Cramaso LLP v Ogilvie-Grant, Earl of Seafield and others

Negligent misrepresentation – Duty of care – Misrepresentation by respondents in course of negotiations for grant of lease of grouse moor – Potential tenant finally entering into lease through appellant limited liability partnership – Whether appellant entitled to recover damages for negligent misrepresentation – Whether duty of care owed where appellant not existing at time representation first made – Appeal allowed The respondents owned a grouse moor near Grantown-on-Spey on which commercial grouse shooting took place. In 2006, E had discussions with the respondents’ surveyor regarding the possibility of taking a lease of the moor. In response to concerns expressed by E regarding the adequacy of the grouse breeding population, the respondents’ chief executive invited the surveyor to forward an e-mail that he had previously sent to another potential tenant regarding grouse counts; that e-mail was forwarded to E in early October 2006. E decided to proceed with the transaction through the appellant, a limited liability partnership incorporated for that purpose in November 2006. The lease was concluded by January 2007. E subsequently discovered that the grouse population was smaller than he had believed and that it would take longer than anticipated for it to recover to the point where shooting could take place at the level he had intended. It turned out that the grouse counts, as set out in the e-mail he had received on the subject, had been carried out in the most heavily populated areas of the moor and were unrepresentative of the moor as a whole, with the result that the estimated grouse population was well in excess of the actual population. The appellant brought a claim for damages against the respondents, claiming that it had been induced to enter into the lease by a negligent misrepresentation contained in the e-mail. The claim was dismissed by the Scottish courts in both the Outer House and Inner House of the Court of Session. The latter held that, in circumstances where the appellant had not existed at the time of the respondents’ misrepresentation, it was not foreseeable that the appellant, as opposed to E personally, would rely on the representation, such that there was insufficient proximity between the respondents and the appellant for a duty of care to arise: see [2011] CSIH 81; 2012 SC 240. The appellant appealed. Held: The appeal was allowed. The case had proceeded in the courts below on the incorrect assumption that it concerned reliance by the appellant on a representation made to E and operating solely at the time when the relevant e-mail was sent. In fact, the contract had been concluded on the basis of a continuing representation by the respondents to the appellant as to the accuracy of the e-mail. A misrepresentation made in the course of pre-contractual discussions could produce a misapprehension in the mind of the other party, which continued so as to have a causative effect at the time when the contract was concluded. Where the remedy sought was the setting aside of the contract, or damages for loss suffered as a result of entering into it, the misrepresentation could, in appropriate circumstances, be treated by the law as having a continuing effect rather than as an event the legal consequences of which were fixed at the time when the statement in question was made. Where the representation had a continuing effect and a contract was concluded in reliance on it, the law might impose a continuing responsibilityon the representor in respect of its accuracy. The possibility that a representation might continue to be asserted, and have a causative effect so as to induce the conclusion of a contract, was not necessarily excluded where the contracting parties were not the original representor and representee. An inference might be drawn from the parties’ conduct that they proceeded with the negotiation and conclusion of the contract on the basis of the accuracy of that representation, implicitly if not expressly, after the identity of the prospective contracting party changed. In such cases, the representation might continue to have a causative effect so as to induce the conclusion of the contract. Where such an inference was made, it might also be inferred that the risk of harm being suffered as a result of reliance on the representation, in the event that it was inaccurate, continued to be foreseeable. In such circumstances, the representor might be taken to have assumed responsibility for the accuracy of the representation towards the contracting party who relied on it, even though that party was not the original representee: Briess v Woolley [1954] AC 333 applied. That was what had happened in the instant case. The representation contained in the critical email was of a continuing nature so long as E remained the contracting party. The change in the identity of the prospective contracting party had not affected the continuing nature of that representation or the respondents’ continuing responsibility for its accuracy. The negotiations that had previously been under way between the respondents and E, in the course of which the critical email was sent, simply continued after it became apparent that a limited liability partnership would be used as the vehicle for E’s investment. Neither party drew a line under the previous discussions or disclaimed what had previously been said in the course of them. The representation made in the email remained operative in the mind of E after he began to act in the capacity of an agent of the appellant, up to the time when the lease was executed. The appellant was thus induced to enter into the contract by that representation. In continuing and concluding the contractual negotiations with the appellant through E as its agent, without withdrawing the representation earlier made to E as an individual, the respondents by their conduct had implicitly asserted to the appellant the accuracy of that representation, in a situation where it continued to be foreseeable that the representation would induce the other party to the negotiations to enter into a contract. The respondents had therefore assumed a responsibility to the appellant for the accuracy of the representation. In those circumstances, the respondents had owed a duty of care to E in respect of the representation contained in the email and had also owed such a duty to the appellant when they negotiated and concluded the contract on the basis of the discussions previously held with E. The respondents had acted in breach of that duty of care and were therefore liable in damages for any loss suffered by the appellant as a result. Per Lord Toulson: In order to establish a negligent misrepresentation to E, it was not necessary for E to show that, at the time when the respondents’ chief executive sent his email to the surveyor, he knew or ought to have known that there was a high degree of probability that the email would be sent to E and that E would rely on it. This was not a case where E had relied on the email in into a transaction with a third party. The statement in that email had been made during contractual negotiations by one prospective contracting party to another and had been intended for the attention of E in relation to the very transaction about which they were negotiating: Esso Petroleum Co Ltd v Mardon [1976] QB 801; [1977] 1 EGLR 57; (1976) 241 EG 82 applied; Caparo Industries plc v Dickman [1990] 2 AC 605 distinguished. Alan Dewar QC and Graeme Hawkes (instructed by Anderson Strathern LLP) appeared for the appellant; Craig RK Sandison QC and David Thomson (instructed by Brodies) appeared for the respondents. Sally Dobson, barrister