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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Cramaso LLP v Viscount Reidhaven's Trustees [2010] ScotCS CSOH_62 (11 May 2010)
URL: http://www.bailii.org/scot/cases/ScotCS/2010/2010CSOH62.html
Cite as: [2010] ScotCS CSOH_62, [2010] CSOH 62

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OUTER HOUSE, COURT OF SESSION

[2010] CSOH 62

CA72/08

OPINION OF LORD HODGE

in the cause

CRAMASO LLP

Pursuer;

against

VISCOUNT REIDHAVEN'S TRUSTEES

Defenders:

________________

Pursuer: C McNeill, Q.C.; Anderson Strathern LLP

Defender: Sandison, Q.C.; Brodies LLP

11 May 2010


[1] The estate of Castle Grant, which is located near Grantown-on-Spey and which for centuries has been the part of the Seafield estates, includes a grouse moor. The current owners of the estate are the trustees of Viscount Reidhaven's trust ("the trustees"). The grouse moor was very productive in the 1920s and in the early 1970s provided a substantial annual bag of grouse. In common with several other Scottish estates, the productivity of the moor at Castle Grant declined thereafter. The presence of ticks on the moor and the spread of louping ill virus was probably the cause of the decline of the grouse population. In an attempt to reverse the decline of Castle Grant as a grouse moor, the owners of the estate instituted a recovery programme in the late 1980s or early 1990s. This involved among other things placing a flock of sheep, whose coats were treated with a chemical fatal to ticks, on part of the estate for several years in the early 1990s and an attempt to cull wildlife, such as hares and deer, which provided a food source for the ticks.


[2] The estate's recovery programme had some success in improving the productivity of the moor. In the early years of this century there was evidence of a general increase in the size of the annual bag. The ten year annual average between 1970 and 1979 was 792 brace; between 1996 and 2005 it was 196 brace; but the five year average between 2001 and 2005 was 300 brace. Notwithstanding this improvement and a belief that the grouse moor was continuing to improve as a result of the recovery programme, the trustees recognised that there needed to be more significant investment in the moor to realise its potential. As the principal beneficiary of the trust did not shoot grouse and would not gain personal benefit from expenditure to improve the grouse moor, the trustees decided that it was appropriate to attract an outsider to make the needed investment by offering a fifteen-year lease of the moor.


[3] Mr Alastair Erskine, a successful businessman and a keen shot, decided to take on the lease of the grouse moor at Castle Grant. He and his wife established a limited liability partnership, Cramaso LLP ("Cramaso") as the vehicle for Mr Erskine's investment in the moor and Cramaso entered into a fifteen-year lease of the moor from the trustees with effect from
1 January 2007 in a formal lease which the parties signed in December 2006 and January 2007. The tenant under the lease was obliged to put and keep the moor in good condition. This involved major capital expenditure in the early years of the lease on rebuilding the butt lines, repairing and upgrading the moorland road system, providing fencing for a sheep flock on the moor, repairing and upgrading the lunch huts, game larder and equipment storage area on the moor, and completing the repair and refurbishment of the cottages and farm buildings. The tenant was obliged "to manage the moor throughout the period of [the] lease in a manner fully commensurate with the operation of a top quality driven grouse moor in the district". The lease also obliged the tenant to employ a third gamekeeper on the estate in addition to the two whom the trustees had employed. It was, in short, an improving lease in terms of which the tenant had to invest heavily in the early years to improve the moor and could enjoy the benefits of those improvements during the currency of the lease before returning possession of the improved moor to the landlords on the expiry of the lease.


[4] Mr Erskine invested large sums in Cramaso to fund the undertaking. Cramaso aver that they incurred overheads and capital expenditure amounting to 530,859 since entering into the lease. Cramaso were disappointed by the small numbers of grouse which they found on the moor after taking possession of it in 2007. They claim that they were induced to enter into the lease as a result of fraudulent or at least negligent misrepresentations by an employee of the trustees, namely Mr Sandy Lewis, the chief executive of the trust and of other Seafield family estates and entities. They therefore seek to reduce the lease and claim damages for loss which they aver resulted from those misrepresentations.


[5] I heard a proof on the issues: (i) whether there had been a fraudulent or negligent misrepresentation and (ii) whether that misrepresentation induced Cramaso to enter into the lease. Questions of remedy and quantum, if relevant, were reserved for a later hearing.


The factual background

(i) The trustees' expert advice and the particulars of let


[6] In 2006 the trustees employed Mr Jonathan Kennedy, a chartered surveyor and a director of CKD Kennedy Macpherson, to advise them on the possible letting of their grouse moors at Castle Grant and Kinveachy. Mr Kennedy advised them that it was appropriate for him to obtain expert advice from a specialist in the management of grouse moors and, with their consent, he engaged Mr Nick Baikie to visit the two grouse moors and to advise.


[7] On
12 May 2006 Mr Kennedy wrote to Mr Sandy Lewis. He advised that Kinveachy was not in a suitable state to be leased under an improving lease but that Castle Grant offered an opportunity for a tenant to revive the grouse moor. He informed Mr Lewis that the tenant would require to have financial resources and that prospective tenants were likely to be self-made individuals with varying degrees of understanding of how grouse moors work. He suggested that it was important that a prospective tenant should take the right advice and that he would encourage the involvement of Mr Baikie. He expressed the view that it would take between 400,000 and 500,000 in capital investment and running costs in the early years of a lease when no grouse were shot before there would be the prospect of "meaningful driven grouse shooting." He recommended that the trustees should consider granting a twenty one year lease at 1,000 per year for the first ten years with reviews to one-half of market value at years ten and fifteen and that there should be a premium of 50,000.


[8] On
24 May 2006 Mr Baikie wrote to Mr Kennedy, giving his advice on the grouse moors at Kinveachy and Castle Grant. He discussed the effect on Castle Grant of the surrounding estates of Tulchan to the east, Dunphail and Braemoray to the north and Lochindorb to the west. Of those estates only Lochindorb had controlled its tick population and as a result of that and good keepering practice had produced significant quantities of grouse in recent years. Forestry to the south of Castle Grant required keepers to control vermin which predated the grouse. He advised as follows:

"We strongly believe that a tenant should be offered as long a lease as possible on Castle Grant (21 years) in order to realise his commitment/investment. We would forecast minimal returns in the first five years of the project which will depend on the infestations of tick and the prevalence of louping ill. We recommend that you set the employee parameter at three full-time hill keepers."

Mr Baikie explained in his evidence that he had recommended a 21-year lease as he thought that it would take a tenant at least 8 years to establish proper grouse shooting on the moor.


[9] On 22 May Mr Lewis reported to the trustees on the advice which Mr Kennedy had given, pointing out that it did not support the wish, which the trustees had expressed in February 2006, to obtain an annual income stream of 25,000 for the let. He pointed out that the trust was making losses on Castle Grant moor of about 30,000 per year and that, while future beneficiaries of the trust would be denied immediate personal enjoyment of the moor during the currency of a lease, a resourceful tenant could enhance the quality of the moor in the medium term. He therefore recommended that the trustees instruct Mr Kennedy to find a grouse tenant for Castle Grant on the best terms that could be agreed. The trustees considered his recommendation and decided (a) that they were not prepared to let the moors for more than fifteen years and (b) that they wished to receive an annual rent of 25,000.


[10] Mr Erskine had been interested in grouse shooting for over twenty years. Since the 1990s he had been tenant of a week's shooting on Invermark estate and, before he became interested in Castle Grant, he had attempted unsuccessfully to purchase the Gannochy estate and Kinrara estate. He had employed CKD Galbraith, which is an associate firm of CKD Kennedy Macpherson, to advise him on those transactions. In April 2006 Mr Tim Kirkwood, the managing partner of CKD Galbraith, approached Mr Erskine and informed him of the possibility that the trustees might be marketing a lease of the Castle Grant grouse moor. He informed him that Mr Baikie had expressed the view that the grouse moor had the potential to be very successful and advised him to contact Mr Kennedy. Mr Erskine met Mr Kennedy in May 2006. Mr Kennedy advised him that the estate wanted a fifteen-year lease and a rent of 25,000 for Castle Grant. He and Mr Erskine discussed grouse moor management and he accepted Mr Erskine's position that the estate would have to allow the tenant to manage the grouse moor.


[11] On
7 June 2006 Mr Kennedy sent Mr Erskine the letting particulars and stated that he had been instructed to let the moor for 15 years. In a note entitled "Offer for lease" he described the grouse moor and its neighbouring estates. He gave the annual bag records from 1969 to 2005, and recorded the ten-year average between 1970-1979 and 1996-2005 as well as the five-year average from 2001-2005. The latter was 300 brace. In the period 2001-2005 in only one year did the estate shoot more than 500 brace on Castle Grant, and that was in 2003 when they shot 659 brace. In a note headed "Proposed Terms of Lease" he stated that the term was fifteen years and that the initial rent was 25,000 with upward only rent reviews. In that note he recorded the tenant's obligations as being to "put and maintain the moor in excellent condition as a driven grouse moor" and to employ a minimum of three full-time gamekeepers for grouse. In a manuscript addition to the covering letter Mr Kennedy informed Mr Erskine that he could visit the estate with the sporting manager of the Seafield estate, Mr Frank Law.


[12] Mr Erskine took up that offer and visited Castle Grant with Mr Law in early June 2006. They drove on estate roads on the Home beat and Ourack beat and ended the tour near Dava on the northern boundary of the estate. In Mr Erskine's opinion, Mr Law was very optimistic about the prospects of the moor which he considered was tracking the recovery of the neighbouring Lochindorb estate. Mr Law discussed the estate's recovery programme and expressed confidence that the moor was in a good state of recovery. He advised Mr Erskine that a tenant would be able to shoot seven hundred brace in a year and that the estate would be shooting that number in 2006. In his evidence Mr Erskine said that at the time he thought that Mr Law was over optimistic about how far the estate's recovery programme had progressed and he did not take his estimates at face value. In Mr Erskine's view, it would take investment and between three and four years of development of the grouse population for the moor to support an average annual bag of one thousand brace. Mr Erskine also spoke to Alastair Laing, one of the proprietors of Lochindorb, who confirmed that Castle Grant had been badly managed.


