Introduction
The recent case of United Central Bakeries Limited v Spooner Industries Limited & Forbo Siegling (UK) Limited [2012] CSOH 111 is a useful reminder of the need to take care when making statements in business dealings, which may subsequently be relied upon.
The Facts
United Central Bakeries Limited ("UCB") operate an industrial bakery, producing naan bread and other items. The process involved in baking naan bread means that the dough occasionally catches fire and emerges from the oven alight.
In 2003, UCB entered into a contract with Spooner Industries Limited ("Spooner"), whereby Spooner supplied a conveyor belt to transport the cooked naan bread from the oven. Later that year, the conveyor belt caught fire. Luckily the fire was extinguished before any further damage occurred and Spooner repaired the conveyor belt with replacement belting from Forbo Siegling (UK) Limited ("Forbo").
UCB were concerned that the fire had been started by the burning naan bread. An email exchange followed, whereby UCB asked Spooner and Forbo to confirm that the correct material had been used in the replacement belting and that it was suitable for use in their ovens. Forbo wrote to Spooner stating that it was "very unlikely" that a naan bread would cause the conveyor belt to catch fire. This letter was forwarded to UCB. In 2006 the conveyor belt caught fire again. This time the fire spread and destroyed part of the factory and the machinery.
The Issues
UCB raised a court action against Spooner and Forbo. As part of their damages claim UCB argued that Spooner and Forbo made a negligent misrepresentation regarding the conveyor belt which led to the physical damage to their property. UCB argued that Spooner and Forbo (i) failed to take reasonable care when advising UCB that the conveyor belt was suitable for use in the naan bread ovens and (ii) had a duty to take reasonable care to advise UCB that the belting material was unsuitable for use.
Forbo and Spooner applied to have UCB's arguments regarding negligent misrepresentation thrown out. In support of their position, they stated that the expression of opinion that it was "very unlikely" that naan from the ovens would melt the belting was made without any special knowledge of UCB's processes. They highlighted that the letter from Forbo did not state that the belting was suitable for the purpose that UCB intended to use it.
The Decision
Lord Hodge allowed UCB's arguments regarding negligent misrepresentation to remain part of their case against Spooner and Forbo. A trial will be fixed to consider the merits of UCB's claims.
In his judgment, Lord Hodge highlighted three common characteristics that should be considered when determining whether it is fair, just and reasonable to impose a duty of care in cases involving negligent misrepresentation:
- the context in which a statement is made;
- the foreseeability of reliance on the statement; and
- whether the statement contains any qualifications.
In particular, Lord Hodge noted that while the maker of a casual statement in a social context may not owe a duty of care, a person making the same statement in a business context may.
Comment
This case highlights the fact that in the current economic climate, pursuers are increasingly looking to maximise their heads of claim beyond any purely contractual claim. It will be interesting to see whether UCB's arguments regarding negligent misrepresentation ultimately succeed.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
