Scottish Court of Session Decisions

LORD DUNPARK'S OPINION.—On the procedure role counsel for the defenders moved me to sustain the defenders' first and second pleas in law and to dismiss the action on the grounds that the purusers' averments were irrelevant and that the pursuers had no title to sue this action.

The pursuers aver that in early 1975 Mr De Watteville, acting on behalf of Mackenzie Fordwater (Holdings) Ltd. (hereinafter referred to as "the Company"), consulted the defenders with a view to the design and possible construction of a vessel which the Company wished to operate for the purpose of conveying tourists from Mull to Staffa. They further aver that the Company changed its name to that of the pursuers on 30th March 1978. They say that the defenders had a known expertise in, and were specialists in the design of, certain types of vessel suitable for this operation. Mr De Watteville asked the defenders to prepare a design of the hull of a vessel suitable for the above purpose and a specification for its construction. It is said that the defenders knew that, if they produced an acceptable design and specification, an order would be placed with a boat builder for the construction of a vessel conform to said design and specification, and that the defenders thus stood to gain financially by this use of their design and specification. The pursuers aver that Mr De Watteville made it clear to the defenders that the vessel must have a carrying capacity in excess of 50 persons.

The defenders prepared a design drawing and a specification, which stated that the vessel would have a seating capacity for a minimum of 50 persons. The drawing showed the design as sufficient for the carriage of 55 persons plus 2 crew. Mr De Watteville is said to have queried the specification in respect that it stated a minimum of 50 persons instead of a number in excess of 50. The defenders are said to have explained that the lower figure had been introduced to guard against disappointment when the passenger certificate was issued by the Department of Trade and Industry.

The said vessel was constructed for the Company, and the Department of Trade thereafter issued a certificate restricting its passenger-carrying capacity to 46 persons. As I read the pursuers' averments, it appears that Mr De Watteville accepted the seating capacity stated in the specification to be for "a minimum of 50 persons." The pursuers aver that, before the Company placed the order for the boat, "the defenders stated personally to the said Mr De Watteville on a number of occasions that the design was adequate to meet the said carrying requirements" (which I read as a minimum of 50 persons), and also that the Department of Trade would be bound "in due course to grant a certificate to that effect." They further aver that, "if the defenders had indicated that the carrying capacity would be limited to 46, the said De Watteville would not have gone ahead with the project."

The pursuers claim reparation from the defenders on the ground that "the carrying capacity of the said vessel has been reduced by at least four persons every trip it makes when the vessel is full with a consequent loss of revenue to the pursuers." [His Lordship then dealt with matters with which this report is not concerned, and continued]—

Mr Emslie's second submission was that the pursuers had not made relevant averments of actionable misrepresentation in Article 5 of the Condescendence. The legal basis of the pursuers' case as averred is that the defenders knew or ought to have known that the Company and Mr De Watteville were expressly relying upon the defenders' representations that the carrying capacity of a vessel built to the design and specification produced by them would be at least 50 persons, excluding crew. The defenders were consulted as experts in this field. They therefore owed to the Company and Mr De Watteville a duty to take reasonable care that the advice given, and representations made, by them were accurate and reliable. They knew that the requirement was that the vessel should have a carrying capacity in excess of 50 passengers. They negligently produced a design and specification which represented that the said carrying capacity would exceed 50 persons, when they knew or ought to have known that the Department of Trade would certify the carrying capacity at less than 50 persons. "A reasonably competent designer of such vessels professing the specialist skill and knowledge of the defenders would have known at the material time that the said design and specifications when constructed would not attract a Department of Trade certificate to enable the vessel to have a carrying capacity as so represented in the said design and specification." The pursuers further aver that "in any event" the defenders had a duty to warn the pursuers that no guarantee would be given that a certificate for 50 persons or more would be given, and that it was likely that such a certificate would be for a lesser number than 50 persons; and that they negligently failed to give any such warning.