[13] Afterwards, Mr Kennedy contacted Mr Erskine to ask him if he were interested in the proposed lease. Mr Erskine suggested that the lease should be for twenty one years, rather than fifteen years, to give a better balance of risk and reward. In an email of
19 June 2006 Mr Kennedy asked Mr Erskine whether he planned to be represented in taking forward the transaction and advised that he thought that it would be a good thing. In his oral evidence Mr Kennedy explained that he meant that Mr Erskine should obtain specialist advice on the management of grouse moors from someone like Mr Baikie. He also stated that he suggested to Mr Erskine that he should talk to Mr Baikie about the project and that Mr Erskine later told him that he had done so. Mr Erskine denied this. His position in evidence was that he had not been advised to obtain specialist advice on grouse management. He considered that he had sufficient knowledge of the management of grouse moors from his prior involvement in shooting and from advice, which he had received when he sought to purchase the moors at Gannochy and Kinrara, to conduct the negotiations at this stage. He responded to Mr Kennedy's email of 19 June as follows: "Yes I will appoint representation however I thought it best to out line the main issues first. Should the estate be interested in my proposal we could take things forward." He explained in his evidence that what he had meant in referring to representation was that he would instruct lawyers who were experienced in rural matters only once he had seen whether there was a basis for doing an acceptable deal.


[14] I accept Mr Kennedy's evidence that he advised Mr Erskine to speak to Mr Baikie and I also accept that Mr Kennedy thereafter believed that he had done so, as a result of something which Mr Erskine said to him. Nonetheless, I also accept that Mr Erskine did not approach Mr Baikie for advice before January 2007 and that before entering into the lease he did not intend to instruct Mr Baikie or any other expert on grouse moors to advise him. It was Mr Erskine's view (a) that he had gained a reasonable knowledge of grouse moor management from his prior involvement in grouse moors and (b) that the most accurate information about a grouse moor could be obtained from those who owned and managed it. There appears to have been a misunderstanding between Mr Kennedy and Mr Erskine on whether Mr Erskine actually obtained expert advice. That misunderstanding does not, in my opinion, call into question the credibility of either of them.


[15] In the event, the trustees were not prepared to give Mr Erskine a twenty one year lease as he wished and entered in negotiations with Mr Paddy McNally, a wealthy businessman with interests in advertising associated with Formula One racing, for a lease on the terms which they wished. From late June 2006 Mr Erskine did not pursue his interest.

(ii) The grouse counting system on Castle Grant


[16] As grouse are wild birds and breed in the wild, it is difficult for sporting estates to ascertain the population of birds available to be shot in any season. Because grouse tend to stay within a limited geographical territory all their lives and over-winter in that territory, an estate has to reckon with its grouse stock being reduced by about twenty five per cent and often more, principally because of predation in the winter months. As a result, many estates plan their shooting programmes by conducting counts of birds in the spring before the survivors breed and again in the summer at the end of the breeding season. The spring counts, which are usually conducted in late March or April, enable an estate to gain an indication of the number of pairs on the counted ground which are potential breeders. The summer counts, which are carried out in late July and early August immediately before the start of the grouse shooting season on 12 August, give an indication of the success of the breeding season on the counted areas. This enables an estate to reach a prima facie view on whether there is a sufficient stock on the ground to support the shooting which it has provisionally booked and to organise its bookings accordingly. The knowledge gained by these counts, even when the counted areas are representative of the estate as a whole, only gives a general indication of the population on the estate; and prudent managers supplement the knowledge gained from the counts with their observations on the estate during the shooting season. Several experienced shots, including Mr Kennedy, Mr Erskine and Mr Mark Osborne expressed the opinion that the best assessment of a population on a moor was obtained by observation during the shooting season.


[17] Castle Grant is divided into three beats which are very roughly of equal size. To the west there is the Home beat which is on the march with the well-managed and highly productive Lochindorb estate. The eastern boundary of the Home beat runs north to south, principally along the line of a disused railway which runs parallel to the A939 public road from Grantown to Forres, but also includes a block of land on the northern boundary of the estate between the Dava School Plantation and Aittendow croft. The Middle beat comprises the middle of the three ridges on the moor which generally run north to south and includes higher ground at Carn na Glaisneach and Carn na Bad na Caorach. To the north it marches with the Braemoray estate. The easterly beat is the Ourack beat which includes the easterly of the three north-south ridges. It is bordered by the Braemoray and Tulchan estates, which were not as intensively managed as Lochindorb estate, thereby causing a greater challenge from predation and the spread of ticks.


[18] Castle Grant estate had for several years adopted a practice of carrying out spring counts of grouse on five areas within the estate. The estate staff carried out the counts in March or early April each year in order to estimate that extent of the potential breeding stock which had survived the winter. The counting areas were five blocks, each of which was half a square kilometre (1000m x 500m). Each block was counted by a line of seven or eight people who, accompanied by dogs, covered half of the width of the block and walked from one end to the other before turning to cover the other half of the width by walking back in the same way. The blocks were located at Drumguish and Aittendow on the Home beat, Tombain and Glaisneach Middle Burn on the Middle beat, and Ourack on the Ourack beat.


[19] The estate also carried out counts in late July or early August to estimate the success of the breeding season. Again the estate carried out the counts in one half square kilometre blocks which consisted in the five blocks which were used for the spring counts and five other blocks. The additional blocks in the summer counts were all in the western half of Castle Grant. Four of the blocks, namely, Loch MacLeod/Anaboard, Crannich Flats, Rhyhorrach/West Limekilns, and Road and Railway (also known as Dava Station) were located in the Home beat and the fifth block, Glaisneach Tops, was located in the centre of the Middle Beat. There were no counts in the Ourack beat. The first three blocks were contiguous and close to the march with Lochindorb estate. The additional blocks were counted by a member of the estate staff who was assisted by a dog handler who used several dogs to cover the block. On several years the head keeper on Castle Grant, Mr Colin Stewart, carried out counts on Chimney Stack, or on Tulchan March and Ourack Tops on the eastern march of the Ourack beat but, as he did so only intermittently, those counts did not contribute to the estate's shooting policy.


[20] It is important to record that the keepers on Castle Grant chose the areas on which to carry out the summer counts not because they were representative of the grouse population on the moor as a whole but because those areas were where the birds were known to be. As a result the counts were carried out on what was thought to be the most populated parts of the estate where it was thought that shooting could take place during the season.


[21] The advisory service of Game Conservancy Limited gave the estate a favourable report on the counting system at Castle Grant in 1996. The report was based on an understanding, that Mr Frank Law had confirmed, that the counting areas were representative of the moor as a whole. Mr Ian McCall, who is the Scottish director of the Game and Wildlife Conservation Trust, prepared the report. In his evidence he expressed the opinion that it was "absolutely critical" that the counting areas should be so representative if they were to be used in assessing what proportion of a bird population should be harvested. Mr McCall visited the moor again in September 2007 and expressed the view that the count areas were heavily biased towards the Home beat, which had a good limestone base, was adjacent to and benefited from the well-managed Lochindorb estate and was in his opinion the most productive part of the moor. Castle Grant estate had also concentrated its earlier campaign against ticks and louping ill virus in the western part of the moor, where it had introduced a flock of treated sheep for several years in the early 1990s. This would have enhanced the relative productivity of that area. I accept Mr McCall's evidence and am satisfied that the summer counts were concentrated in areas which were not representative of the moor as a whole. Extrapolation from those counts of a grouse population on the moor as a whole was likely to give rise to a material overstatement of the grouse population on Castle Grant.


[22] In 2006 the spring counts disclosed fifty eight breeding pairs spread across the five blocks. The summer counts revealed 411 birds on the blocks which were counted in both spring and summer and 470 birds on the blocks which were counted only in the summer counts. These figures were significantly more than had been counted in previous summer counts on the blocks which were counted in spring and summer and were also larger than the previous counts on the blocks which were counted only in the summer. Mr Law was encouraged by the increased counts to promote a shooting bag of eight hundred brace in the 2006 season.

(ii) Mr McNally's interest in Castle Grant


[23] As I have mentioned, in the summer of 2006 Mr Paddy McNally considered taking a lease of the Castle Grant moor. The estate reorganised its shooting programme to give him two days shooting at the start of the 2006 season. Mr McNally expressed concern that, if he were to take on the proposed lease, the estate should not overshoot Castle Grant in the 2006 season. To accommodate those extra shooting days the estate cancelled bookings on 22 and
23 September 2006. Additionally, to reassure Mr McNally that the estate had considered the capacity of the moor to bear the shooting of the 2006 season, Mr Sandy Lewis sent his adviser, Mr Richard Brooks, and copied to Mr Kennedy, an email on 4 August. In that email Mr Lewis explained that the grouse counts, which had been completed, had disclosed grouse stocks at the highest level in recent years. He expressed the view that the stocks appeared adequate to complete the booked shooting programme but that they would have to think through the stocking levels which Mr McNally wished at the end of the season and certain other matters. The email contained among other things the description of the count system and the extrapolation of the count which Mr Lewis later sent to Mr Kennedy and the other representations, which are the subject matter of this action. See paragraph [29] below.


[24] After Mr McNally had taken two driven days on Castle Grant moor on 14 and
15 August 2006, his advisers discussed the possibility of a lease with the estate's advisers for some time. Mr McNally was advised by Mr Mark Osborne, a chartered surveyor with expertise in grouse moors. Mr Osborne expressed concerns to his client that the estate was shooting a rapidly declining grouse stock in 2006 but did not advise his client to withdraw from the negotiation of a lease. Eventually, after the detailed terms of the lease had been negotiated, Mr McNally decided not to proceed with the transaction. His reasons for doing so related to his other shooting commitments and were not because he had reached any view as to whether the moor had been overshot.

(iii) The revival of Mr Erskine's interest


[25] On Mr McNally's withdrawal, Mr Kennedy contacted Mr Erskine in early September 2006 to see if he was still interested in leasing the moor. He suggested to Mr Erskine that he would have the best prospect of success in obtaining a lease if he were prepared to accept the terms which had been agreed in principle with Mr McNally. To allow Mr Erskine to become more familiar with the moor, he invited him to join his party for two days' shooting on Castle Grant on 14 and
15 September 2006. He had reserved two days' shooting on Castle Grant or Kinveachy with an allocated bag of fifty brace on each day. Mr Kennedy, who was concerned that the moor was being overshot, had earlier sought to cancel his booked two days, but the estate had insisted that he honour his commitment.


[26] On the first day of Mr Kennedy's shoot, his party shot forty four brace in five drives on the Home Beat. All of the drives were relatively close to the Lochindorb estate. Mr Erskine and Mr Kennedy both formed the view that that part of the moor had been overshot. They both commented that there were not large numbers of grouse. Mr Kennedy was aware that his party were good shots but had not managed to shoot the agreed bag despite the birds having been driven towards the guns. He thought that the estate was damaging the grouse stocks by continuing to shoot on Castle Grant. He discussed his view with Mr Erskine, who shared his opinions that there had been overshooting but that there would still be a sustainable population at the end of the season. At lunchtime on 14 September, the estate staff decided to transfer the shoot on the following day to Kinveachy, where the shooting party bagged only twenty seven brace. This concerned Mr Erskine, who questioned why the shooting party had been sent to Kinveachy for such a poor bag and wondered whether there was a shortage of birds on Castle Grant moor. Mr Erskine had wanted to spend two days on Castle Grant moor but the move to Kinveachy prevented him from doing so.


