Hamilton & Ors v. Allied Domecq Plc (Scotland)

The appellants sued in delict (tort) for damages for negligent misrepresentation said to have been made by a director of the respondents, inducing them to enter a subscription agreement. The key legal principles were (i) liability for negligent misstatement requires either an actionable positive misrepresentation or, in certain circumstances, a duty to speak founded on a voluntary assumption of responsibility (Hedley Byrne principles as discussed in Banque Keyser), and (ii) mere silence will not normally found liability (Peek v Gurney). The House held that the evidence did not establish that the director had represented that distribution to the on-trade would be available from the outset, nor that he had volunteered a responsibility to ensure such distribution. On that basis the Lord Ordinary’s finding of actionable misrepresentation could not be sustained and the appeal was dismissed.

This was an appeal from a Scottish civil court decision awarding damages to the claimants (the pursuers) who had been minority shareholders in a bottled water company (Gleneagles). The pursuers alleged that, during negotiations leading to a November 1992 subscription agreement, a director of the respondents (Mr Beatty) had represented that the respondents' distribution arrangements and facilities would be made available to enable Gleneagles to penetrate both the on-trade (Hotels, Restaurants and Catering sector) and the off-trade from the outset. Relying on that representation, the pursuers claimed they entered the agreement; Gleneagles later failed and the pursuers lost the value of their shares.

The procedural history was: the Lord Ordinary (Abernethy) found for the pursuers (1 August 2003); the Second Division of the Court of Session allowed the respondents' reclaiming motion and assoilzied the respondents (reversal) (decision: 2006 SC 221); the pursuers appealed to the House of Lords.

The issues framed by the House were:

• whether the director had in fact made an actionable misrepresentation that the respondents would provide distribution to the on-trade from the beginning;
• whether, alternatively, a duty to speak arose by a voluntary assumption of responsibility such that negligent silence could found liability;
• whether the pursuers had proved causation and relied on any representation to their detriment.

The House analysed the evidence of what was said in the negotiations, the contemporaneous omission of any distribution strategy from the subscription agreement, and the commercial context (including constraints on access to the distribution network noted in the evidence). The court held that (i) the alleged words were too equivocal and indirect to support the Lord Ordinary’s finding that a contemporaneous promise to assist on-trade distribution from the outset had been made; (ii) there was no basis to infer a voluntary assumption of responsibility by Mr Beatty which would give rise to a duty to speak; and (iii) the Lord Ordinary’s conclusion on misrepresentation was therefore unsupported by the evidence. The House dismissed the appeal and ordered the appellants to pay the respondents' costs.

Appeal dismissed. The House concluded that the evidence did not support the Lord Ordinary's finding that the respondent’s director had represented that on-trade distribution would be provided from the outset, and there was no voluntary assumption of responsibility giving rise to a duty to speak; accordingly there was no actionable negligent misrepresentation.

First instance: Lord Ordinary (Abernethy) found for the pursuers (judgment 1 August 2003) (see [2003] ScotCS 216). Reclaiming motion allowed by the Second Division of the Court of Session, which assoilzied the defenders and reversed the Lord Ordinary (decision reported 2006 SC 221). Appeal to the House of Lords ([2007] UKHL 33) dismissed.