Mr Johnston for the pursuers stated that the pursuers' case was based upon the legal proposition framed by Lord Denning M.R. in Esso Petroleum Co. Ltd. v. Mardon [1976] QB 801. The proposition is to be found on p. 820 of the report, and it is this—"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." While I do not know of any authority in Scotland to the same effect, I have no doubt but that the principle stated by Lord Denning is now incorporated in Scots law as an example of culpa. The duty to take care, as defined by Lord Macmillan in Muir v. Glasgow Corporation, 1943 SC (HL) 3, at page 10, is the duty to avoid an act or omission which may have as its reasonable and probable consequence injury to others, and the duty is owed to those to whom injury may reasonably and probably be anticipated if the duty is not observed.

In this case I am of opinion that, if the pursuers prove the facts which they undertake to prove, they will be entitled to recover from the defenders such operating losses as may be proved to have resulted from the shortfall in passenger capacity. The pursuers' averments do not fall exactly within the terms of Lord Denning's proposition in respect that the defenders' alleged misrepresentations were not made with the intention of inducing Mr De Watteville or the Company to enter into a contract with the defenders, but I do not regard this distinction as material. In my opinion, the duty to take care exists (1) where a party gives to another advice, information or an opinion (a) in the ordinary course of his business, (b) on a matter in which he professes to have special knowledge or skill, (c) knowing that the recipient is relying upon that special knowledge or skill and intends to act upon the advice, information or opinion received, and (2) the informant also knows, or ought to have known, that the recipient is likely to suffer financial loss unless the advice or opinion is sound or the information accurate. This principle is undoubtedly part of the law of England. See Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd . [1964] AC 465, and the references thereto in Mutual Life and Citizens' Assurance Co. Ltd., v. Evatt [1971] AC 793 (P.C.). Counsel for the defenders, wisely in my opinion, did not submit that Scots law did not recognise this principle. The fact that it has not yet been judicially acknowledged in Scotland is, in my opinion, attributable to the lack of opportunity. I am now able to give formal recognition to a proposition which is no more than a particular application of the definition stated by Lord Macmillan as long ago as 1942 in Bourhill v. Young, 1942 SC (HL) 78, at p. 88.

Mr Emslie proponed two reasons why this proposition was inapplicable to the pursuers' averments. Firstly, he submitted that a distinction must be drawn between the actual carrying capacity of the vessel and its licensed capacity and that, in the absence of an averment that the defenders had represented that the vessel would have a licensed carrying capacity for at least 50 passengers, the pursuers' case was irrelevant. I reject this submission on the ground that there are passages in the pursuers' pleadings which indicate that both Mr De Watteville and the defenders appreciated that the only relevant carrying capacity of this vessel would be that authorised by the Department of Trade. For example, there is an averment on page 7D that "the defenders indicated that the lower figure (of 50) had been introduced to guard against disappointment when the passenger certificate was to be issued upon completion of the vessel."

Secondly, Mr Emslie submitted that the pursuers had no proper basis for their averment at page 12C that the defenders knew or ought to have known that their design and specification would not attract a certificate for more than 46 persons. I find this support, however, on page 15 where the pursuers aver that a reasonably competent designer of such vessels would have known that the Department of Trade would not certify a vessel built to the defenders' design and specification as having a carrying capacity in excess of 50 persons. The pursuers must be given the opportunity of proving this averment.

Mr Emslie also submitted that, reasonably read, the pursuers' averments only disclosed an expression of opinion that a certificate would be granted for at least 50 passengers, and that the statement of such an opinion was not actionable. He founded upon the passage in Gloag on Contract (2nd ed.) p. 462, to the effect that a mere expression of opinion, honestly held, is not a misrepresentation. It is unnecessary for me in this case, which is based on negligence, to consider the extent to which the views of Professor Gloag, expressed in 1929 anent misrepresentation in the law of contract, have been affected by the development of the law of negligence. It is enough for me to point out that the passage referred to occurs in a chapter which is solely concerned with misrepresentation in relation to contract (see in particular pages 457 and 468). The principle, which I have held to govern the present case, relates to any false statement, whether of fact or opinion, if made without due care.

[His Lordship then dealt with a matter with which this report is not concerned.]