An LLP was entitled to sue for misrepresentations made during negotiations for a lease before the LLP was formed.

The Supreme Court decision in the Scottish case Cramaso LLP v Ogilvie-Grant, Earl of Seafield [2014] UKSC 9; [2014] PLSCS 49 highlights that the law is capable, in appropriate circumstances, of imposing continuing responsibility for pre-contractual representations made by a representor, even though there is an interval of time between a representation and the conclusion of a contract in reliance upon it. The case also addresses the question of whether a representation is capable of continuing following a change in the identity of one of the parties – a point that was not dealt with in any of the authorities cited to the court. The case concerned a grouse moor at Castle Grant. During the course of negotiations for a lease, the landowner provided information about grouse counts carried out on the moor and the estimated grouse population of the moor, which was extrapolated from the counts. Unfortunately, the areas of the moor in which the counts were made were not representative of the whole. Consequently, the estimated grouse population was well in excess of the actual population. The individual to whom the information was provided decided to proceed with the transaction and informed the landowner of his intention to form a limited liability partnership to take the lease. Discussions continued and the lease was signed a couple of months later. When the partnership discovered the true state of the grouse population, it began proceedings for misrepresentation. The Supreme Court held that whether a representation should be treated as continuing depends on the facts of the case. A misrepresentation may be withdrawn or lapse, or there may be a material change in circumstances, or the true state of affairs may emerge before the contract is concluded. The representations in this case (which were made honestly, but negligently, and had induced the decision to proceed) were undoubtedly of a continuing nature so long as the individual to whom they were made remained the prospective tenant.  Did the representations continue after the change in the identity of the prospective tenant? The court decided that they did. The parties had continued negotiating without drawing a line under their previous discussions, or disclaiming what had previously been said, or seeking assurances that the information previously provided could be relied upon. The only change was that the individual negotiating the lease was no longer the principal, but an agent. The change in the identity of the prospective tenant had not affected the continuing nature of the representations, or the landowner’s continuing responsibility for their accuracy.  The negotiations had continued on the basis that they remained in effect and the partnership was entitled to damages in respect of the loss that it had suffered in reliance on them. The case highlights the importance of reviewing what representations have been made, and to whom, before parties commit themselves to a transaction. Indeed, the Commercial Property Standard Enquiries, which are widely used in England, require the seller to confirm that it will notify the buyer, before the buyer makes a binding commitment to the transaction, if it becomes aware of anything that might cause any of the replies given to be incorrect. It will be interesting to see whether lawyers acting for buyers or sellers seek to expand or limit this confirmation in response to this case. Allyson Colby is a property law consultant