[27] Mr Erskine visited the moor again on 23 September and met Mr Colin Stewart, the head keeper, who also was concerned at the level of shooting. Mr Erskine was worried that the continued shooting would leave an inadequate breeding population on the moor. He expressed his concern to Mr Kennedy in an email on
25 September 2006 in which he stated his disappointment that the estate had had two days of walked up shooting in Castle Grant on the previous week and planned another driven day for a family member. He stated that he was not qualified to quantify the damage which this was doing to the grouse stocks but thought that it was not insignificant. Mr Kennedy forwarded Mr Erskine's email to Mr Lewis on 28 September 2006 and expressed his own concerns in the following terms:

"Sandy,

There is no doubt in my mind that, for any tenant of the quality we require, the estate has been overshot this year. This has undoubtedly had an effect on the letting of the moor. It may have made it impossible.

Regards, Jonathan."


[28] Mr Lewis responded by email dated 29 September 2006 (17.45 hours) in which he referred to the email which I set out in the next paragraph and which is the subject matter of this action. He said that he had already sent that email, which he invited Mr Kennedy to pass on to Mr Erskine if he wanted. He pointed out that it contained information of the estate's grouse programme which he had sent in his email of 4 August and that neither Mr Brooks, Mr Osborne nor Mr Kennedy had challenged his calculations or conclusion. He observed that Mr Kennedy had expressed concern only later when finalising arrangements for his own shooting days. He continued:

"While to stop shooting may assist somewhat to securing a tenant, I have to operate on the basis that we will have this moor in hand next year until the position changes. If however, evidence of a good stock of birds on the moor is critical to obtaining a tenant, it must be impossible to secure a tenant until the July counts are completed in any year. At the start of this exercise, we were expecting someone to sign up before the end of June with a date of entry in December. I would have thought that the evidence of a reasonable breeding season would mean that we are currently in a stronger position to let than we were in the first six months of this year."

(iv) The representation


[29] Mr Lewis, having been alerted to Mr Erskine's concerns, sent Mr Kennedy the following email message on
29 September 2006 (17.30 hours):

"Jonathan

Now that we are well through with the grouse season, I thought it may be appropriate to recap on how we set this year's programme for Castle Grant and where we are to date. The following information was provided to you at the beginning of August:

Count system

The moor has been divided into 10 1/2 K2 blocks. Five count plots are historically counted using our staff and five are counted using pointers. An additional area called "Chimney Stack Ridge" has been counted by the Head Keeper for his own interest over the past couple of years.

Statistical sheets

The schedules show the count numbers by plots and then summarised by type of count - staff or pointers. The right side of the summary sheets also show the bags for each year. Prior to 2002 the moor was lightly shot and this was continued in 2002 although the numbers indicated that the bag could have been increased. 2003 was a good year but while 2004 showed early potential, in common with most Scottish moors that year, the programme had to be largely dropped after the Summer counts were known.

2006 Summer Count and extrapolation

Frank Law, our Sporting Manager, and I have been doing a number of calculations based on the counts. No doubt there are a number of ways to do this but I will set out our calculations.

       Calculated from count numbers - since the moor area is roughly 45 k2, we multiply the count figures by 9. The total number of birds counted in the 10 plots is 881 therefore the total population may be around 7,929 birds. There are 238 old birds in the count which over the whole moor would equate to 2,142. If we assume that since the close of last season we have lost 25%, then the birds on the moor at the end of last season may have been around 2,856. If we set our target of leaving that level of birds at the end of the current season we could shoot 5,073 birds (7,929 less 2,856) which equates to 2,536 brace. Taking into consideration that the density near woodland edges will be lower and plot counts not entirely representative, if we half this figure at 1,268 we are being very conservative.

       Calculated comparing prior year bags against summer counts - Until 2003 we shot sparingly as grouse numbers were building on the back of our own recovery programme, but in that year from 482 birds in the counts, the actual bag was 659 brace. If the same kill to count ratio is used for 2006, then from a count of 881, the potential bag would be 1,203 brace.

       General Rule of thumb - I understand some managers aim to leave 30 pairs per K2 as the closing season population. Over 45K this would equate to 1,350 pairs or 2,700 birds which is not much different from the 2,856 used in the first calculation above.

The programme already forwarded to you showed a total bag of 819 brace. The programme is well covered at the booked bag rate and probably also able to take bags being shot over the booked day figure, should the birds show in numbers and the guns shoot well.


Shooting days

Frank has discussed with the Head Keeper the potential for consecutive driven days this year. His assessment is that it will be possible to do 2 days some weeks and 1 day on others. In North winds, the moor will only shoot one day.

Since the above review, as you are aware, two 50 brace driven days were added at the start of the season and two deleted towards the end. In addition, the Head Keeper was happy to add a further 40 brace day for a family member in October. This last booking was not confirmed until the Head Keeper (who is very cautious) indicated that he was happy to accept the booking. It was his decision and not influenced by Frank or the family member. At the moment, the bag for this season from driven and walked up sport is 611 brace - well covered by the above calculations. We remain comfortable that the anticipated total bag is well provided for by the counts in July and the evidence of birds on the moor on a day when the conditions are good.

I should perhaps say that the general failure of Kinveachy Moor this year has not influenced our position as to the anticipated bag from Castle Grant. This is because we did not expect such good numbers on Castle Grant. Further, neither Frank Law nor anyone else on the estate is on any performance bonus and the quality of their work would be assessed on good management rather than an attempt to boost income at the expense of the continuing moorland asset condition.

I am very happy for you to pass this on to Alistair Erskine if you feel this would be helpful to him.

Kind regards

Sandy."

In the email the passages above which are indented (from "Count system" to "Shooting days" inclusive) were written in blue and were copied from part of the text of the email which Mr Lewis sent to Mr Brooks on 4 August 2006. See paragraph [23] above.


[39] Mr Kennedy followed Mr Lewis's suggestion and forwarded this email to Mr Erskine on
2 October 2006. In his email message Mr Kennedy stated:

"This might be helpful. How do you want to progress? If there are any specific aspects you are concerned about do give me a call."


[31] Before doing so, on
1 October 2006, Mr Kennedy responded to Mr Lewis by email, stating that he had not taken issue with the analysis of the grouse counts and that he would not want to. However he questioned whether that was the right starting point. While he accepted that a good season at Castle Grant might place the estate in a good position to "go forward", he expressed concern about the bad "vibes" which the shooting of a full season gave a prospective tenant and thought that that was making it more difficult to achieve a letting.


[32] Mr Erskine in his evidence explained that Mr Lewis's email satisfied him that the estate had not significantly overshot the moor and that there ought to be a stock of about 2,700 birds on the moor at the end of the season. He stated that the most accurate assessment of the grouse stock on a moor was done during a shooting season. He therefore took comfort that Mr Lewis was making this assessment when the shooting season was well through as by then he would have had a very clear picture of the grouse stock. I was initially puzzled by this evidence as Mr Erskine also accepted that he was aware that the text in blue, which formed the bulk of the factual representation, repeated a report made in August. But on reflection I consider that Mr Erskine's comment related to the concluding paragraphs of the email in which Mr Lewis described the progress of the shooting season.


[33] When he considered the email he thought that there was "no way" in which the estate could have shot about 2,500 brace in 2006. On cross-examination he described 2,536 brace as "a ridiculous figure." He considered the suggestion that the estate might have shot 1,200 brace to be very optimistic but that, if the estate ended the season having shot 650 brace or less, there ought to be a sustainable population left at the end of the season. He formed the view that the estate was mindful of the need to leave a sustainable population. He explained that he was reassured that neither Mr Lewis nor Frank Law were on performance related bonuses and that they were seeking to maintain the quality of the moor rather than generate short term income. He attached weight to the facts that Mr Lewis was the chief executive of the estate and that, as a chartered accountant, he was prepared to endorse the figures and statements in the email. Mr Erskine also took comfort from the fact that Mr Kennedy passed on the email without raising any concerns about it.


[34] In summary, Mr Esrkine's evidence was that as a result of Mr Lewis's statements in the email he was satisfied (a) that the estate's senior management had been acting responsibly and would leave about 2,700 birds on the moor at the end of the sporting season and (b) that the moor's current productivity (before his investment) was an annual surplus of 700 brace. I discuss in paragraphs [111]-[113] below how far I accept this evidence of reliance.


[35] Mr Erskine involved his lawyers, Anderson Strathern LLP, in the negotiation of the lease. The terms were in large measure those which the estate had discussed with Mr McNally but it was agreed also to allow some pheasant shooting on lower-lying ground at Castle Grant. In about October 2006, Mr Erskine decided to take the lease in name of an LLP; and the pursuers were incorporated on
16 November 2006.


[36] On commencement of the lease the pursuers kept Mr Colin Stewart as head keeper and Mr Ian Crossan as a beat keeper. They invested significant sums in the estate in accordance with their obligations under the lease. Mr Erskine instructed Mr Baikie to act as his adviser on the management of the moor. The spring counts in 2007 were conducted in the same manner as in previous years. They revealed 54 pairs, while the previous year's spring counts had revealed 58 pairs. This caused Mr Erskine concern as he had expected the counts to be better than in 2006 because he believed that the moor was improving. He raised his concerns with one of the trustees. When the summer grouse counts were made in the same way as in previous years, Mr Erskine became aware that they were concentrated on the western side of Castle Grant and formed the view that the counting system was flawed. Although the 2007 breeding season had been good, Mr Erskine was of the view that there had been too few grouse left on the moor at the end of the 2006 season. He obtained support for his concerns from the advice of Mr Baikie, which I discuss in paragraph [46] below.


[37] Relations between Mr Erskine and the estate's senior management deteriorated during this period. Mr Erskine considered them to be obstructive; and they disliked his attempt to renegotiate the lease to expand the area on which pheasants could be shot. There was a confrontational meeting on
2 May 2007, which caused a further deterioration in personal relations.


[38] On investigating Castle Grant's counting system and after interviewing the keepers, Mr Erskine ascertained that the keepers were aware that in recent years the highest concentrations of grouse had been on the Home beat on the west of the estate and that the other beats were much more lightly populated. The historic pattern of shooting in Castle Grant in those years also revealed that the keepers concentrated on the western side of the estate, where they knew the birds were located.


[39] Mr Erskine introduced drive counts in the summer of 2008 which revealed an uneven distribution of young birds on moor. The 2008 drive counts showed 246 young birds on nine drives the Home beat, 20 on six drives on the Middle beat and 48 on five drives on the Ourack beat. The counts on the Home beat disclosed four young per adult, on the Middle beat three and on the Ourack beat two.


