The Continuing Effect Of A Negligent Pre-Contractual Misrepresentation

Cramaso LLP (Appellant) v. Ogilvie-Grant, Earl of Seafield and Others (Respondents) (Scotland) [2014] UKSC 9

Pre-contractual representations: to whom is the duty owed? A recent Supreme Court Judgment dealing with an appeal from the Scottish Inner House decides that a party can be liable for a pre-contractual misrepresentation, even though the representation was first made to a party other than the ultimate contracting party. While this is a decision developing upon Scots law principles, it may well be persuasive (and is therefore significant) authority for English jurisprudence.

The background facts

The Respondents were the owners of a grouse moor at Castle Grant in Scotland, over which commercial shooting takes place. They sought to attract a tenant who would be willing to undertake the substantial investment in the moor in order to increase the number of grouse. In the autumn of 2006, the Respondents contacted an individual, E, to pursue the possibility of his taking a lease of the moor.

The Respondents made representations in an email to reassure E that the moor had the capacity to bear the planned shooting that season. The email included information about grouse counts and the estimated grouse population of the moor, extrapolated from the counts. The counts were based on the parts of the moor which were considered to be the most heavily populated by grouse, and were not representative of the moor as a whole. As a result, the estimated grouse population, as stated in the email, was well in excess of the actual population.

As negotiations progressed, E informed the Respondents that he intended to use a new LLP entity, Cramaso LLP, as a special purpose vehicle (SPV) to acquire the lease. The appellant LLP was incorporated on 16 November 2006 and the lease was signed on various dates between 8 December 2006 and 18 January 2007.

Proceedings were brought against the Respondents on the basis of misrepresentation.

The Lower Scottish Court decisions

At first instance, the Judge found that E had been induced to enter into the lease on behalf of Cramaso by a misrepresentation that had been made negligently. However, the Judge dismissed the proceedings on the ground that, at the time the misrepresentation was made, Cramaso had not come into existence. Cramaso appealed the decision. The Appeal Court held that the Respondents could only have foreseen that the representation would be relied upon by E, but not Cramaso. For that reason it was held that...