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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.
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.
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