[40] Mr Erskine explained that, if he had been correctly advised of the likely population on the moor, he would have been told that there was a population of about 1,300 birds (650 brace) at the end of the season. After allowing for losses over the winter months of between 25 and 30 per cent, that would have left a spring population of about 450 brace. Such a population would amount to about one pair per 25 acres on the moor as a whole, which he considered would leave the moor critically underpopulated. This in turn would delay the recovery of the moor as it would take longer for the tenant to build up the population again. He estimated that it would take between five and seven years to develop the potential of the moor, whereas, if the residual population had been what he had been led to believe, it would have taken between three and four years to reach the same point. Had he not received the representations in the email of
29 September 2006, he would not have entered into the lease.


[41] In 2007 and 2008 the pursuers did not shoot Castle Grant moor to the extent that Mr Erskine had intended. On the unanimous advice of their keepers, they organised only one driven day in each of those years and also one walked up day in 2008.


[42] Mr Erskine reached the view that the estate had knowingly overshot Castle Grant in 2006 to generate short term income before a tenant took responsibility for improving the moor. He considered that Mr Lewis had deliberately misled him in the email of
29 September 2006 in order to induce him to take on the lease. This action was the result.

The grouse population and expert evidence


[43] Mr Nick Baikie, who is a graduate of
Edinburgh University and the Royal Agricultural College, Cirencester, and a sporting consultant specialising in grouse moor management, gave evidence as a witness of fact and not as an independent expert. His evidence included the opinions which he formed of Castle Grant moor both when visiting it with Mr Frank Law in the summer of 2006 and also in 2007 in his capacity as an adviser of Mr Erskine and the pursuers.


[44] Mr Baikie trained as a land agent under Mr Mark Osborne before setting up his own consultancy on grouse moor management. He was a reliable and well-informed witness. I do not think that the fact that he was employed by Mr Erskine in any way undermines the value of the opinions which he formed at the time and which he repeated in his evidence.


[45] When he visited Castle Grant in May 2006 he warned Mr Frank Law that the moor was not, as he thought, already improved. He advised that the moor needed substantial investment, an extra keeper and also the re-introduction of treated sheep to control ticks. He formed the impression that the Home beat was more populated than the other beats.


[46] He gained a more detailed knowledge of the moor in the early months of 2007 when he visited Castle Grant on about four occasions and walked over the moor with Mr Colin Stewart. From his observations on those visits, he estimated that the maximum population of grouse on Castle Grant in March 2007 would have been in the range of 500-700 pairs. He recognised that it was difficult to estimate the grouse population and to justify that estimate to the court, but asserted that practical judgements could be made from observation. His methods of assessment included counting birds, and observing feathers, droppings, the up-take of grit, and carcasses left by stoats. He also observed hares, which were hosts for ticks that spread louping ill virus. He was aware of the presence of louping ill virus on Castle Grant. He walked the Ourack beat six or seven times. He expressed the view that it was a good habitat for grouse but that the population was not there. He thought that the east end of the estate had a greater potential to produce grouse than the west side. The proximity of the west end of the estate to the well managed Lochindorb estate would have assisted the grouse population in that area as it was likely that predation and louping ill virus near the boundary would be reduced. When he learned of the location of counts on Castle Grant in early 2007, he considered that they were not representative of the moor in the state it was then. Thus he considered the presentation in Mr Lewis's email of
29 September 2006 to be fundamentally flawed.


[47] The evidence of the head keeper, Mr Colin Stewart, supported Mr Baikie's views, both of the uneven distribution of grouse on the moor and the likely grouse population on Castle Grant in the spring of 2007. He explained his involvement in the counts. He said that in 2006 there was a reasonable number of birds to the west of the old railway line (principally on the Home beat) but that the population was "not good at all" to the east of that line. The counts were located where the keepers expected to find the grouse. He expressed the views (a) that it was ridiculous to suggest that there were about 8,000 birds on Castle Grant at the start of the season, (b) that it was impossible to shoot 1,200 brace in the season and (c) that there were at most 700 brace left on Castle Grant at the end of the 2006 season. He accepted that his figure of what was left at the end of the season was a guess but he recalled being concerned about the shortage of birds from his observations when working on the moor when the season ended. He explained that it had been a struggle to achieve the bags which were shot in the later part of the 2006 season.


[48] Mr Baikie's views also received some support from the evidence of Mr Stewart Blair, who formerly was head gamekeeper at Kinveachy, that he and Mr Colin Stewart gave strong advice after the 2006 summer counts to Mr Frank Law against the estate's proposal to shoot 800 brace on Castle Grant. He and Mr Stewart had suggested that numbers be restricted to 300-400 brace and advised that a bag of 800 brace could not be achieved and would damage the future stock on the moor. During the season the keepers struggled to achieve adequate bag numbers and Mr Blair again warned Mr Law that the stock on the moor was being damaged. Although Mr Sandison challenged Mr Blair's evidence that he and Mr Stewart had made objections to Mr Law about the shooting programme, he did not call Mr Law as a witness to counter it. Mr Stewart did not recall the detail of those discussions but said that it was normal for the estate to consider him to be over-cautious and to overrule him.


[49] I accept Mr Stewart's and Mr Blair's evidence on these matters. I recognise that there were no scientifically accurate counts of all the drives on the moor. But experienced keepers, who are active on a moor, should be able to have a clear impression of the numbers of grouse on the moor and acquire a knowledge of its stronger and weaker areas, by observing the things of which Mr Baikie spoke. Both of the keepers were credible witnesses and their knowledge of the moor gave weight to their views. While it appears that Mr Law had a different view of the moor, the defenders chose not to lead his evidence to justify that view.


[50] Mr Mark Osborne, whom the pursuers called as their skilled witness, is a chartered surveyor. He is very experienced in managing grouse moors and has a good reputation for successfully restoring grouse moors to productivity, principally in the North of England but also in
Scotland. He is a keen shot and has leased several grouse moors over the years. He also acts as agent for Ellipsis Farms Ltd, which is a company controlled by Mr Paddy McNally and owns the Glenlochy estate close to Castle Grant. In that capacity he advised Mr McNally and was present with him on Castle Grant on 14 and 15 August 2006.


[51] Mr Sandison challenged Mr Osborne's status as a skilled witness because he was involved in the facts of the case and in particular because he had already formed views about the overshooting of Castle Grant before he was instructed by the pursuers to act as an independent expert witness. I do not consider that is a ground for rejecting his evidence. While Mr Osborne had formed the view from his observations in 2006 that the estate's programme for that year involved overshooting the moor, that is not the central question in this action. He also advised Mr Richard Brooks in robust language in an email dated
14 August 2006 that he had examined the estate's historic count records and that he and experts whom he had consulted rejected them as there was little correlation between their counts and what they shot. But much of what Mr Osborne had to say, for example about the unrepresentative nature of the counting system, which is directly relevant to this litigation, did not depend on any judgements which he might have made when acting as agent of Mr McNally's company. Indeed, his views on those matters were consistent with and reinforced those of Mr Baikie and the keepers.


[52] I do not consider that Mr Osborne is in any way disqualified from giving expert evidence because he was recommended to the pursuers by Mr Baikie, who had formerly been his trainee. While I do not doubt that he and Mr Baikie are generally on good terms, they are, as Mr Osborne stated, competitors as providers of advice in a very specialised professional discipline. Further, when Mr Baikie left his employment to set up his own business, he took some of Mr Osborne's clients with him. That, in my opinion, would have engendered sufficient detachment.


[53] I have considered the dicta in Liverpool RC Trustees Inc v Goldberg (No 3) [2001] 1 WLR 2337 and Toth v Jarman [2006] 4 All ER 1276, to which Mr Sandison referred me, and consider that there is no conflict of interest or inappropriate connection to either Mr Erskine or the pursuers which would make it inappropriate for him to act as an expert. Further, he disclosed in his reports both his prior involvement with the estate when engaged by Mr McNally and the views which he then expressed. I am satisfied that Mr Osborne's evidence is, and can be seen to be, uninfluenced by the exigencies of the litigation: see The "Ikarian Reefer" [1993] 2 Lloyd's Rep 68, Cresswell J at pp.81-82.


[54] Mr Osborne gave his evidence often in a forthright manner. In his first report and in his oral evidence he expressed views, which were properly a matter for assessment by the court, on whether certain statements could have been made in good faith. I have disregarded his opinions where he has strayed into matters which are for the court to determine. But I consider that I am entitled to have regard to his acknowledged expertise and weigh the opinions which he has expressed on matters which are within the remit of a skilled witness and are relevant to assessing whether or not there has been a misrepresentation.


[55] Mr Osborne expressed the opinion that the summer counting blocks were not representative of Castle Grant moor as they were concentrated on the western part of the moor which benefited from the proximity of the well-managed Lochindorb estate, while the marches with the other estates were not so counted. He advised that of the grouse counted in the 2006 summer counts, 70% were on the Home beat, 23% on the Middle beat and 7% on the Ourack beat. This broadly tallied with his experience on Castle Grant on 14 and
15 August 2006 when he observed a reasonable stock of grouse on the Home beat, considerably less on the Middle beat and very few grouse on the Ourack beat. He opined that if the estate were to seek representative summer counts there should have been three counting blocks on each of the beats. He also criticised the use of different counting methods on individual blocks, which, he said, would affect the comparability of block with block. He criticised the counting system for its concentration on lower ground at the expense of high ground on the moor. He also advocated the use of drive counts in preference to block counts but, whatever the merits of that system, they are not material to the issues which I have to determine.


[56] Mr Osborne recognised that it was not possible to assess precisely the population of grouse on Castle Grant at the end of the 2006 season. Nonetheless, his estimate, derived from his observations on the moor, the pattern of the bag during the season, and the facts that the estate concentrated its shooting on certain drives and did not shoot others, was that there were no more than 1,300 grouse (650 brace) left and that there were probably considerably fewer birds. While it was not clear how far, if at all, he took account of the estate's practice to let 50 brace days, rather than seek larger culls, in order to maximise its revenue from the provision of accommodation at Kinveachy Lodge, his estimate is not dissimilar to those of Mr Baikie and Mr Stewart. The pattern of shooting in 2006, which the keepers selected by reference to the presence of birds, was also informative. The breakdown of the 2006 bag was that 69% of the birds were shot on the Home beat, 12.5% on the Middle beat and 18.5% on Ourack beat.


[57] I accept Mr Osborne's view that the extrapolation from the summer counts which Mr Lewis presented in the email of
29 September 2006 was misconceived, because the counting areas were not representative of the moor as a whole and materially overstated the population of grouse on Castle Grant.


