Cramaso LLP v Ogilvie- Grant, Earl of Seafield & Ors (Scotland) [2014] UKSC 9 (12 February 2014)
Citation:Cramaso LLP v Ogilvie- Grant, Earl of Seafield & Ors (Scotland) [2014] UKSC 9 (12 February 2014)
Rule of thumb:Where a misrepresentation is made to one party, and it is known that there is a high chance that this misrepresentation will be passed on to another, is this still a misrepresentation that can be used to reduce a contract and obtain damages based upon the continuing effect of misrepresentations? Yes a misrepresentation does not have to have been made directly between the 2 parties to the contract in order to be used – this is called the ‘foreseeable continuing effect of misrepresentation’.
Background facts:
The facts of this case were that Erskine was interested in leasing a property from Grant-Ogilvie in Scotland in which there were grouse on the land. Erskine stated that he was concerned that there would be an optimum number of grouse on the land – not too many so that he would have to kill some and not too little so that they were not really a feature of the land. Grant-Ogilvie informed him by email that the number of grouse were at the optimal level required, which would turn out to be a false representation. Erskine therefore set up a company called Cramaso LLP to lease the land long term. Ogilvie agreed the lease with Cramaso LLP rather than Erskine himself. When Cramaso LLP took on the lease they discovered that the grouse were not at the appropriate level as Grant-Ogilvie informed. Cramaso sought to reduce the contract based upon the misrepresentation in the email sent by Ogilvie.
Parties argued:
Ogilvie refused to take the land back and pay Cramaso the money back so the matter went to Court. Cramaso argued that this was a black and white case of a negligent misrepresentation making a statement about the number of grouse which was factually wrong, thereby entilting him to reduce the contract and get his money back. Ogilive argued that by the company law principle of separate personality they had not actually made any misrepresentation to Cramaso, meaning that they could not make this argument. Ogilvie clarified that they made the misrepresentation to Erskine who was a different person from Cramaso.
Judgment:
The Court upheld the arguments of Cramaso and extended the scope of the misrepresentation principle. The Court referred to the principle that people in society widely owe a duty of care and skill to others. The Court stated that misrepresentations have a 'continuing effect' and that because Erksine was a party in the Cramaso company, it was reasonable that he would rely on this misrepresentation as part of Cramaso. The Court affirmed that where someone has knowledge that a new person could be relying on one of their misrepresentations passed on to them, then they it is a misrepresentation by silence not to clarify it. Cramaso were entitled to have the contract reduced and get their money back. The Court held that Cramaso were entitled to reduce the contract based upon misrepresentation.
Ratio-decidendi:
‘In the present case, it is plain, on the Lord Ordinary's findings of fact, that a duty of care was owed by the respondents to Mr Erskine in respect of the representation contained in the critical email. For the reasons I have explained, a duty of care was also owed by the respondents to the appellant, when they negotiated and concluded the contract on the basis of the discussions previously held with Mr Erskine. The respondents acted in breach of that duty of care, and are therefore liable in damages for any loss suffered by the appellant as a result. The case will therefore have to return to the Court of Session for further procedure’, Lord Reed at 44.
'a duty of care was owed ... in respect of the representation contained in the critical email... continuing effect', Lord Reed
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.