances change. | Used to explain continuing nature of representations. |
| Brownlie v Miller (1880) 7 R (HL) 66 & Brownlie v Campbell (1880) 5 App Cas 925 | Duty to correct earlier misstatements once their falsity is known. | Supports existence of continuing responsibility. |
| Irvine v Kirkpatrick (1850) 7 Bell App (HL) 186 | Misrepresentation must inure up to date of contract to have effect. | Reinforces requirement of operative misrepresentation at contract time. |
| Jones v Dumbrell [1981] VR 199 | Inducing representations are ordinarily continuing. | Quoted to underline typical continuing effect. |
| Macquarie Generation v Peabody Resources [2000] NSWCA 361 | Whether representation is continuing depends on facts. | Cited for contextual analysis. |
| Briess v Woolley [1954] AC 333 | Continuing misrepresentation can bind principals even where agency arises after the statement. | Analogised to current facts to extend duty to the Appellant. |
| Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 | Liability for negligent misstatement where duty of care exists. | Foundation for recognising duty in negligent misrepresentation cases. |
| Esso Petroleum Co Ltd v Mardon [1976] QB 801 | Hedley Byrne duty applies to pre-contractual negotiations between contracting parties. | Relied on to bypass broader Caparo analysis. |
| Manners v Whitehead (1898) 1 F 171 | Historic rule barring damages for non-fraudulent misrepresentation between contracting parties. | Identified as superseded by section 10 of the 1985 Act. |
| Le Lievre v Gould [1893] 1 QB 491 | Earlier English authority aligning with Manners v Whitehead. | Cited for historical context. |
| Twomax Ltd v Dickson, McFarlane & Robinson 1982 SC 113 | Illustrated illogicality of pre-1985 position. | Supports legislative rationale for section 10. |
| Smith v Eric S Bush [1990] 1 AC 831 | Scope of duty for negligent valuation reports. | Referenced in duty-of-care discussion. |
| Shankland & Co v Robinson & Co 1920 SC (HL) 103 | Representation true when made may become false before contract. | Supports need for accuracy up to contract conclusion. |
| Martel Building Ltd v Canada [2000] 2 SCR 860 | No general duty of care in contract negotiations. | Used to explain limited scope of duties. |
| Hamilton v Allied Domecq plc 2001 SC 829 | Early interpretation of section 10 (1) as creating a direct statutory remedy. | Discussed and distinguished; Supreme Court clarifies section 10 is not self-standing liability. |
| BSA International SA v Irvine [2010] CSOH 78 | Followed Hamilton’s reading of section 10. | Supreme Court refines the analysis. |
| Ultramares Corporation v Touche (1931) 174 NE 441 | Warning against indeterminate liability. | Mentioned in comparing third-party reliance scenarios. |
| White v Jones [1995] 2 AC 207 | Duty where solicitor’s negligence harms intended beneficiary. | Cited in broader duty-of-care discussion. |
| Al Saudi Banque v Clark Pixley [1990] Ch 313 | Auditor liability to third parties. | Part of comparative duty analysis. |
| Customs & Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 | Assumption-of-responsibility test for economic loss. | Referenced in evaluating Respondents’ responsibility. |
Court's Reasoning and Analysis
1. Continuing Representation. Drawing on historic authorities, the Court held that a pre-contractual statement intended to induce agreement is ordinarily a continuing representation unless expressly withdrawn or rendered irrelevant. The email therefore remained operative when the lease was executed.
2. Assumption of Responsibility. By proceeding with negotiations after learning that the Appellant would take the lease, the Respondents implicitly re-asserted the accuracy of the earlier statement and could reasonably foresee reliance. Consequently they assumed responsibility toward the Appellant.
3. Duty of Care. Because the parties were in direct contractual negotiation, classic Hedley Byrne/Esso v Mardon principles, not the broader Caparo analysis, governed. A duty of care existed both to Plaintiff personally and to the Appellant once formed.
4. Statutory Context. Section 10(1) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 abolishes the earlier rule that only fraud supports damages but does not create liability by itself. Liability still depends on breach of a common-law duty, which the Court found present.
5. Breach and Causation. The Respondents’ employee acted negligently in misstating grouse numbers. That misstatement induced the Appellant to enter the lease, satisfying causation requirements. Quantum of loss was remitted to the Court of Session.
Holding and Implications
APPEAL ALLOWED. The Supreme Court finds the Respondents owed a duty of care to the Appellant and breached it. The case is remitted for assessment of damages.
The decision clarifies that in Scots law a negligent pre-contractual statement may bind a representor to an entity formed after the statement, where the negotiations continue and the representation remains operative. It confirms that section 10 (1) removes the fraud requirement but leaves the duty-of-care analysis to common law. No new precedent is set beyond this clarification, but contracting parties should now appreciate that careless statements made early in negotiations can have enduring legal consequences even if the counter-party’s identity evolves.
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