[58] The defenders led as their skilled witness Mr George Winn-Darley. He is an estate owner in
Yorkshire and chartered surveyor with a practice providing rural estate management. He trained at the Royal Agricultural College, Circencester. He has considerable experience of the management of grouse moors in the North of England and of advising on such management. Mr Osborne described him as an experienced shot and a competent grouse moor manager. In my view, he, like Mr Osborne, had the necessary expertise to assist the court as a skilled witness. He read the relevant documents which were made available to him and recorded in Appendix 1 of his report. He gave his evidence in an open and straightforward way. He cautioned against too much reliance of grouse counts as the sole basis for determining shooting pressure, because of the many variables which can affect a grouse population and, in particular, the incidence of louping ill virus from season to season. He suggested that, as Castle Grant had ticks and louping ill virus, there could be no formulaic relationship between the summer counts and the moor's shooting capacity in a particular year. He opined, correctly in my view, that the appropriate stocking density for a moor depended upon the use which its occupier wished to make of it. He disagreed with Mr Osborne on whether there was evidence of overshooting in the 2006 season. He also disagreed with Mr Osborne on the degree to which grouse might move from an overstocked area to an understocked one (which was part of Mr Osborne's argument that the Home beat would have benefited from the proximity of the Lochindorb march). He also did not share Mr Osborne's view that it was legitimate for Mr Erskine to expect that the moor would become more productive soon after he had invested resources in it; much would depend on the stage in the cycle of the grouse population. In Mr Winn-Darley's opinion it would take four or five years before the investment under an improving lease would show substantial increases in the numbers of grouse.


[59] Fortunately, it is not necessary for me to reach a concluded view on most of these disputed matters as they are not directly relevant to the issues in this litigation. What is directly relevant is whether or not Mr Lewis misrepresented the likely population of grouse on Castle Grant in his email of 29 September 2006 and the legitimacy of the extrapolation from the summer counts in that context.


[60] On that issue I prefer the evidence of Mr Baikie, Mr Osborne and Mr Stewart. While, as Mr Winn-Darley stated in his report, the counting areas on Castle Grant may have been sufficient to make year on year comparisons as they were counted in the same ways each year, I do not accept that they gave an indication of the total number of grouse on the moor on which any reliance could be placed. I note that Mr Winn-Darley visited Castle Grant for about three hours on only one occasion in October 2008 and formed the view that most of the moor offered a heather habitat and the capacity to support a significant grouse population. This tallies with Mr Osborne's assessment of the habitat and topography and Mr Baikie's view of the potential of the Eastern side of the moor; but, as Mr Winn-Darley accepted, it does not tell us anything about the population actually on the eastern parts of the moor. On that matter I accept the evidence of Mr Baikie and the keepers, who understandably had more opportunity to assess the moor as a whole. Their evidence is consistent with Mr Osborne's view on the illegitimacy of an extrapolation from the counted areas. I discuss below, when I consider the email of
29 September 2006 as a whole, whether the qualifications which Mr Lewis placed on his extrapolations prevented them from being a misrepresentation.


[61] I note from paragraph 3.2.5 of his report that Mr Winn-Darley was given an account of the history of the development of the count areas by Mr Frank Law and was told that the Game and Wildlife Conservation Trust had approved the system. Thus when producing his report Mr Winn-Darley did not have the benefit of Mr McCall's views which I have recorded in paragraph [21] above. I conclude that Mr Winn-Darley did not know and, on the information given to him, could not have known the extent to which the count areas were unrepresentative of the moor as a whole in 2006. Thus he was not in a position to give a reliable view on whether the 50% discount from the result of extrapolation exercise was too small or too large. I have to assess his evidence as to the reasonableness of Mr Lewis's assertions in the email of
29 September 2006 in that light.


[62] Mr Winn-Darley also expressed the view that he expected a prospective tenant of an improving lease of a grouse moor to take reasonable steps to satisfy himself as to the condition of the moor before he signed the lease. As well as speaking to the keepers and neighbours, he could enquire about the counting system and carry out some short, informal counts at the end of the season. While I readily understand that view and note that Mr McNally took Mr Osborne with him when shooting on Castle Grant on 14 and 15 August 2006, I do not think that the fact that Mr Erskine chose to depend on his own knowledge, supplemented by what the estate told him, made it in any sense unreasonable for him to rely on information provided by staff of the estate, who, other things being equal, should have had a greater understanding of the moor than any outside expert who spent a day visiting it. I am not persuaded that a one day visit by a grouse management expert would of itself give a prospective tenant information of the quality needed to second guess the assessments of the estate which proposed to grant the lease.

[63] As I have said, the main issue in this case is not whether there was overshooting in 2006; nor is it about the speed with which the grouse population on Castle Grant could have been built up thereafter. On the latter issue there appeared to be a broad consensus that any overshooting in 2006 would have delayed the development of the moor by no more than two to three years. There was evidence of reasonable spring counts in 2007 which were not markedly lower than those of 2006 - see paragraph [36] above. That, the defenders submitted, was evidence that there had not been overshooting. But I observe that Mr McCall cautioned against reading too much into the 2007 spring counts without the benefit of more information. Whether a particular season's bag amounted to overshooting depends on the expectations of the person who is to enjoy the use of the moor in the following years. There was no evidence that Mr Erskine discussed his expectations with any of the estate staff, beyond expressing generalised concerns. I therefore reach no conclusion on whether and to what extent the estate overshot the moor in 2006. Nor am I in a position to reach any conclusion on the issue of whether Mr Erskine was entitled to expect that Castle Grant was on the upward stage of grouse population cycle in 2006. That also is not relevant to the issue which I have to determine.


[64] In relation to the question whether birds from Lochindorb populated parts of the Home beat at the time of the summer counts, I conclude that it is likely that the areas closest to the march with Lochindorb benefited from some migration but that, as grouse tend to remain within relatively confined territories, this was not a major contribution to the grouse population in that beat. The principal benefits which that beat derived from the good management of Lochindorb were the elimination or reduction of predators and of wildlife carrying the ticks which spread louping ill virus.

Mr Lewis's evidence


[65] Mr Lewis is a chartered accountant and the chief executive of the Reidhaven Trust and also of other family interests including the Seafield Estate, the Ogilvie-Grant estate, Reidhaven Farms, Old Cullen Farms, and Dava Enterprises Limited. He explained that he worked from the Seafield Estate Office at Cullen and had responsibility for the administration of, and financial matters relating to, the several businesses. Various managers dealing with property, sporting, forestry and farming matters reported to him. Mr Lewis did not involve himself in the fixing of the shooting programmes from year to year. That was the responsibility of Mr Law, the sporting manager, who might have discussed it with his line manager, Mr Andrew Norval, the property manager.


[66] After the trustees decided to lease Castle Grant moor in 2006, Mr Lewis became involved in discussions with Mr Richard Brooks, who was acting for Mr Paddy McNally. When Mr Norval was on holiday, Mr Lewis prepared the email of
4 August 2006 to explain the rationale of the shooting programme at Castle Grant, as Mr McNally had expressed concerns that the moor should not be overshot if he were to take the lease. He saw the exercise as the equivalent of an accountant's check in a company audit. He gained the information on the counts and on such matters as winter mortality and the rule of thumb in the third bullet point from Mr Law. He showed him a draft of the email before it was sent.


[67] After Mr McNally had shot at Castle Grant for two days, he requested the estate to stop shooting as he thought that the moor could not support the shooting programme. Mr Lewis put this down to Mr McNally being a "big bag man" while the estate pursued a policy of smaller bags in order to leave a reasonable breeding stock at the end of the season. He had to plan on the basis that the moor might not be let and therefore sought a reasonable shooting income from it in both 2006 and 2007. He was prepared and offered to stop shooting in the 2006 season but only once Mr McNally had signed the lease. He knew that Mr McNally sought to take the lease in the name of Ellipsis Farms Limited and that he withdrew from the negotiation in late August.


[68] Mr Lewis did not take at face value Mr Kennedy's concerns about the shortage of birds when he asked to get out of his booked two shooting days. He received no reports from Mr Law or anyone else that there were serious concerns about grouse numbers. He was not aware of the reasons for the transfer of the shooting to Kinveachy on the second day of Mr Kennedy's let. No-one had spoken to him about it. If Mr Law had consulted the senior management at Cullen, he might have spoken to his line manager, Mr Norval.


[69] He became aware in late September that Mr Erskine was concerned about overshooting when Mr Kennedy forwarded his email of 25 September to him. He said in evidence that he understood Mr Kennedy to be concerned not with overshooting but with the difficulty which he had in finding a tenant if the estate continued to shoot.


[70] He explained that he sent the email of
29 September 2006 to Mr Kennedy and authorised him to pass it on to Mr Erskine. He stated that all he had been trying to do in the email was to say that, when the estate set up the 2006 shooting programme, they were able to justify it to themselves. He wanted Mr Kennedy to explain to Mr Erskine that the estate had given thought to the programme and had made calculations when it decided on the programme. His motivation was to be as transparent as possible. But he emphasised that it had been up to Mr Kennedy whether or not to pass on the email.


[71] Mr Lewis said that he genuinely believed the opinions that he expressed in the 4 August email, which he repeated in the email of 29 September. He continued to believe them thereafter, including when the lease was signed. The events of the season did not alter his view. He was aware that Mr Law considered the head keeper to be a conservative man and that he would not allow the moor to be overshot. He derived support from the fact that Mr Stewart had allowed Lord Reidhaven's youngest son a driven day at the end of the season. He had insisted that the request for that extra day be cleared with Mr Stewart. He took comfort from Mr Stewart's attitude to the extra day and from the fact that the number of birds shot was less than the estate had programmed. Thus he believed that the estate was leaving an adequate stock at the end of the season. He had not spoken to Mr Stewart during the 2006 season.


[72] Mr Lewis explained that he took the view that Mr Erskine would either accept or reject the opinions which he expressed in the email. He also stated that he had assumed that Mr Erskine would take expert advice on the whole transaction. He did not explain why he made that assumption beyond saying that at some stage he learned that Mr Kennedy had advised Mr Erskine to obtain that advice. There was no evidence that Mr Baikie ever approached the estate to seek permission to advise Mr Erskine or that the estate were aware of the involvement of any other grouse specialist on Mr Erskine's behalf. During October Mr Lewis negotiated directly with Mr Erskine and only then learned of his intention to incorporate the pursuers.


[73] Mr Lewis stated that, at the time, he did not have any involvement in, or concerns about, the counting methods on Castle Grant. He was not a sportsman; he did not shoot or fish. He did not know the locations of the counting blocks. He understood that Mr Law had put together the counting areas and that independent experts had visited the moor and had found nothing amiss with the counting methods. The extrapolation exercise was a hypothetical calculation which had to be adjusted for variables such as the lower density of birds near roads and forestry and the tendency of birds to move within the moor. He knew that one could not be precise and that there was a margin of error. If he had known at the time that the counting areas were not generally representative of the moor as a whole but had been selected as the areas where the birds were known to be, he would not have carried out the extrapolation exercise in the emails of 4 August and
29 September 2006.


