Cramaso LLP v Viscount Reidhaven’s Trustees [2014] UKSC 9 –

http://www.bailii.org/uk/cases/UKSC/2014/9.html

It is possible to owe a duty of care to someone in negligent misrepresentation even if the statement was originally made to someone else.

VR was leasing out a grouse moor for commercial shooting purposes. During negotiations, VR misstated the population of grouse to a prospective tenant, Mr Erskine. Mr Erskine later set up a limited liability partnership, Cramaso, to be the contracting party. The contract was concluded and Cramaso claimed for damages for negligent misrepresentation. The issue was whether VR could owe a duty of care to Cramaso even though Cramaso did not exist when the statement was made.

The Supreme Court decided that VR did owe a duty of care to Cramaso. The statement was a continuing representation, which lasted from when it was made until the contract was signed.

If a statement has continuing effect, the person who makes it has a continuing responsibility for its accuracy. Whether a representation has continuing effect depends on the facts. For example, if a representation is withdrawn or lapses, it will not have continuing effect.

Here, the representation continued because Mr Erskine was Cramaso’s agent and the negotiations continued seamlessly after it was clear that Cramaso would be the contracting party. VR therefore implied that the statement was still accurate. VR owed a duty of care because it assumed responsibility towards Cramaso for the accuracy of the statement.

VR breached this duty of care and Cramaso was entitled to damages.

The case is a reminder to be careful of what you say during pre-contractual negotiations. Remember that you may be liable for misrepresentations you make to someone other than your contracting party. Take particular care when negotiating with a contracting party’s agent.