[74] Mr Lewis in his evidence had a tendency to discount advice which did not tally with his understanding and to attribute ulterior motives to that advice. Thus he thought that Mr Baikie underestimated the quality of the moors in his report because he acted for people who wanted bigger bags than the estate sought; he suggested that Mr Baikie had had an eye to acting as manager of the moor and impressing the tenant if he achieved bigger bags than his base-line assessment might suggest. In Mr Lewis's view the moor had achieved a good level of recovery by 2006. He also did not accept that Mr Kennedy's reluctance to take up his booked two days of shooting was motivated by concerns about overshooting; he attributed it to his difficulties in putting together a party of shots to use the booked days. Mr McNeill criticised Mr Lewis for this tendency. But, in my opinion, his inclination to accept the views of Mr Law and to discount contrary views, while it may have deprived him of much of the benefit of outside advice, does not, of itself, call into question his honesty.

Legal submissions


[75] In this part of my opinion I do not address counsel's comments on particular witnesses or the defenders' challenge to the independence of Mr Osborne and thus his acceptability as a skilled witness. I have considered those matters and given my views of the witnesses elsewhere in this opinion. I therefore concentrate in this part on the structure of the arguments advanced by each party.


[76] Mr Calum McNeill QC for the pursuers invited the court to make findings that the pursuers had been induced to enter the lease as a result of fraudulent misrepresentation by Mr Lewis, which failing, to find that the representation which induced the contract was negligent. He submitted that the email of 29 September 2006 was sent in response to Mr Erskine's concerns about overshooting which Mr Kennedy had passed on to Mr Lewis in his email of 28 September. As Mr Law had been present on all of the driven days on Castle Grant in 2006 and knew that the estate had had to shoot on the Home beat on all of those days, the senior management of the estate must have been aware of the sparsity of grouse on the moor, which had dictated where the shooting had to take place; they knew where the grouse were and where they were not. The calculations in the email of 29 September, which were composed on or about 4 August, were designed to justify a shooting programme which had already been decided upon by that time.


[77] He analysed the representations in the email under the heading "2006 Summer count and extrapolation". He criticised in particular the suggestion that the extrapolation in the first bullet point gave rise to a "very conservative" estimate that the estate could shoot 1,268 brace in 2006 and still leave 2,856 birds on the moor. The focus of his criticism was the representation that the count areas were to any material degree representative of the moor as a whole. Mr Lewis had no information before him to justify that representation nor did he make any enquiry of Mr Law or of the estate's keepers to support it. He chose to ignore Mr Osborne's and Mr Kennedy's warnings that the moor was being overshot.


[78] Mr McNeill pointed out that the discount from the extrapolation figure was stated to be in consideration of (a) the lower density of birds near woodland edges and (b) the assessment that plot counts were "not entirely representative". This did not undermine the representation that a modified extrapolation from the count areas would give a reasonable estimate of the grouse population on the moor. It was important to observe that the 50% discount was applied to the number of brace which could be shot and not to the extrapolation of the total grouse population from the count areas. Had the 50% discount been applied to the extrapolation so that the assertion was that the count areas were representative only to that extent of the moor as a whole, the calculation would have shown a croppable surplus of only 554 brace (i.e. 7,929 x 0.5 = 3,965 - 2,856 (the target end of season surplus) = 1,109 (the birds available to be shot in 2006) = 554 brace).


[79] Mr McNeill also criticised the use of the kill to count ratio in the second bullet point. He pointed out that Mr Lewis had selected the ratio of the summer counts to the bag attained in 2003 (2.734), which he demonstrated from the estate's count records and bag records was by far the highest ratio in the eight years to 2005. The year with the closest summer count to 2006 was 2002 (652 birds) when the kill to count ratio was 1.253. If, as appeared to be the case, Mr Lewis selected the 2003 ratio because the bag in 2003 (659 brace) was the closest to the estate's programmed bag in 2006 (811 brace), the calculation made no sense as a justification of the shooting programme because he was merely working back from his conclusion.


[80] Mr McNeill criticised Mr Lewis for founding on Mr Stewart's willingness to allow a 40 brace day for a member of the beneficiary's family in October as that made no allowance for the unspoken influence of the family on the head keeper. He also submitted that there was no support in the evidence led in court for the assertion that the anticipated bag of 611 brace was well provided for by the summer counts and "the evidence of birds on the moor on a day when the conditions are good."


[81] In relation to the incorporation of the pursuers, Mr McNeill submitted that Mr Lewis was aware by
10 October 2006 that Mr Erskine intended to use a limited liability partnership to take the tenancy and that this would be the vehicle representing his interests in the same way as Mr McNally had proposed to use Ellipsis Farms Ltd. Mr Lewis knew that Mr Erskine was the directing mind of the pursuers.


[82] On the issue of fraudulent misrepresentation, Mr McNeill referred to McBryde, "The Law of Contract in Scotland" (3rd ed.) paras 14.10-14.12, Gloag, "The Law of Contract" (2nd ed.) pp. 475-479, Derry v Peek (1889) 14 App Cas 337, pp.374-376 , Boyd & Forrest v The Glasgow and South-Western Railway Co 1912 SC (HL) 93, pp.98-99 and Lees v Tod (1882) 9 R 807, pp.853-854.


[83] In relation to negligent misrepresentation he referred to McBryde, "The Law of Contract in Scotland" (3rd ed.) paras 15.74-15.77, Gloag, "The Law of Contract" (2nd ed.) pp. 462-465, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, pp.486 and 502-503, Esso Petroleum Co Ltd v Mardon [1976] 1 QB 801, pp.818-820, Clelland v Morton Fraser & Milligan WS 1997
SLT (Sh Ct) 57, and an article on misrepresentation by Professor Joe Thomson in 2001 SLT (News) 281, in which he commented on the decision at procedure roll in Hamilton v Allied Domecq plc, and which the later decisions in that case (2004 SLT 191, 2006 SC 221 and 2007 SC (HL) 142) did not contradict.


[84] In support of the submission that the pursuers were entitled to found on the misrepresentation in the email of 29 September 2006, although they had not then been incorporated, Mr McNeill referred to McInerny v Lloyds Bank Ltd [1974] 1 Lloyd's Rep 246, in which Lord Denning MR at p.253 held that if a person, who makes a representation with the intention of inducing a contract, knows or ought to know that a statement which he makes to a third person would or might be passed on to a contracting party, he is taken to accept responsibility for that statement whether made fraudulently or negligently. Mr McNeill also referred to Spice Girls Ltd v Aprilia World Service BV [2002] EMLR 27, in which the Court of Appeal referred to the principle set out in With v O'Flanagan [1936] 1 Ch 575 on the continuing effect of a representation.


[85] Mr Sandison QC for the defenders submitted that the pursuers had failed to establish that the statements complained of were either fraudulent or negligent. On the law relating to fraudulent misrepresentation he referred to the same authorities as Mr McNeill and also to Erskine, Institute III.1.16. There was no evidence of any dishonesty on Mr Lewis's part. In relation to the existence of a duty of care Mr Sandison submitted that the pursuers had glossed over the distinctions between statements of fact and statements of opinion. The default position of the modern law of delict was that a person suffering loss was not entitled to recover compensation from the person whose act or omission could be said to have caused it: Stovin v Wise [1996] AC 923, Lord Hoffmann at p.949. There was no single touchstone for economic loss claims: Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181.


[86] In relation to negligent misstatements the leading authority remained Caparo Industries plc v Dickman [1990] 2 AC 605 which upheld the threefold test for the existence of a duty of care which required (a) that the loss was reasonably foreseeable, (b) that there was sufficient proximity between the parties and (c) that it was fair, just and reasonable to impose a duty. But the House of Lords recognised that the concepts of proximity and fairness amounted to little more than convenient labels rather than practical tests. One had to examine the particular circumstances of specific situations to ascertain pragmatically the existence and scope of a duty of care. The case placed clear restrictions on the persons to whom the duty of care was owed and had close regard to the purposes for which and circumstances in which the information was given; see Lord Bridge of Harwich at pp.618, 620-623, Lord Oliver of Aylmerton at pp.633, 635-636, 638.


[87] By reference to dicta of Neill LJ in James McNaughton Paper Group Ltd v Hicks Anderson [1991] 2 QB 113 and BCCI (Overseas) Ltd v Price Waterhouse (No 2) [1998]
BCC 617 Mr Sandison invited the court to assess the pursuers' claim by having regard to the following lower-level considerations. They were: (a) the purpose for which the statement was made; (b) the purpose for which the statement was communicated; (c) the general and particular relationships involved - in this case whether the parties were at arm's length; (d) the size of class to which the advisee belongs; (e) the state of knowledge of the adviser; and (f) whether reliance by the advisee without independent advice was reasonable. In relation to factor (c) Mr Sandison referred also to Grieve v Rutherford's Trustees (1871) 9 SLR 60. In relation to factor (d) he distinguished McInerny and Spice Girls Ltd and referred to Reeman v Department of Transport [1997] 2 Lloyd's Rep 648. In his submissions on factor (e) he referred to Howes v Crombie 2001 SCLR 921.


[88] In short, he submitted that on the evidence (i) there was no material misstatement in the email of
29 September 2006, (ii) there was no negligence, (iii) Mr Erskine did not rely on statements in the email, and (iv) if there were such reliance, it was not reasonable. Further, as a matter of law, Mr Lewis owed no duty of care to the pursuers: Cramaso did not exist when the impugned statements were made.

Discussion


[89] The email of
29 September 2006 contained both factual assertions and expressions of opinion. The matters which the pursuers challenge as being misrepresentations are not the factual data which Mr Lewis used but the opinions which he expressed through his use of those facts. In Esso Petroleum Co Ltd v Mardon, Lord Denning MR (at p.820) stated the applicable principle in these terms:

"If a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another - be it advice, information or opinion - with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side to enter into a contract with him, he is liable in damages."


[90] Thus, in so far as the court is concerned with negligent misrepresentation, the first question is whether Mr Lewis exercised due care to see that the opinion which he expressed was reliable. In relation to the more serious allegation of fraud, the test is whether Mr Lewis in expressing his opinion acted dishonestly, because (i) he knew the representations were untrue, (ii) he had no belief in their truth, or (iii) he made the representations recklessly, careless whether they were true or false:
Derry v Peek, Lord Herschell at p.374.


[91] Against this background there are five issues which I have to determine. They are: (i) whether Mr Lewis's exercise to justify the 2006 shooting programme involved misrepresentation; (ii) whether the representations were fraudulent; (iii) whether Mr Lewis failed to exercise due care; (iv) whether Mr Erskine relied on the representations which thereby induced the contract and (v) whether Mr Lewis owed a duty of care to Cramaso. I deal with each in turn.


(i)                Did Mr Lewis's exercise involve misrepresentation?


[92] I am satisfied that the email, in its presentation of the calculation from the count numbers, contained a material misrepresentation. The text in the first bullet point contained an implicit representation that Mr Law and Mr Lewis were of the opinion that the summer counts were broadly representative of the population of grouse on the moor. This opinion was, in my judgement, very misleading, even with the allowance for error which Mr Lewis made.


[93] I accept that it is not possible to be certain about the actual grouse population on the moor. But I do not consider that the court needs scientific surveys to reach a view on the balance of probabilities about that population. The combination of (i) the observations of Mr Stewart and Mr Blair, (ii) the practice of where the estate allowed their guests to shoot in 2006 (concentrating on the Home Beat and there being only three days on which there were any drives in the eastern part of the estate), (iii) the opinions of Mr Baikie and Mr Osborne, (iv) Mr Ian McCall's evidence and (v) the 2008 drive counts supports the view that in and around 2006 the grouse population on the moor was concentrated on the Home beat. Thus the counts, which concentrated on that area, were not representative of the moor as a whole. I therefore accept Mr Baikie's and Mr Osborne's opinions that Mr Lewis's calculation on this point were fundamentally flawed. For the reasons which I stated in paragraph [60] above, I do not accept the contrary view of Mr Winn-Darley. I accept that the estate did the summer counts where its staff knew the birds to be and not on the basis that the count areas were representative of the moor as a whole.


[94] Mr Sandison, when submitting that there was no reliable evidence of the grouse population, referred to Davie v Magistrates of Edinburgh 1953 SC 34, in which the Lord President (Cooper) at p.40 emphasised that the court would not rely on ipse dixits or oracular pronouncements by an expert, which could not be tested by cross-examination or independently appraised. While I see the force of the observation, I am not persuaded that it applies to this case, in which the combination of the views of various people experienced in grouse moor management, the actions of the estate managers in 2006 and the 2008 drive counts all point to the same conclusion.


[95] The halving of the population available for shooting from 2,536 to 1,268 did not remove the implicit representation that the counts were to a significant degree representative of the moor as a whole. As Mr McNeill demonstrated (in paragraph [78] above) the halving of the product of the calculation was a significantly smaller concession than a halving of the multiplier of nine. The statement that the counts were "not entirely representative" did not mean that they were not representative; on the contrary it supported an inference that there was a significant degree of representativeness. Further the halving of the product was said to give rise to a "very conservative" result. In my opinion this was materially misleading.


[96] The second bullet point of itself contained no factual inaccuracy. Mr Lewis selected 2003 as the comparator because it was the first year in recent years that the estate had attempted to achieve a significant bag. Mr McNeill's criticism however was that it had no substance as a support for the 2006 shooting programme. See paragraph [79] above. While I see the force of that point, the methodology was open and Mr Erskine had the data to compare the kill to count ratios of other years if he had chosen to do so. I see no misrepresentation in this bullet point.


[97] I am also not persuaded that there was any material misrepresentation in the matters which Mr McNeill criticised in paragraph [80] above. Accordingly, in my view it is in the first bullet point ("Calculated from count numbers") that the email contained material misrepresentations.

(ii)              Were the representations fraudulent?


[98] I am satisfied that Mr Lewis's misrepresentation was not fraudulent. The issue ultimately is not whether Mr Lewis had reasonable grounds for saying what he did but the honesty of his belief. While there was no evidence that he had a reasonable basis for the implied representation that the counting areas were broadly representative of the moor as a whole, as there was no direct evidence of what Mr Law or Mr Norval may have told him, I am persuaded that Mr Lewis acted honestly in compiling the email of 4 August and in making the further representations on 29 September 2006.


[99] Mr Lewis as chief executive of the varied Seafield enterprises had many responsibilities and had no expertise in grouse moors. He relied on the advice of others. He was not a shot and so had no personal knowledge to apply to the judgements of Mr Law or Mr Norval. He understood that experts had approved the counting system, although he did not know the terms of that endorsement. I accept Mr Kennedy's assessment that Mr Lewis genuinely believed that there was a good stock of grouse on Castle Grant and that he relied on information which Mr Law provided. I note also that Mr Osborne formed the view that Mr Law thought there was a significant number of grouse on the moor and that he did not appreciate what was needed for a sustainable population at the end of shooting season. Mr Kennedy also stated that he was satisfied that he, Mr Osborne and Mr Baikie all thought that the estate management did not understand the problem. Thus contemporaneous assessments support the good faith of the estate management, but not their competence. There was no evidence, nor was it suggested to Mr Lewis, that Mr Law told him that there were insufficient grouse on Castle Grant or advised him that his extrapolation exercise was misleading.


[100] I am also satisfied that Mr Lewis was not informed of the reason for the decision to move the second day of Mr Kennedy's shooting from Castle Grant to Kinveachy on 15 September 2006. Nor was there any reliable evidence that Mr Lewis had any reason to know that the shooting, which had taken place by late September 2006, had demonstrated his estimates of August to be inaccurate.


[101] I accept Mr Lewis's evidence that, when he made the representations in August and September, he did not know whether a tenant would be obtained for the grouse moor and so had to plan on the basis that the estate would still have the moor in hand in 2007. He said so to Mr Kennedy at the time; thus his evidence was not afterthought. I observe also that the estate did nothing to discourage or prevent Mr Erskine from approaching Mr Kennedy and Mr Colin Stewart to discuss any matter relating to the grouse moor. Such behaviour is hardly consistent with a fraudulent contrivance.


[102] In conclusion, there was no reasonable basis in the evidence for Mr Lewis's representation that the counts were representative of the moor as a whole, but it was honestly made. There was no evidence that Mr Lewis asked Mr Law to confirm that the counts were representative in this way. But it appears likely, from the contemporaneous assessments to which I have referred, that Mr Law did believe that the counts could be used in the way in which Mr Lewis used them. Unsurprisingly, there was no suggestion that he criticised the representations when he saw the email. I accept Mr Lewis's evidence that, if he had known that the counts were not representative, he would not have presented the extrapolation exercise in the way he did.

(iii)            Did Mr Lewis fail to exercise due care in a question with Mr Erskine?


[103] I am persuaded that Mr Lewis owed a duty of care to Mr Erskine in making the representations in the email of
29 September 2006 and that he failed in that duty. In my opinion he was careless in his presentation of the extrapolation exercise as he took no steps to confirm with Mr Law or Mr Stewart that the counts could properly be used in this way. I can infer from the evidence, to which I have just referred, what Mr Law would have said, had he been asked this question and thus made to consider the point carefully. But he was not asked. I am satisfied on the evidence that, if Mr Lewis had asked Mr Stewart, he would have been advised against making such a representation. As Mr Lewis did not have a basis for making the representation and did not check his facts before he did so, I am satisfied that his actions can properly be characterised as lacking in due care.


[104] I am satisfied that in the circumstances Mr Lewis was under a duty to exercise such care. He was aware of Mr Erskine's and Mr Kennedy's concerns that there had been overshooting. I accept Mr Kennedy's evidence that he raised the issue with Mr Lewis in their initial meeting and in discussions thereafter. The issue was clearly flagged up in the emails to which Mr Lewis responded with his emails of 29 September. He was also aware of the importance to an incoming tenant of an adequate base population on which to build. The purpose of the representation was to give reassurance to Mr Kennedy and Mr Erskine that the 2006 shooting programme was justified and that it would leave a substantial surplus of birds on the moor, in order to maintain Mr Erskine's interest in entering into the lease. See Caparo, Lord Bridge of Harwich at pp.620H-621B. I am not persuaded that the fact that Mr Lewis gave Mr Kennedy a discretion whether to pass on the email to Mr Erskine is a material consideration as in both of his emails to Mr Kennedy on 29 September Mr Lewis clearly invited Mr Kennedy to do so. He would therefore know that it was likely that Mr Kennedy, as the estate's agent, would do so.


[105] I am not persuaded that the fact that the estate was at arm's length from Mr Erskine in the negotiation of a lease points against the existence of a duty of care. The managers of the estate had, or would be perceived to have, access to a much more detailed knowledge of the quality of their moor than any other party. In response to expressed concerns about the 2006 shooting programme and the availability of a sufficient end of season surplus, Mr Lewis chose to provide reassurance in his representations.


[106] In a question with Mr Erskine alone, no issue arises of a class of advisees of indeterminate size. Nor is there an issue of the knowledge of the adviser. Mr Lewis had access to Mr Law and, if he had wished, Mr Stewart when he made the extrapolations. He was a qualified accountant conducting an exercise which he compared to a company audit exercise, and chose to use the figures in the way he did, without verifying with his managers whether the exercise was a legitimate one.


[107] Any belief on Mr Lewis's part that Mr Erskine would take or had taken independent advice does not militate against the existence of a duty of care. It was not, in my opinion, unreasonable for Mr Erskine to rely on his experience of twenty years and the advice which he had received in other transactions, together with the estate's representations, in reaching a decision whether to take the tenancy. Mr Kennedy gave evidence that Mr Erskine was generally well informed. While Mr Lewis may have been aware that Mr Kennedy had advised Mr Erskine to consult Mr Baikie, there was no evidence that Mr Baikie had studied the moor in sufficient detail at that time to be able to contradict the estate's representations nor that Mr Lewis believed that Mr Baikie had any further involvement with Castle Grant in 2006 after he produced his report for the estate in May 2006.


[108] I conclude therefore that Mr Lewis, when he made the representations in the first bullet point of the email of 29 September 2006, owed Mr Erskine a duty to exercise reasonable care and failed in that duty.

(iv) Did Mr Erskine rely on any misrepresentation?


[109] I am satisfied that the representation as to the likely stock of grouse on the moor at the end of the 2006 shooting season was material as it could inform Mr Erskine's assessment of the extent to which he could shoot in the early years of the lease. As the lease was for only fifteen years, a tenant would be very interested in ascertaining how long it would take to develop the grouse population to support his planned level of shooting.


[110] In my opinion, Mr Erskine was entitled to rely on the representations made on behalf of the estate. I am not persuaded that he should have sought to include warranties in the lease if he wished to rely on the existence of a certain end of season population. Such warranties would have been difficult to frame and even more difficult to police. Nor am I persuaded that he should have attempted an end of season count of the birds. Such counts are rarely made and would have been very difficult to conduct when the birds would be stressed by shooting and would fly in packs. While he could have instructed Mr Baikie to investigate the moor more thoroughly, and some would-be tenants might have done so, it is not clear that Mr Lewis would have allowed him to do so. Mr Kennedy expressed the view that he would not. In my view, Mr Erskine's decision to rely on his own knowledge and what the estate told him was not unreasonable as he had considerably more knowledge of grouse moors than most tenants.


[111] The more difficult question, which has caused me some anxiety, is whether and to what extent Mr Erskine did in fact rely on Mr Lewis's representations in deciding to take the lease. I have recorded his evidence on this matter at paragraphs [32]-[34] above. It has to be weighed against Mr Erskine's evidence that, when he visited the moor in June 2006, he thought that Mr Law was over-optimistic in his assessment of the state of the moor and that he did not take what Mr Law said to him at face value. See paragraph [12] above. Mr Kennedy also gave evidence that he had discussed with Mr Erskine the estate's management of the grouse moor and that both were sceptical about that management and about its counting methods. He did not expect Mr Erskine to conclude that Mr Lewis's estimate of end of season stock was correct because it came from what he called "a transparently inadequate regime." It was also clear from Mr Erskine's evidence that he did not accept Mr Lewis's initial extrapolation which (before the 50% discount) suggested that the estate might have been able to shoot 2,536 brace. He described that figure as "ridiculous" and said that when he received the email he thought that they should not shoot more than 650 brace: paragraph [33] above.


[112] It is thus clear that Mr Erskine did not accept at face value all that Mr Lewis wrote in his email of
29 September 2006, even in the first bullet point which has become the principal focus of the allegation of misrepresentation. Nonetheless, I found Mr Erskine to be a credible and generally reliable witness. I am not persuaded that he was lying in his assertion that he relied on that representation or that his position was to a material degree a retrospective rationalisation. I observe that he had not had an opportunity to shoot over a large part of the moor and thus had not seen the grouse population on the eastern parts of the estate. He did not know where the counting blocks were located and had no basis for challenging the implicit representation that the counting blocks were broadly representative of the moor as a whole. The email informed him of the estate's policy of leaving an end of season population of about 2,700 birds. While, because he took a poor view of the quality of management of the moor, he may have questioned how they could be confident that they would leave that number of birds, there was nothing in the email to alert him to the possibility that the end of season population might be 50% of that figure or even a smaller proportion.


[113] It is our law that, to have a legal effect, the misrepresentation must have produced error which must have been the motive, or one of the motives, which induced the representee to enter into the contract: Gloag, p.468 and Esso Petroleum - paragraph [89] above. It is clear from the evidence as a whole that Mr Erskine relied to a considerable degree on his own judgement when he decided to take the lease of the Castle Grant moor. But, having expressed his concerns about the damage to the grouse stocks in the email of 25 September, he received Mr Lewis's reassurance in the email of
29 September 2006. Thereafter, Mr Erskine did not express concerns about overshooting. In that context I accept that Mr Lewis's representation of the policy to leave 2,700 birds on the moor at the end of the season and his extrapolation exercise to demonstrate the implementation of that policy (containing, as it did, the implicit assertion of representativeness) produced error which operated as one of Mr Erskine's motives for choosing to enter into the lease.

(v) Did Mr Lewis owe a duty of care to Cramaso?


[114] The difficulty facing the pursuers in this action is that they are a separate legal person from Mr Erskine: see Limited Liability Partnerships Act 2000, section 1. The members of Cramaso are Mr Erskine and his wife. Mr Erskine introduced all of the capital of the business. His wife is not actively involved in running the enterprise other than ensuring that that proper catering is available on shooting days. Thus it is not misleading to describe Cramaso as being in substance Mr Erskine's vehicle for operating the lease or to call Mr Erskine the directing mind of the limited liability partnership. But no evidence was led as to the rights inter se of the members of Cramaso.


[115] Further, Mr Lewis was not aware when he composed and sent the email of
29 September 2006 that Mr Erskine intended to create Cramaso. He learned of that intention several days later. Cramaso did not come into existence as a legal entity until 16 November 2006: paragraph [35] above. On the law as it currently stands, this places an insuperable obstacle in the way of Cramaso's claim.


[116] For a defender to be liable in delict for a careless representation, he must have broken a pre-existing duty of care to prevent the pursuer sustaining economic loss as a result of his negligent misrepresentation: Professor Joe Thomson in 2001
SLT 279 at p.280. Using a Hohfeldian analysis, there must exist at the time of the representation the person (or class of persons) to whom that duty is owed and who therefore has the correlative rights.


[117] When the courts deal with an assertion that a duty of care is owed not to a particular representee but to a class of persons, there is always the concern, which Cardozo CJ classically stated in Ultramares Corporation v Touche (1931) 174 N.E. 441, (at p.444), that the law might subject a person to "liability in an indeterminate amount for an indeterminate time to an indeterminate class". To counter that danger, the Court of Appeal in
England in Reeman v Department of Transport [1997] 2 Lloyds Rep 648 has set strict limits on the class to whom a duty of care is owed when a person gives advice. That case concerned a DoT surveyor's certificate of the seaworthiness of a fishing vessel and whether the surveyor who issued the certificate owed a duty of care to a person who later purchased the vessel to avoid causing him financial loss. The court drew on the speeches of Lord Bridge and Lord Oliver in Caparo in setting those limits. Thus Phillips LJ stated (at p.681):

"When Lord Bridge and Lord Oliver spoke of the need for the advice to be given in the knowledge that it would be communicated to an ascertainable or identifiable class of persons I believe that they were probably speaking of a class of persons the membership of which was capable of ascertainment at the time that the advice was given, e.g. shareholders who could be identified by consultation of the share register. I am certain that they were speaking of a class, in existence at the time of giving the advice, whose identifiable characteristics necessarily limited the number of its members."

Similarly, Peter Gibson LJ emphasised the need to have an identifiable class in order to create the needed proximity. He stated (at p.684):

"In my judgment the members of the identifiable class must be capable of identification at the time of the making of the negligent statement. It is not sufficient that the plaintiffs should be members of a generic class capable of description at that time, whether as potential purchasers or successors in title of the owner who asks for the certificate. That would be to create a potential liability to an open-ended class... ."

Lord Bingham CJ also (at p.685) emphasised the difficulty in establishing a claim for financial loss caused by negligent mis-statement even where there was no doubt about the negligent mis-statement and the resulting financial loss. The leading cases laid down that the plaintiff must meet a number of conditions, the first of which was that:

"[t]he statement (whether in the form of advice, an expression of opinion, a certificate or a factual statement) must be plaintiff-specific: that is, it must be given to the actual plaintiff or to a member of a group, identifiable at the time the statement is made, to which the actual plaintiff belongs."


[118] A reasoned decision of the Court of Appeal, in which the judges analyse a decision of the House of Lords, is always persuasive authority. A decision of that Court given by such eminent judges is highly persuasive. The requirement that the plaintiff and the identifiable class should exist at the time of the making of the representation is consistent with the principle that the duty of care must exist at that time, as the duty must be owed to someone. While I can envisage a possible exception where, in the context of negligent testamentary advice, a duty might be owed to a limited class of persons, such as the children of the testator, which included an unborn child, I can see no reason why the law should depart from principle in the present context. For all that Mr Lewis knew when he made the representation, Mr Erskine might have sought to take the lease in the name of a company in which people other than his wife had an interest. In my view there was not sufficient proximity between Mr Lewis and any as yet uncreated vehicle for the lease for there to be a duty of care to that entity.


[119] Thus, unfortunately, Mr Erskine's decision to create Cramaso to take the lease deprives him of a remedy in law. While it may appear a harsh decision at first sight, I observe that Mr Erskine, who is an experienced businessman and is familiar with corporate transactions, chose to transact through Cramaso for his own reasons. The use of corporate vehicles can give rise to unforeseen complications; see e.g. Woolfson v Strathclyde Regional Council 1978 SC (HL) 90. He did not seek to obtain the agreement of the defenders that Cramaso could rely on their representations in entering into the lease. Such a device could have preserved a remedy for Cramaso.


[120] Mr McNeill sought to equate negligent misrepresentation with fraudulent misrepresentation as Lord Denning MR did in McInerny v Lloyds Bank (at p.253) in which he referred to various cases, including Dutton v Bognor Regis UDC [1972] 1 QB 363, in which a person was held (at that time) to be under a duty to use care in making a statement. He said:

"He owes this duty to those whom he knows, or ought to know, will rely on it, or will be injuriously affected by a mistake. Similarly, it seems to me that when one man makes a statement to another with the intention of inducing him to enter into a contract with him - or with someone else, on the faith of it, the maker must be regarded as accepting responsibility for the statement. It is not necessary that it should be made directly to the contracting party. It is sufficient if the statement is made to a third person to be passed on to the contracting party, or in such circumstances that the maker knew or ought to know that it would or might be passed on to the contracting party and acted on by him. That is sufficient when the statement is made fraudulently, see Swift v Winterbotham (1873) L.R. 8 Q.B. 244, ay pp.252/3. Likewise, it is sufficient when it is made negligently."

[121] In my opinion, whatever may have been the position in 1974, it is now wrong to equate negligent mis-statement with fraudulent misrepresentation. Fraud involves "a contrivance to deceive" (Erskine III.1.16) and it is sufficient if the person, who has set in motion the deception, intends, or can or should foresee, that entities other than the representee (including entities yet to be created) might rely on the misrepresentation. See, for example, Leslie Leithhead Pty Ltd v Barber (1965) SR (NSW) 172 and Mach Marketing International SA v MacColl [1995] BCC 951. Since the Courts' retreat from the statement of an overarching principle in the law of negligence, in which Caparo is one of the landmark cases, mere foreseeability of possible damage is not sufficient to ground liability for loss caused by negligent mis-statement. Emphasis on the requirements of proximity has given rise to the more restrictive and case sensitive approach to which Mr Sandison referred: paragraph [86] above.


[122] Finally, I derived no assistance from Spice Girls Ltd, which was concerned with the continuing effect of a representation to a known representee for the purposes of a specific transaction when circumstances changed before a transaction was completed.

Conclusion


[123] As I have concluded that Mr Lewis did not owe a duty of care to the then non-existing Cramaso when he sent the email of
29 September 2006, the pursuers' case must fail. I therefore sustain the second and third pleas in law for the defenders and grant decree of absolvitor. I reserve all questions of expenses.

Postscript


[124] Much of the factual evidence in this case concerned the question whether the estate had overshot Castle Grant moor in 2006 as that was the background to the email of
29 September 2006. Overshooting, as I have said, was not a central issue in this case. I have not reached any firm view on that matter. The similarity of the 2007 spring counts to those of 2006 may be prima facie evidence against overshooting. But, as well as the absence of a base line by which to measure overshooting, there are so many variables such as (i) the uncertainties over cycle of grouse population caused by the strongyle worm burden, (ii) predation, (iii) louping ill virus, (iv) weather and (v) the extent of winter mortality, that it is not possible to reach a firm conclusion on the evidence which I have heard. I note, however, that the witnesses generally accepted that a grouse population, which had been depleted by overshooting, could be redeveloped within two or three seasons. Thus, if there had been goodwill, a short extension of the lease might have remedied the loss caused by the misrepresentation and avoided this unfortunate litigation.


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